Sovcomflot in breakthrough Sakhalin II LNG contract

Lloyds List: Sovcomflot in breakthrough Sakhalin II LNG contract

“Shell-led Sakhalin Energy Investment will time charter the 147,200 cu m vessel for 20 years.”

Sep 14, 2004

Profit jumps as shipping group envisages export deal will be its ticket into world gas club, writes Tony Gray

A groundbreaking contract in the liquefied natural gas (LNG) market as well as strong profit growth have been unveiled by Sovcomflot, the Russian state-owned shipping group.

Sovcomflot, along with its partner Nippon Yusen Kabushiki Kaisha (NYK) of Japan, has won the tender issued by the Sakhalin II project for a large LNG carrier.

Shell-led Sakhalin Energy Investment will time charter the 147,200 cu m vessel for 20 years.

Japan’s Mitsubishi Heavy Industry will build the vessel.

The yard has beaten compatriot Mitsui Engineering and Shipbuilding to the contract.

The vessel will be powered by a steam turbine main engine developing a speed of 19.5 knots.

Sovcomflot said this was the first time a Russian shipping company had participated in the construction and operation of LNG carriers for Russian export cargo.

The Russian company’s management believes this project will help the company break into the ‘world gas club,’ with the experience gained useful for further LNG export projects in Russia.

Sakhalin Energy Investment is expected to need a maximum of three ships.

The Sovcomflot’NYK partnership is now well placed to win further business.

The Russian company’s determination to stake a claim in the LNG market was underlined earlier this year when the company placed its first newbuilding order at Daewoo Shipbuilding ‘ Marine Engineering without employment in hand.

Sovcomflot, which is in line for privatisation by the Russian government, lifted first-half consolidated net trading profit after taxation by 56% to US$61m.

This showed an increase from $39m in the like period of 2003.

Freight and hire receivable advanced 6.5% to $211m from $198m.

Trading profit from vessels increased by 19% to $138m from $116m.

The six-month net profit of the Sovcomflot parent company alone improved to Roubles62m ($2m) from Roubles34m.

The group said that taking into account the first-half operational results of Sovcomflot and its subsidiaries and the projected profit, the company’s executive board planned to double the dividend payment in 2004 to about Roubles140m.

Sovcomflot’s growing profits and dividends will stand it in good stead with investors if the company pursues a New York listing,

The listing is one of the possible options under the privatisation.

During the first half of 2004, the Sovcomflot group agreed newbuilding contracts worth $375.8m.

These comprised orders with Daewoo for two ice-class suezmax tankers.

They also included the 145,700 cu m LNG carrier, as well as the construction of two 35,000 cu m liquefied petroleum gas carriers at Hyundai Heavy Industries.

– Cristoforo Colombo , a Belgian dredger working on the Sakhalin II project, spilled over 100 tonnes of heavy fuel and diesel after losing power and running aground in strong winds,

The spill polluted 5 km of public beach.

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