Russia’s tanker company Sovcomflot expects to continue growing its industrial business, which includes offshore services and gas transportation. The unit already makes up more than 50% of revenues
Sovcomflot’s chief financial officer tells Lloyd’s List that the company has an $8.4bn backlog from long-term contracts.
Sovcomflot chief financial officer Nikolay Kolesnikov envisages further diversifying its portfolio from conventional oil and product tankers to shuttle tankers and ice-breaking supply ships for upstream projects plus liquefied natural gas carriers.
SOVCOMFLOT, the Russian tanker company, is targeting further growth in its industrial business unit, which comprises offshore services and gas transportation.
The company has a backlog of $8.4bn from new and continuing contracts, some spanning up to 20 years, said chief financial officer Nikolay Kolesnikov.
The figure, which is principally derived from the industrial unit, reflects future contracted revenues including from vessels under construction and jointly owned carriers.
“We are staying disciplined and consistent in our strategy implementation,” Mr Kolesnikov told Lloyd’s List in a phone interview from Moscow.
The company has been diversifying its portfolio from conventional oil and product tankers to shuttle tankers and ice-breaking supply ships for upstream projects plus liquefied natural gas carriers, which represent more than 50% of revenues.
That strategy resulted in the size of the group tripling, in terms of its asset base, number of vessels, and revenues, over the past decade.
“We want to continue in that direction,” said Mr Kolesnikov.
Last year, the company agreed LNG contracts with oil majors Shell and Total worth more than $500m. It also renewed or extended contracts for four shuttle tankers for the Sakhalin-2 and Varandey projects with Sakhalin Energy and Lukoil, respectively.
It is seeing a return to growth from the conventional tankers business owing to expectations of a market recovery. Less than half of its fleet trades in the spot market.
“We share industry optimism on the tanker markets — the fourth quarter was good and compensated for the losses incurred in the first half of 2018,” Mr Kolesnikov said. “The beginning of this year was also strong. The supply-demand dynamics and orderbook make it very manageable across all tanker segments we operate in.”
The company has 145 vessels in its fleet, most of which are owned, according to its website. It has 118 tankers in total, 13 gas carriers, 12 specialised vessels and two bulk carriers. The figures include four jointly owned LNG carriers and nine long range one tankers.
Two of the LNG carriers are owned with Nippon Yuesen Kaisha and operate from Sakhalin to Japan, while the other two are employed for the Tangguh LNG project in Indonesia. Samudera Indonesia has a minority stake in one of the vessels, called Tangguh Towuti.
The LR1s are in a joint venture with commodity trader Glencore for the carriage of oil products.
The company has two very large crude carriers, the only tankers of this size, which are on charter to Petrochina, with “years” still left on the contract, according to Mr Kolesnikov.
In terms of vessel disposals, only three medium range product tankers are listed as held for sale, with further disposals dependent on asset prices, he said.
Its two chartered-in vessels are for marine seismic ships for the upstream services unit.
Sovcomflot has five tankers and three LNG carriers under construction, according to its website.
It took delivery of one of the ice-class LNG-fuelled aframaxes earlier this year, with another two due in the next few months, Mr Kolesnikov said, adding that three previous vessels from the six-ship order placed at the Hyundai Samho yard in South Korea were delivered in the second half of last year and are plying the Baltic, North Sea and emission control areas. Two of the vessels are chartered to Shell.
Of the five tankers being built, two LNG-fuelled aframaxes are destined for charters with Rosneft. They are being constructed at the Zvesda shipyard in Russia and are due for delivery in 2022, while three medium-range product tankers being built at the same yard will be chartered to Novatek.
The three Atlanticmax LNG carriers are being built at Hyundai Samho. One of the carriers, due to be delivered in the first quarter of 2020, is chartered to Total, while the other two, scheduled for delivery by 2021, are chartered to Shell.
LNG as future fuel
Sovcomflot has no plans to use scrubbers on board its vessels to comply with the International Maritime Organization’s new sulphur regulations, because it believes that LNG is a “clean marine fuel for the future” with virtually no emissions.
Using scrubbers “is not a sustainable long-term solution — it is a short-term band-aid patch,” the executive said, adding that there is “no big drama” because the company already has vessels trading in the ECA areas, which have 0.1% sulphur limits, well below the IMO cap of 0.5%.
“If the whole industry switches to low-sulphur fuel, we will comply,” he stated.
It has been using LNG-powered engines for a number of years on LNG carriers, as the tri-fuel engines offer more flexibility.
The LNG-fuelled aframaxes shuttle back and forth from Russia and Rotterdam, able to make two to three round trips before having to refuel, the executive said, making it cost-competitive.