Deliberate localization

An immense market is being formed in Russia for shipbuilding which is associated with the large-scale plans for Arctic and continental shelf development, modernization of auxiliary fleet, icebreakers and naval ships. Is domestic industry ready to meet this challenge or is it to let the foreign partners skim the cream off?

Those reap who sow

Rosneft says it will need about 300-500 support vessels and 102 drilling rigs for the development of the license areas in the Kara Sea alone. Besides, at least 3 icebreakers are required for icebreaking services at the Kara Sea route.

Apart from Rosneft, the fleet is needed for other companies’ projects, first of all those of Gazprom and NOVATEK. Yamal LNG project requires the construction of 16 Arctic gas carriers. They will be built by Sovcomflot, According to Rosneft President Igor Sechin each tanker costs $300 (almost $5 bln in total). Sovcomflot is also to secure orders for 13 gas carriers for Gazprom and 6 tankers for Gazprom Neft. So total value of just the mentioned contracts is estimated at $10 bln.

The number of LNG carriers of various ice classes required in the period 2016-2020 could be in excess of 30 vessels. This statement was made in February 2014 at the annual coordination meeting with representatives from Russia’s leading shipbuilding and oil & gas companies as part of Sovcomflot’s shipbuilding programme. The meeting was attended by the representatives of the Ministry of Industry and Trade, United Shipbuilding Corporation, Gazprom, NOVATEK etc.

Besides, it is necessary to build up the fleet of icebreakers including the 100-MW icebreaker. 

We should also mention the necessity of modernization and building up of naval fleet with state-of-the-art ships able to meet the challenges of modern warfare. Both surface ships and submarines are to be transferred to modular multipurpose combat platforms. Modular ships are already under construction in the U.S.A. under the programme on construction of naval inshore crafts.

So Russia sees intense expansion of the demand for different vessels and crafts, especially sophisticated ice class ships which opens perfect opportunities for the development of domestic shipbuilding, construction of HVA ship components and equipment.

However, many enterprises of the industry require modernization with many to be built from the scratch which is quite difficult amid the complicated access to long-term money and high competition with foreign producers.

With a view to renovate the industry, United Shipbuilding Corporation was set up in Russia. Yet, that was not enough. Far Eastern Shipbuilding and Ship Repair Center of USC was handed over to the consortium of investors including the vertically integrated companies (first of all Rosneft and Gazprom).

Meanwhile time presses and the construction should commence right now before global LNG market is divided between other players. Hence the urgent need to find a balance between the time limits and phasing out of imports through localization of production.

Experts at the annual meeting concluded that Russia does not currently possess the necessary shipbuilding facilities to build vessels of the required size and in the volumes needed. There are also strict deadlines regarding the introduction of industrial and production facilities for oil & gas projects and Russian shipbuilders lack the experience required to fully satisfy the demands of the oil & gas companies in the next several years. Therefore, to achieve the stated goals it will be necessary to form partnerships with foreign shipbuilders.

“In contrast with other types of large-tonnage vessels, gas carriers have a more complex construction cycle that requires special attention to technical detail. Bearing in mind the intended operational area of these vessels, it is vital to bring in the very latest innovations in the global shipbuilding industry,” said Igor Tonkovidov, Executive Vice-President of Sovcomflot.

At the end of the meeting the decision was taken to create a special team to investigate the possible phased localisation of gas carrier construction under the supervision of Deputy Minister of Trade and Industry A. L. Rakhmanov.  

At the Meeting of the Commission for Strategic Development of the Fuel and Energy Sector and Environmental Security held in June 2014, RF President Vladimir Putin recommended to place orders for construction of vessels via domestic shipbuilders with foreign companies as sub-contractors. The President believes it would let Russian shipyards get resources and competence for localization.

“Order via USC or its subsidiary (Far Eastern Shipbuilding and Ship Repair Center) and they will accumulate competence”, Vladimir Putin said to Leonid Mikhelson, Director General of NOVATEK OJSC. – Then they will understand what and how is to be built, they will come to foreign partners and place an end order on competence transfer. … Otherwise, if you do not place orders in Russia we won’t have the industry. We will not recover it and everything will go somewhere abroad… If they are general contractors, general customers they will negotiate directly with foreign partners and foreign partners will depend on them and will have to transfer their competence under certain conditions, will have to come to our territory and agree upon localization within certain terms and to certain extent”.

Light at the end of the tunnel

Meanwhile, production of equipment and components for shipbuilding industry is quite developed in Russia.

