Tankers will depart late – Newspaper Kommersant No. 233 (7434) dated 12/15/2022

The Russian shipyard Zvezda does not manage to produce the Arc7 lead tanker for NOVATEK’s Arctic LNG-2 LNG project by March 2023. According to Kommersant’s information, the delivery of the first vessel is delayed by at least a year, and the production of four more tankers for the first line of the LNG plant can be postponed by about the same time. Under such circumstances, NOVATEK may be forced to postpone its plans to deliver most of the cargo from the new LNG plant to Asia, redirecting LNG shipments to Europe, where the transportation distance is shorter.

The Zvezda shipyard (operated by a consortium of Rosneft, Rosneftegaz and Gazprombank) is “at least a year” delaying the delivery of the lead Arc7 ice-class gas carrier for the NOVATEK Arctic LNG-2 project, and delays in the production of the following tankers will be similar, they say Kommersant’s sources among shipbuilders familiar with the situation. Initially, the first tanker was to be delivered in March 2023, the next four – at the end of September, October, November and December. Delivery dates for ten more tankers have not been announced before. The pilot vessel is planned to be delivered to Sovcomflot, the rest – to Smart LNG (JV of NOVATEK and Sovcomflot).

The timing of the production of tankers should be synchronized with the launch of the Arctic LNG-2 liquefaction lines (6.6 million tons each) – this is the end of 2023, 2024 and 2026.

Kommersant’s sources attribute the delay, among other things, to the difficulty of purchasing ship equipment.

In March, the EU imposed technological sanctions against Russian shipbuilding, banning the supply of almost the entire range. In addition, Russia still has no experience in building LNG tankers (Zvezda is building tankers for NOVATEK in partnership with the South Korean shipyard Samsung Heavy Industries, SHI).

The main issue is the installation and supply of azipods (azipods; their supply is prohibited by sanctions) for Arc7 tankers, says Mikhail Grigoriev, head of the Gekon consulting center. According to him, the ships are designed for a certain type of propulsion, and there are no domestic analogues. NOVATEK, Sovcomflot, Rosneft and SHI did not respond to Kommersant’s requests.

For LNG shipments from Arctic LNG-2, NOVATEK planned to create a fleet of 21 Arc7 ice-class tankers: 15 of them should be built at Zvezda, six at the South Korean shipyard Daewoo Shipbuilding & Marine Engineering (DSME). The shipowner of the last three should be Sovcomflot, and three more – the Japanese Mitsui OSK Lines. However, as Kommersant wrote on May 25DSME terminated the contract for the construction of tankers with Sovcomflot.

At SPIEF-2022, the head of NOVATEK, Leonid Mikhelson, said that the contract with DSME was being transferred to another owner, without specifying who exactly: “Everything is being built, the issue was with Sovcomflot.” In September, he allowed a delay in the delivery of the first tanker for Arctic LNG-2 until the end of 2023. “I think the first (tanker.— “b”) will be, but at the end (next.— “b”) of the year, this does not bother us, because we ourselves planned so, in December … the first line (“Arktik LNG-2”.— “b”) … 2023,” Mr. Mikhelson explained.

Based on NOVATEK’s plans to supply 80% of LNG from Arctic LNG-2 to Asian markets, a delay in the delivery of tankers may affect the marketing strategy of the project.

The transport arm for LNG deliveries to Europe is much shorter; accordingly, fewer tankers are needed for the same volume of cargo. At a meeting with Vladimir Putin in August, speaking about the supply of tankers for Arctic LNG-2, Leonid Mikhelson stated that “the fewer tankers, the more LNG will go west.” “This is completely wrong and carries additional risks. Therefore, we need it this way: one million tons of LNG – one tanker. We must enter and conquer the market there (in the Asia-Pacific countries.— “b”),” he emphasized. This year, against the backdrop of a sharp drop in supplies of Russian pipeline gas to the EU, LNG shipments increased one and a half times (see “Kommersant” dated October 17).

If the launch of the first line of Arctic LNG-2 takes place at the end of 2023, the plant will start operating at the end of the shipping season to the east, notes independent analyst Alexander Sobko: “Shortly after that, all gas carriers will go west anyway, but there are opportunities for optimization, for example, transshipment from ice-class vessels in the Murmansk region, which can significantly reduce the transport shoulder for Arc7.” In addition, he clarifies, in cases of “acceptable ice conditions”, NOVATEK has already attracted vessels of a lower ice class from the market for transportation. The expert believes that the reorientation of LNG to the West will not create problems: “If the difference in prices between the Asia-Pacific Region and the EU persists in the next year or two (the premium in Europe reached $400 per 1,000 cubic meters.— “b”), the main part of the cargo, as now, will go to Europe, which reduces the need for Arctic-class ships compared to originally planned.”

Tatyana Dyatel