Sovcomflot and Novatek to form SMART joint venture

Malcolm Latarche

05 September 2019

Russian ship operator Sovcomflot is to form a joint venture with compatriot gas producer Novatek under the name SMART LLC. The newly formed SMART LLC will be registered in Vladivostok and is expected to be in operation before the end of this year.

The main purpose of the joint venture is to ensure safe year-round maritime LNG logistics from the Arctic LNG-2 and other current and prospective projects of Novatek. The newly established company will work with the relevant shipyard to provide the technical designs for future vessels, place shipbuilding orders and supervise the technical aspects of their construction. The JV will function as the ship-owner and fleet operator. The company will also account for the financing requirements of the projects.

Sovcomflot building
Office of Public Joint Stock Company Modern Commercial Fleet or Sovcomflot with flags of company and St Petersburg at the entrance, St Petersburg, Russia

No less than 17 new generation Arc7 LNG-carriers are planned to be built at the Zvezda shipbuilding complex, in cooperation with technology partners of the Russian shipyard. The resulting vessels are expected to be delivered from 2023 - to 2026.

The vessels’ technical specifications will differ from the LNG carriers of the Christophe de Margerie series. Notably, the anticipated vessel design foresees a changed hull shape and better icebreaking capabilities, to enable efficient commercial shipments from the Gulf of Ob eastwards along the Northern Sea Route all year-round. The vessels will be operated under the Russian Federation flag.

It is anticipated that the financing for the vessels’ construction will be organised with the assistance of VEB.RF, on the basis of the project structure taking into account best Russian and international practices. In 2010, Vneshekonombank successfully financed the construction of the two Arctic shuttle tankers of the Mikhail Ulyanov series at the Admiralty Shipyards in St. Petersburg. The ships are now in year-round operation serving the Arctic Prirazlomnoye project.

Sergey Frank, President and CEO of Sovcomflot, stated, "Establishing a JV with NOVATEK is the optimal solution, considering the high capital intensity of the projects, as well as its long-term nature and the financial resources required. It also recognises the benefits of using the latest technologies and our experience of fleet management in severe ice and climatic conditions. The company is potentially open for other professional investors and participants that may be considering the development of LNG-projects in the Arctic.

“For Arctic and subarctic sea basin projects, Sovcomflot’s vessels have transported over 250 million tonnes of crude oil and over 50 million cubic meters of LNG. We are pleased to bring this unique experience and expertise accumulated by the company during years of successful and safe operation of our technically unique fleet of specialised vessels. The implementation of the project envisages the great importance of training for seafarers of the vessels, and it is symbolic that the agreement was signed in the building of the legendary Maritime State University named after Admiral G. I. Nevelskoy, one of Russia's oldest universities and a pioneer in the formation of the traditions of Arctic navigation.