Shipbuilding gets its second wind

The need to create a modern fleet for offshore fields as well as the development of Russia’s inland waterways for transits flows prompted the government to focus more on shipbuilding and shipbuilding.

Ambitious fleet expansion project

Russia needs to expand its fleet to 1,900 ships of total value $42 billion until 2020. The figure was announced by a scientist at an international conference during Neva 2011 Expo. Valentin Panship, Academician of Krylov Central Research Institute speaking at the conference named "Russian shipbuilding and shipping, port activities, development of the shelf and the ocean" said that the demand of the Russian marine fleet amounts to 260 ships and 175 support vessels, while Director of Shipping of Gazprom Marketing & Trading Nikolai Grigoriev said the demand of Gazprom for two LNG projects only - Shtokman gas condensate field and the expansion of "Sakhalin-2" – might total at least 40 vessels.

To handle such a huge demand, Russia should either give these $ 42 billion to foreign shipyards, or, what is more preferable, award the newbuilds orders to Russian shipbuilding companies.

"We are able to develop the most sophisticated marine equipment and effectively use foreign experience," says Valentin Pashin.

It’s true that the domestic shipbuilding industry can boast its long experience in building ice-class vessels and a unique experience in building nuclear-powered icebreakers. This is especially important taking into account that Russia needs such vessels for development of the northern offshore deposits and to ensure navigation along the Northern Sea Route. In addition, new icebreakers would help solve the problems with winter navigation in the Gulf.

As Deputy Transport Minister Viktor Olersky announced at a scientific conference that the government has projected the construction of one nuclear and four diesel-electric icebreakers. In October, the contracts will be awarded either to a bidding winner or to a contractor chosen by the Russian President, most likely to United Shipbuilding Corporation (USC)."In any case, we expect to resolve the issue before the end of 2011," said the official.

Shortage of capabilities

However, the situation in the Russian recovering shipbuilding industry still facing difficulties. USC has not managed as yet to consolidate all the key shipyards, namely St. Petersburg-based Baltic Shipyard and Severnaya Verf, which remain in limbo. Speaking of the latter firm, its future business will largely depend on the Russian Government’s state guarantees for tens of billions of rubles for defense contracts.

Recently, Russian Prime Minister Vladimir Putin has signed a decree on state guarantees the shipyards provided prior to the end of 2015. As Andrei Fomichev General Director of Severnaya Verf and Baltic Shipyard commented, the government’s aid means the beginning of stable funding and the construction of serial warships for the Russian Navy.
 

According to the State's arms procurement program until 2020, Severnaya Verf is to deliver to the Customer, the Russian Defense Ministry before 2018 a series of six corvettes of Project 23185 and Project 23180 (upgraded Project  23180) and by 2020 - a series of six frigates of Project 22350. Now the shipyard is executing newbuilds contracts for 4 corvettes of Project 20380, 2 frigates of Project 22350 and a communications vessel of Project 18280 for the Russian Navy. Severnaya Verf in accordance with the decree of the Russian government is the sole supplier of frigates of Project 22350 and corvettes of Project 20380 corvettes.

Vladimir Putin has announced the rearmament of the Russian Navy as a priority of his program he will be implementing if he is elected President of Russia. Ex-Finance Minister Alexei Kudrin, dismissed recently, was against an increase of federal spending for state defense orders. This also gives reason to believe the government plans to boost funding of shipbuilding.

However, Baltic Shipyard is now experiencing serious financial difficulties so that it had to announce holdback pays. In this case a four oil tankers order awarded by Baltic Fuel Company to Baltic Shipyard turned out to be a reprieve for the company. The first newbuild was launched on September 27,2011. But this is not enough for the shipbuilding firm to resolve all of its problems. It’s urgent to find money for funding Rosatom’s orders for icebreakers. The newly appointed Governor of St. Petersburg Georgy Poltavchenko, who attended the BFC’s tanker launching ceremony, vowed he would be promoting new icebreakers orders for Baltic Shipyard. The official noted he had held successful talks with the head of Rosatom Sergey Kiriyenko. He added that the issue of funding a floating nuclear power plant (FNPP) contract is expected be settled in the near future.

Some time ago, Baltic Shipyard appealed against cancellation of a tender for construction of 25MW diesel-electric icebreaker. Eventually, the court ruled in favor of Baltic Shipyard and now the firm is making bids for the contract.

It is not entirely clear the future of new projects of USC, namely the construction of shipyards in the Far East and on the Kotlin Island in St. Petersburg. Experts doubt that the South Korean partners would be interested in the Far East mega-shipyard project, given that Korea is facing now growing social tension caused by underperforming of its yards facilities.

As to the Kotlin shipyard and shifting on the island of Admiralty Shipyards’ facilities, it is unlikely the new city authorities’ would welcome the idea. Thus, according to media reports, the city government mulls over possibility to cancel the New Admiralty Bridge project, which was a reason for Admiralty Shipyards relocation.

Vitaliy Chernov.