President Vladimir Putin: I have signed a decree on the reorganisation of two existing companies – Sovkomflot and Novoship – as a single new company. This was largely the initiative of the ministry and yourself. I would like to know how you intend carrying out this decision.
Sergei Frank: Sovkomflot is Russia’s biggest shipping company and has been showing quite dynamic growth of late. The fleet has grown by 60 percent over the last two years. The company’s value, independently assessed by investment banks, has increased two-fold and dividends paid to the state, the company’s sole shareholder, have increased almost four-fold. The process of consolidating the two companies will involve establishing a tanker company, which will confidently take its place among the world’s five biggest tanker companies. Its assets will come to around $5 billion. This consolidation is a logical step given the consolidation process taking place in the world energy sector. The big oil and gas companies are our customers and this accordingly makes consolidation in the tanker sector a logical process.
This will be the biggest consolidation project in the tanker sector this year, but deals involving capitalisation of $2 billion were concluded a few months ago, and so we can say that this is an objective process that is taking place. By consolidating their resources, the two companies concerned will be able to give more reliable and quality support to the serious projects Russia is currently pursuing in offshore gas and oil production, to future shipments of liquefied natural gas, and to the development of the pipeline transport infrastructure. All of these projects will be complemented by quality services offered by a reliable major company.
Our goal is to turn this company into a national world-class public company. This is not just a question of size but also of the quality of corporate procedures and attractiveness for investors. Shipping the liquefied natural gas produced as a result of developing Russia’s offshore fields will require considerable financial resources. This is a capital-intensive sector and guaranteed access to the kind of capital required will be essential for both the country’s transport and energy sectors.
Vladimir Putin: How many ships have you placed orders for?
Sergei Frank: Sovkomflot currently has an order portfolio for 20 ships with total deadweight of around 2 million tons. A sizeable part of these orders have been placed with Russian shipyards. Last year, Sovkomflot invested 3 billion roubles in the Russian shipbuilding sector, mostly in the Admiralty Shipyards. I would like to inform you that we and our colleagues at the Admiralty Shipyards have already begun practical work to build ships here in Russia for transporting a volume of 70,000 cubic metres of liquefied natural gas. This is practically the volume we use now in the services we provide on the international market to companies such as Gaz de France. We will eventually need to replace our current vessels, and we want to be ready by this time to build their replacements here in the Russian Federation.
Vladimir Putin: How many ships has Novoship ordered?
Sergei Frank: Novoship has a similar portfolio – a very high quality portfolio. This is a solid tanker company and I am sure that by consolidating our human and financial resources and making use of the possibilities we have in Novorossiisk, St Petersburg and Murmansk, we will be able to provide a new quality of service to the Russian energy sector.
Vladimir Putin: Yes, our transport companies should have the most advanced technology and the best transport and best ships available to them. Considering that we are in the process of establishing a major shipbuilding company, which will bring different state assets together in one organisation, I hope very much that in this respect too the newly formed shipping company will take into account the possibilities offered by the Russian shipbuilding industry.
Sergei Frank: We are already holding active consultations with parts of the United Shipbuilding Corporation and with the corporation’s management. We have made clear to the industry what kind of orders our company is interested in. We are sure that the Russian shipbuilding industry has an excellent niche in terms of providing a wide range of vessels needed for developing offshore projects in Russia.
It is our view that there are no prospects in competing with the new shipbuilding powers such as China in building relatively simple conventional vessels. We need to get involved in high-technology projects and the possibilities for this exist. Just two weeks ago, we began work on a unique dual-purpose ice-class shuttle-tanker for servicing Gazprom’s offshore projects. There are only two or three shipyards in the world able to build such tankers, and we are pleased that the Admiralty Shipyard has taken on this project. We have decided to name the ship Mikhail Ulyanov – it is a ship that will need a good strong character. This is a model for the kind of ships that can and should be built here in the Russian Federation.
Vladimir Putin: I would like to draw your attention to two circumstances. First, Russian shippers and producers need to work in market conditions and provide world-class products and services that can out-perform those of their competitors. Second, and this goes for both shippers and producers, we need to be mindful of environmental issues and we need to ensure that the products and services we provide meet modern environmental standards.
Sergei Frank: We are currently in the process of building several series at the Admiralty Shipyards, and the tankers being built there meet the most stringent demands set out by the Lloyds Register, and this is the highest level possible.
Vladimir Putin: This is all the more important now with the development of port facilities in the Russian part of the Baltic Sea – the facilities at Ust-Luga and the work to increase throughput capacity at Primorsk.
Sergei Frank: We have discussed this issue on many occasions with Novoship’s management. We agree that the consolidated company should play a more active role in general, including in developing sea terminal infrastructure in the Baltic. We will invest money, knowledge and skills in order to raise the level of the terminal infrastructure to the highest international standards and possibilities.