SOVKOMFLOT: investments into the future of the Company and State

With the appointment in the end of 2004 of a new Administration of the “Sovkomflot” headed by Mr. Igor Shuvalov (Chairman of the Board of Directors) and Mr. Serguei Frank (General Director), the Company announced their strategy of growth. By the year 2009, the total deadweight of the “Sovkomflot” fleet, even if assessed on a most pessimistic scenario, will increase by 1.5 times thus amounting to a figure of 1.5 million tons. Mr. Serguei Teryokhin, the First Deputy of the General Director of “Sovkomflot”, comments upon the Company’s future as it is seen by its Administration.

In December 2004, the Board of Directors of “Sovkomflot” has approved strategy of development of the Company until the end 2009. The shipment by sea of raw materials for power production, or “energy shipping”, where “Sovkomflot” avails of due skills and reputation, will remain a target segment of the Company’s development. Basing on these skills and reputation, the Company will deepen its specialization with an aim to attain its leadership in this segment, making emphasis on cargoes originating from Russia. By 2010, the Company plans to increase the share of Russia-originating cargoes to 50% of the total amount of shipment.

Our special prospects are related to servicing the export from Russian ports. The “Sovkomflot” intends to attract major companies involved in the Russian market of raw materials for power production, of a scale of “Gazprom”, Exxon, “LukOil”, Shell and others, as charterers for medium- and long-term contracts.

Availability by the ships’ crews and Company’s Managers of the experience of ship operation in ice conditions is considered by us as an important competition advantage, and we are going to increase it further. Our Masters and navigators will undergo additional training for navigating in icy areas. Eight ships of ice class (which corresponds to 40% of the total portfolio) are already on order; these are intended for operation in Sakhalin and in Baltic, Barentz and White Seas. The Company plans to construct new generation icebreakers to ensure navigational and ecological safety of shipment of hydrocarbons from the port of Primorsk, whose annual turnover might exceed 60 million tons by the year 2010.

Acquisition by the fleet of most modern ships able to warrant a high level of navigational and ecological safety is a permanent concern of the “Sovkomflot”. The Company’s order book includes 17 ships whose contract price amounts to some 900 million USD. And this describes a tanker fleet which is one of the youngest in the world. Its average age is some 4.6 years, whereas the world’s figure is 11 years. 100% of Company’s ships belong to the double-hull type, with this world’s indicator equaling to 61%.

At the meeting of the Board of Directors it was recommended to strengthen the Company’s orientation towards a high-tech prospective segment of transporting natural and petrol gas (LNG and LPG). As for today, transportation of LNG happens to be a most dynamically growing segment of shipping by sea. The increase of LNG transportation in 2003 compared to 2002 reached almost 13%. According to preliminary assessment, in 2004 this figure is expected to be higher, and by 2010 the total volume of LNG shipped may reach 290 billion cu.m, which is nearly twice as much, as compared to the absolute figures of the year 2002.

Russia possesses a huge potential as a world’s gas exporter, and “Sovcomflot” is able to contribute to its realization. The Company successfully acquires experience in the practice of shipping liquefied gas by sea, and we are convinced that such practice will be demanded by domestic exporters as a means of entering new market areas not accessible by pipelines.

In September, “Sovkomflot”, acting together with a Japanese Company ‘NYK’ as partners, won a tender for shipping LNG from the Sakhalin gas fields. Entry of “Sovkomflot” to the liquefied gas shipping market is not only a new step of the Company’s history, but of the Russian fleet as well. To comply, two ice class gas carriers having a cargo capacity of 145,000 cu.m, were ordered at «Mitsubishi Heavy Industries». For future projects, two more gas carriers of a higher capacity will be constructed at «Daewoo Shipbuilding & Marine Engineering» in Korea.

World analysts firmly predict a fall in the oil shipment market in some three to four years, still we feel prepared to it. Freight market was always cyclic. Falls are always inevitable after rises. Our strategy will be oriented towards the Russian market. Therefore main work will aim at establishing mutually profitable relationship with Russian oil and gas companies and participating in their projects.

Go to Index of # 1(11) 2005


# 1(11), 2005

Serguei Teryokhin, the First Deputy of the General Director of “Sovkomflot”

Serguei Teryokhin, the First Deputy of the General Director of “Sovkomflot”