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VEB pumps $1.2bn into the future of Far East shipbuilding

8 Oct '09
Oleg Kouzbit, Online News Managing Editor

In a bid to revitalize shipbuilding in Russias Far East, government-owned Vnesheconombank (VEB) has announced plans to put $1.2bn into the launch of tanker and oil platform production in Primorsky Region. The funding will go to another government-owned entity, United Shipbuilding Corp. USC will reportedly start putting together a Phase 1 production line in the second quarter of 2010, and in 2011 construction of a first tanker is expected.

Vnesheconombank (VEB) is set to invest $1.2bn to create a Far East shipbuilding and repair hub at the Vladivostok-based Zvezda Shipyard, VEB president Vladimir Dmitriev told Prime Minister Vladimir Putin last week.

Government shipbuilders on the move

According to Mr. Dmitriev, another government-owned entity, United Shipbuilding Corp. (USC), will get the loan but is also expected to put up some equity of its own. 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.

USC is divided into three shipbuilding territorial sub-holdings: West, established in St. Petersburg, North in Arkhangelsk Regions Severodvinsk, and Far East based in Vladivostok the one that VEB Bank will soon start funding.

New tankers from Russias majors

The first phase of the project for Vladivostok will begin in Q2 2010 with the planned construction of a sizeable dry dock and dockyard complex. The company will focus on building gas tankers and oil production platforms at first and move into additional product lines later on, RBC and OilCapital.ru reported. The first new ship is expected to be launched in 2011.

With the price of oil finally stabilized above $60, the potential tanker orders from Russian majors like Gazprom, Rosneft or Sovkomflot could be substantial. If so, Mr. Dmitriev believes the investment will start paying off within 10 to 15 years.

Creating synergy

VEB regards the project as one of its most important investments in Russias Far East. Vladimir Dmitriev calls it very serious, both economically and socially. In addition to generating new jobs and taxes, even more significant, he thinks, is the opportunity to develop related hi-tech industries to supply the new hub.

A good example of the synergy the bank is hoping to create is Amurmetal, a huge but financially-distressed metallurgical company in the neighboring Khabarovsk Region that VEB was forced to take over. If the Zvezda project takes off, Amurmetal will be able to get a stable and potentially growing regional market for its products.

Long-term plans

Khabarovsk Governor Vyacheslav Shport attended a USC board meeting last week and reported more details about the nascent Far East shipbuilding strategy. According to the governor, the deal calls for the establishment of four shipbuilding zones in the area, each having its specific focus. There will be two in Khabarovsk Region and the other two in Primorsky.

The East zone, which includes the Primorsky companies, will reportedly specialize in construction of ocean-going platforms and big-displacement vessels. The Amur zone, based at the Amur Shipyard in Khabarovsk Regions city of Komsomolsk-on-Amur, will focus on ships for both military and commercial purposes.

A third zone will be stationed at Khabarovsk Shipyard to churn out low-tonnage commercial vessels and military ships for the Pacific Fleet and border guards; while a fourth zone, Zvezda, will be set up in Primorsky to produce gas tankers with the displacement of up to 250,000 tons--the target for VEBs current investment.
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