Sovcomflot and LNG developer Novatek sign multiple contracts to secure shipping for Arctic II project

Tuesday, 08 September 2020
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A Russian joint venture involving fleet owner Sovcomflot and natural gas company and LNG developer Novatek has signed contracts with a Russian bank and Zvezda Shipbuilding in the Far East to construct and lease 10 ice-breaking Arc-7 class LNG carriers.

The venture called Smart LNG has simultaneously signed long-term time-charter agreements for these 10 vessels with the Novatek-led Arctic LNG II project.

In total, contracts for 15 such vessels have now been signed, including shipbuilding, financing with Russian bank Veb.Rf Group, leases and time-charter contracts.

The Arctic LNG II project being developed with three gravity-based platforms and the estimated capital expenditure for the joint venture is now put at the equivalent of US$21.3 billion.

Arctic LNG will produce 19.8 MTPA of LNG as well as gas concentrate from the principal feed-gas resources, the Utrenneye gas field.

Novatek holds 60 percent of the Arctic LNG project and four other 10 percent stakes are shared between various shareholders.

The 10 percent holdings belong to French major Total, which is also a shareholder in the Novatek company, China National Petroleum Corp., China National Offshore Corp. and a Japanese investor group comprising Mitsui & Co. and the government institution, the Japan Oil, Gas and Metals National Corporation (Jogmec).

The contracts for the lead ship in the series were signed by Socomflot in October 2019 and the contracts for another four sister ships were signed by Smart LNG in January 2020.

Sovcomflot, also known as SCF, continues to implement its strategy, with the goal of steadily growing the company’s value through expanding its portfolio of long-term industrial shipping contracts.

“The company point as a special focus on operations in challenging climatic and ice conditions,” said Sovcomflot.

“With 10 long-term time charters added to this portfolio, SCF $20 billion in contracted future earning and receivables,” stated the Russian shipping line.

The vessels will be operated under the Russian Federation flag and the Russian Maritime Register of Shipping (RS) will provide supervision during the construction of the vessel series.

The Zvezda complex is located at Bolshoi Kamen on the coast of the Sea of Japan and about 12 miles northeast of the city of Vladivostok.

The shipbuilder is owned by a consortium of Russian energy companies, including Rosneftegaz, Rosneft and the financial affiliate of Gazprom, Gazprombank.

“Shipbuilding and time charter contracts for 15 Arc7 LNG carriers, signed between 2019-2020, enable the Russian shipping community to play a role in transporting cargoes of strategic importance for the Russian economy, which are generated by large-scale energy projects in the Russian Arctic,” said Igor Tonkovidov, President and Chief Executive of Sovcomflot.

“These contracts will also help to further develop our national expertise in ice navigation and create over 850 new jobs for Russian seafarers, as all the 15 vessels will have Russian crews,” explained Tonkovidov.

“We are pleased to see that this new generation of Arctic LNG carriers, which will contribute significantly to growing the cargo traffic along the Northern Sea Route, was designed based on SCF’s long-standing experience of safely operating vessels in ice conditions,” stated the Sovcomflot CEO.

Sovcomflot bases its success in developing long-term partnerships with key customers, including Gazprom, Novatek, Lukoil, Royal Dutch Shell, French major Total, Exxon Neftegaz and Sakhalin Energy.

The Russian line’s fleet comprises 146 vessels with a total deadweight of 12.6 million tonnes, including ships owned through joint ventures. More than 80 vessels have an Ice classification.


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