Marine diesels in Russia are produced by Penzadieselmash OJSC, RUMO OJSC (Nizhni Novgorod), Kolomensky Zavod OJSC. Type and size range of marine diesels of the above manufacturers are technically equivalent diesel engines manufactured by ANGLO Belgian Corporation (Belgium) with nominal capacity within 600-4,000 KW, Man Diesel & Turbo (Germany) with nominal capacity within 1,300-5,800 KW, Wartsila (Finland) with nominal capacity within 600-1,200 KW.

Marine diesels is also a specialization of Bryansk Machine Building Plant CJSC, Zvezda OJSC (Saint-Petersburg), VDM OJSC (Balakovo), UDMZ LLC, Barnaultransmash OOJSC – high-speed engines with nominal capacity of 390 KW, Dagdiesel OJSC (Dagestan Republic), Tverdieselagregat CJSC.

Compressors produced by Compressor OJSC are technically equivalent to products of SAUER&SOHN, HATLAPA (Germany), ATLAS COPCO (Sweden) and Tamrotor Marine Compressor AS (Norway).

Auxiliary boilers and boiler units are manufactured by Baltiysky Zavod – Sudostoyenije OJSC (equivalent to technical parameters of Aalborg Industries (Sweden) and Leninskaya Kuznitsa Plant OJSC (Ukraine).

Distillation units are produced by Rokem Service LLC (equivalent to technical parameters of ROCHEM (Germany) and Proletarsky zavod OJSC (equivalent to technical parameters of Allweiler, Hamann (Germany), DESMI (Denmark), Flaktwoods (Finland).

Pumps are produced by HMS Pumps OJSC (equivalent to technical parameters of ALLRUS Maschinenhandels GmbH (Austria) and Imo Pump (USA), Plant named after Gadzhiev OJSC (equivalent to technical parameters of ALLRUS Maschinenhandels GmbH (Austria), DESMI (Denmark), ENA OJSC, Gidromash OJSC, LGM OJSC – (equivalent to technical parameters of Allweiler, Hamann (Germany), DESMI (Denmark), Flaktwoods (Finland), Turbonasos OJSC, KNZ CJSC, HMS Pumps OJSC, Vzlet Plant (equivalent to technical parameters of National Oilwell Varco, MI-Swaco (USA), NETZSCH Mohnopumpen GmbH (Germany).

Oily water treatment units are produced by ECOS LLC (equivalent to technical parameters of DVZ SERICEC GmbH (Germany), Coffin World Water Systems, LLC (USA).

Marine propellers and vessel movement control means are produced by Zvezdochka Center OJSC. They are also equivalent to certain products of foreign companies.

Steering engines are produced by Proletarsky zavod OJSC and Plant named after Gadzhiev OJSC (equivalent to technical parameters of Hatlapa, Blohm+Voss Industries (Germany); Rolls Royce Marine (UK). 

Besides, some Russian companies manufacture deck equipment (windlasses, winches, cranes).

Drilling equipment is produced by Uralmash Holding LLC, Generation Group.

In Russia they also produce a wide range of navigation and hydroacoustic equipment, special equipment for self-submerge drilling rigs.

In production of steering simulators Russia is in step with foreign companies as well. Transas is a successful company in this industry.

As Russia primarily needs sophisticated Arctic class vessels, advanced technologies like 3D-modeling comes to the fore in prospective development of national shipbuilding.

According to the comment provided to IAA PortNews by Alain Houard, Vice President of Marine and Offshore Industry at Dassault Systemes (France), forward-looking shipyards all around the world are interested in software allowing for both 3D designing and providing vessels with the comprehensive technological stuff for automated control. 

“In Russia, like in other countries worldwide, shipbuilding is behind other industries in the use of IT solutions (for instance, aircraft and automobile industries), as their introduction requires large investments while profitability of shipbuilding companies is 5% at the most. It is very expensive to change the technological “landscape” in shipbuilding. I think, the Koreans are the most advanced in this respect. As for Europe and Russia, the majority of shipyards still use 2D designing,” Alain Houard says. At the same time he notes gradual introduction of 3D-technologies in Russia.

So Russia has a substantial base for successful phasing out of imports. It is important to ensure that huge resources spent by mineral companies for purchasing of vessels do not disappear from Russian economy to the accounts of foreign producers. Instead, they should be reinvested into the construction of new production facilities and shipyards as well as into modernization of the existing ones.

Vitaly Chernov