NEVA 2017 – MAY Newsletter – Global Maritime Industry heads for St Petersburg

May 17, 2017

NEVA 2017 Newsletter - May Header

NEVA 2017 Event & Russian Maritime Industry Highlights – May Newsletter


NEVA_2017_XXVII_Crest_Warm_Red_175x111Exhibitor bookings at NEVA 2017 continue to outstrip expectations by some margin, with this week’s confirmation from the Croatian Chamber of Economy just the latest to demonstrate that international interests will be out in force at the St Petersburg event between 19-22 September.

In fact, momentum is building towards the most successful NEVA of recent times when the International Maritime Exhibition and Conferences returns to the new Expoforum Convention Centre, with bookings overall running 10-12% ahead of 2015. Also confirming their participation over recent weeks have been Finpro, promoting Finland’s maritime and offshore export industries, and Innovation Norway.

Innovation Norway, the Norwegian-Russian Chamber of Commerce and the Norwegian Russian Consulate will occupy a new Norwegian National Pavilion, signifying an emerging partnership that looks set to be central to the modernising of Russia’s fishing fleet and ancillary services. Ten of the 18 participating companies are active in either vessel building or fishery fleet equipment.

Finnish interests will be bringing highly sought after expertise in the ice-going vessel sector, which will find form in May when the Vyborg Shipyard launches Andrei Vertitsky – the second 121.7m length icebreaking support ship built to the Aker ARC 130 design for Gazprom Neft’s Yamal operations. With more than 80% of ship equipment in Russia imported, almost half comes from Finland.

Among other stand-out overseas exhibitors at NEVA 2017 will be a new Pavilion for Rostock Business, while Istanbul Exporters Associations take a 200m2 Pavilion. However, returning international partners are as highly prized, with Pavilions once again confirmed for the Netherlands, Poland, Denmark and China.

Strong Chinese participation at NEVA 2017 is certainly opportune, with recent energy-related activities including delivery of two 100 ton cranes to Russia’s new Zvezda mega-shipyard China Heavy Industry Corp Nantong. Meanwhile, Rosneft and the China National Chemical Company (ChemChina) have agreed to jointly build Russia’s largest marine coatings plant at Zvezda.

Premium positions for exhibitors remain within the 26,228m2 area available at NEVA 2017, but early action to reserve space is now recommended, with demand from both international and domestic interests pointing towards numbers overtaking the 15,000 visitors and 538 participating organisations seen in 2015.


Localised Opportunities in Shipbuilding & Machinery Abound

Shipbuilding, engineering and electronics are considered key sectors within Federal Law No. 488-FZ “On Industrial Policy”, the document which has framed Russia’s economic strategy since mid-2015 and which encourages and incentivises international partners to set up production inside Russia.

Across all three areas, collaboration is proving key to modernisation. Commercial shipbuilding production in Russia has grown by 11% since 2014, Russian Prime Minister Dmitry Medvedev said recently. Order No 502, in force from the first days of May, makes 400 million roubles available in 2017 as subsidises to cover part of construction costs for domestic shipbuilders, if the replaced tonnage is going for scrap.

Hyundai_Samho_Heavy_Industries_logoCollaboration is certainly at the heart of Hyundai Heavy Industries’ new joint company with Russia’s Far Eastern Shipbuilding and Ship Repair Centre to design commercial vessels and support shipbuilding. Again, Vladivostok’s Far East Shipbuilding Centre is the vehicle through which Rosneft and Siemens will develop floating production, storage and offloading units.

With more than 80% of ship equipment in Russia imported, almost half comes from Finland. Typical of the opportunities available was a recent agreement between Rosneft and Finland’s Lamor Corp to study producing oil spill response equipment in Russia for the arctic on the basis that 70% of production will be ‘localised’ by 2025. Rosneft is also behind plans for a coastal support base in Murmansk to provide oilfield and maintenance services for ships operating along the Northern Sea Route, and also recently reached agreement with the China National Chemical Company to build Russia’s largest marine coatings plant at Zvezda.

NEVA 2017 is thus ideally timed to explore moves to kickstart efforts to renew Russia’s river shipping fleet, which sustains around 1,000 companies operating 24,000 vessels, with many ships dating to the 1970s. It is reckoned that over 80% of Russia’s sea/river class ships will need to be de-commissioned and replaced by 2020 to meet safety regulations.

Sergei Italyantsev, Head of the Sea/river vessels Programme Directorate, United Shipbuilding Corporation pinpointed localised production of high-tech dredging equipment as a key path for shipbuilding development at the International Forum of Dredging Companies in Moscow.


Good timing for Russian offshore market reflection 

Offshore prospects remain conservative in the short term, but NEVA 2017 provides an interesting moment for reflection, three months before the turn of a year that many predict will bring a long-awaited market upturn.

Russian Energy Minister Alexander Novak told delegates at the recent International Arctic Forum that Russia could wait for oil prices to hit $70-$100/bbl before resuming Arctic drilling. He told Bloomberg that Russia expected investments in the Russian Arctic to reach $600 billion in the next 20 years and that the total initial recoverable resources amount to 286 billion tons – 60% of all Russia’s hydrocarbon resources.

