Russias USC and Daewoo weigh anchor on $1.5bn Primorsky dockyard | Volga,

Russia’s USC and Daewoo weigh anchor on $1.5bn Primorsky dockyard

13 May '10
Oleg Kouzbit, Online News Managing Editor

After more than six months of speculation and ‘what-would-happen-if’, some clear details have finally crystallized of what is now left of the ambitious $2.5bn super-dockyards project for Primorsky. Although one of the expected investors, Sino-Singaporean Yantai Raffles, is still hoping for a piece of the project, S. Korea’s Daewoo is onboard partnering with Russia’s United Shipbuilding Corp. for the $1.5bn chunk. Vnesheconombank is expected to provide much of the financing.

Russia’s government-owned shipbuilding giant, United Shipbuilding Corporation (USC), put an end earlier this month to the speculation surrounding two Primorsky regional shipbuilding projects that Russian officials floated back in October-November 2009 by announcing that S. Korea’s Daewoo has been chosen to partner in a $1.5bn dockyard.

Headquartered in St. Petersburg, USC was set up in 2007 by a decree of the RF President as an umbrella for all state-run shipbuilding assets. At the time of its creation, the holding was worth an estimated $17bn.

According to USC president Roman Trotsenko, the Korean firm has finalized its plans to invest a tentative $200m in a facility to be built near the town of Bolshoi Kamen in the Primorsky region.

Ten-year build-out…perhaps

The Kamen project’s overall price tag is reportedly estimated to be around $1.5bn. USC will get most of the funding from Russia’s largest state-run bank, Vnesheconombank (VEB). The latter’s contribution has yet to be specified but the bank is said to provide the lion’s share of the investment.

Under plans, the construction phase of the project will begin in June next to a local factory, Zvezda. The future dockyard is expected to be completed by the end of next year, with its first ship commissioned in early 2012.

In November 2009, the partners had plans to build further stages between 2012 and 2020. Six months later, however, they stopped short of making any long-term plans.

The dockyard will reportedly build gas-carriers, ice-breaker class tankers, shelf exploration ships, as well as ocean-going LNG-making vessels. Among the future customers are Russia’s oil and gas majors, such as Rosneft, Transneft, Gazprom, Sovkomflot, and others.

Well-laid plans

Unlike the Bolshoi Kamen yard, the fate of USC’s other project announced last fall, the $1bn Chazhma Bay development, is stalled. The expected partners, Sino-Singaporean Yantai Raffles and VEB Bank, have refused comment.

Under original plans, the project partners were supposed to get things going in March 2010 and complete construction within two years to start building ocean-going oil rigs and related equipment. Churning out up to 150,000-ton deadweight tankers and ships to transport chemicals had also been considered at initial planning, but USC then apparently dropped the idea as redundant.

The prospective ‘super-dockyard’ was conceived to reportedly support the Shtokman and Yamal oil and gas projects in Russia’s North-West, which are expected to gain momentum by 2013.

This much, that much; here, there…

In October 2009, Russian officials announced that the Sino-Singaporean investor would put up $200m. One month later the figure was set at “$100-200m”.

Finalizing the location was problematic, too. Early plans called for construction in Vladivostok; later USC opted for the Bay of Chazhma next to the closed town of Fokino, home to a Russian naval base. No official reason for the alteration was given.

Behind the scenes

Now USC’s Trotsenko says the Chazhma Bay project “has been put off indefinitely.” The reason he cited was land tenure issues, but analysts feel that the RF Ministry of Defense, which currently holds title to the site, was reluctant to let it go. Kommersant reported that Singaporean engineers were not allowed to enter the territory to do some in-situ work.

Knowledgeable observers feel that bureaucratic procrastination, not defense issues or ill will, is the main reason for the lack of progress. In the meantime, discouraged by the latest developments, Yantai Raffles either has to wait it out or walk away.

Russian tankers for Russian oil

The USC-Daewoo project is expected to lay the groundwork for a shift in Russia’s focus from investing in foreign dockyards to ‘helping itself’.

Currently, Russian oil majors order most of their heavy-tonnage tankers and specialized vessels from international makers, predominantly Asian ones. With the Russian-Korean project unfolding successfully, and hope for the Yantai deadlock to be resolved, the Asian investments are likely to help Russia dramatically reduce its dependency on Asian dockyards.