Analysts at Morgan Stanley have forecast that it will be the end of 2019 before the lower price is reached. Russia plans to boost exploration in the Arctic Barents and Kara seas from 2019, Novak said.

Other signals are not quite so clear-cut. In early May, Saudi Arabia and Russia agreed to extend oil output cuts in pursuit of higher crude prices, but only by a further nine months until March 2018. In the same month, Lukoil passed the 9m tonne milestone of oil produced by Vladimir Filanovsky and Yuri Korchagin fields in the Caspian Sea, with “the most significant gain” in its offshore production observed since V. Filanovsky came on stream in the Q3 2016.

Meanwhile, Gazprom subsidiary Gazprom Neft has signed a memorandum of understanding with India’s ONGC Videsh to join forces for implementation of offshore hydrocarbon production projects in Russia and elsewhere. The parties expressed their intent to exchange best technical, production, and commercial practices on field development in the Arctic and on the Sakhalin Island, as well as to explore the possible use of these at license blocks owned by Gazprom Neft, including the Arctic Dolginskoye field in the Pechora Sea.


Ice-breaking initiatives drive Arctic fleet growth

As a fossil fuel-driven economy, Russia’s appetite for new sources of oil and gas lies behind its unique fleet of nearly 40 ice-breakers, but it is a fleet hard-pressed to keep up with demand.

The recent International Arctic Forum in Arkhangelsk was perhaps not the first to hear a Sovcomflot projection that the 6.5 million tons moving via the Northern Sea Route in 2016 would triple by 2020. However, its restatement focused attention on the scale and urgency needed to upgrade ice-breaking tonnage.

Eleven new ice-breakers are already in production, and Chief designer of the Krylov Ice-Class Vessels Center, Valery Belyashov, emphasized what has been accomplished. “A new generation of diesel and nuclear icebreakers is under construction,” he said. “The series of two-draft nuclear icebreakers 22220 Arktika, Sibir and Ural will replace the outdated icebreakers of the Arktika type and various diesel-electric icebreakers.”

Artist impression of nuclear powered icebreaker "Arktika" (project 22220) Image: ROSATOMFLOT

The nuclear-powered Arktika is a particular source of pride: the world’s biggest and most powerful icebreaker, the 33,500 dwt vessel can smash through 3m-thick ice escorting oil and gas tankers from the Yamal Peninsula and Gdansk oil fields to Asia-Pacific markets.

However, while some believe a total of 14 new icebreakers are needed (six nuclear, four diesel and four supply), Deputy Prime Minister Dmitry Rogozin, who also chairs the state commission on the Arctic told Rossiiskaya Gazeta that the requirement would be greater. To offer year-round escort of vessels along the Northern Sea Route and the Arctic Ocean, and serve ports, Russia would need 5-6 nuclear icebreakers of 60-110MW, 6-8 non-nuclear icebreakers of 25-30MW and 8-10 non-nuclear icebreakers of 16-18MW, he said.

With Arktika reckoned to have cost $1.74 billion, the upgrade will not come cheap, especially when the necessary infrastructure and meteorology stations along the Northern Sea Routes are considered.

“What Russia really lacks is mighty technical vessels. For example, we do not have strong cranes, drilling ice vessels,” the Deputy Prime Minister said. “Not many can build vessels of the kind, which can work in the complicated Arctic conditions. This is a promising direction for the Russian industries.”


Technology comes in from the cold for Oil & Gas Transport

The award-winning Arctic shuttle tanker Shturman Albanov is the first in the world designed for export loading year-round from the Gulf of Ob and the first ship in RS class attracting Polar Code certification.

tanker_shturman_albanov

Technical highlights in 2017 include entry into service of Sovcomflot’s, and the world’s first icebreaking LNG carrier Kristof De Margerie from Daewoo Shipbuilding & Marine Engineering (DSME), for the Yamal project – the first of a series of 15 ships to be ready for year-round shipping of gas from Sabetta.

Some 196 tankers have been despatched since oil transportation from the Novoportovskoye field first started via the Northern Sea Route in April 2016. Yamal’s significance as a mainstay outlet for Russia’s oil and gas exports grows with each passing month. Yamal LNG, operated by Novatek, is expected to reach its annual target production of 16.5 million tons of LNG as soon as 2018. As part of a separate collaboration with Shell, meanwhile, Sovcomflot has ordered the world’s first (four) LNG-fuelled Aframax tankers from Hyundai Heavy Industries.

Sovcomflot_LogoEven so, acclaim for Sovcomflot’s Shturman Albanov as the European Marine Engineering Awards ‘2016 Ship of the Year’ in a competition judged by an industry jury and a shipping public vote recognizes the first of the six-ship series, but also Russia’s maritime industry transformation. The Russian Register of Shipping Arc7 ice-class ship can operate at temperatures as low as – 45 °C and features two Azipod azimuth thrusters with total capacity of 22 MW. Double Acting Tanker (DAT) functionality allows the ship to sail through heavy ice up to 1.8 m thick when moving astern.

It is the design and technology necessary to sustain energy exports from some of Russia’s harshest locations, in a year of development and opportunity that culminates at NEVA 2017, to be held September 19-22 in St Petersburg.