MOSCOW. (RIA Novosti political commentator Maxim Krans)
On June 20, Russian President Vladimir Putin signed a decree ordering the country's two largest tanker companies to be reorganized into a single corporation.
The objects of the merger are 100% state-owned Sovkomflot in St. Petersburg, the country's largest tanker company by capacity, and Novoship, the second largest, in which the government owns an 87.4% stake, in Novorossiisk on the Black Sea coast.
It will take nine months to complete the merger and hold an IPO. The new company will then become the fifth or possibly the third largest tanker operator in the world.
Putin recently met Sovkomflot CEO and former Transport Minister Sergei Frank and said this project was largely the idea of the ministry and Frank himself.
Frank proposed the merger seven years ago and continued to lobby for the project after resigning as transport minister and while he worked as an aide to Prime Minister Mikhail Fradkov. In 2004, he was appointed Sovkomflot director general and started working on the merger project.
At that time, Frank said that the trend towards consolidation, already apparent on the global shipping market, would become more pronounced in the event of a future recession. Although the market remains upbeat and no recession is in sight, the companies had no choice but to merge because they would otherwise have had trouble staying afloat and vying with their rivals on this difficult market.
The Russian shipping industry is not alone in consolidating. In 1999, Denmark's A.P. Moller Maersk Group took over Sealand Corporation, an American shipping company, to establish Maersk Sealand, the largest container company in the world.
Both Sovkomflot and Novoship were privatized in the early 1990s and started operating the most advanced vessels of that period. Both companies eventually established Russia's largest cargo fleets for transporting fuel and energy.
Although Russian vessels are on average almost 25 years old, the two companies operate vessels that were commissioned 5.5 and nine years ago, respectively. Sovkomflot and Novoship each own 56 vessels, mostly tankers, and their consolidated fleet will displace over 8 million metric tons. These figures will make the new company a strong rival to the global leaders.
Production will soon begin at hydrocarbon deposits on the Russian Arctic shelf and will lead to tougher competition among tanker companies. The new Russian tanker giant will mostly operate in the Arctic, because oil and gas production in that region is expected to total 17% and 21%, respectively, of nationwide output by 2020.
The Russian Industry and Energy Ministry said 55 offshore oil and gas platforms, 85 specialized transport vessels and 140 auxiliary ships would have to be built in the next 20 years in order to develop Arctic deposits. It would be imprudent to allow foreign companies to operate on this lucrative market. Therefore, as a first step, Sovkomflot and Novoship have each ordered about 20 new tankers and gas carriers displacing almost 2 million metric tons of deadweight.
In early June, both companies submitted a joint design for Arctic shuttle tankers intended to transport oil from the Prirazlomnoye deposit in the Barents Sea. The keel of the first shuttle tanker was laid a week later in an impressive setting at St. Petersburg's Admiralty Shipyard, one of the old Russian shipbuilding companies. It thus appears that Russia can minimize foreign involvement in developing its hydrocarbon deposits on the Arctic shelf.
Energy giant Gazprom, which owns the Shtokman gas condensate deposit in the Barents Sea and other similar projects; Sevmash, Russia's largest shipyard, in Severodvinsk, northern Russia, which makes nuclear-powered submarines, oil and gas platforms and tankers; the Murmansk shipping company, which operates a unique ice-breaker fleet and has its own terminals in Arctic ports; and pipeline monopoly Transneft, now building an oil pipeline from Eastern Siberia to the Pacific coast and contemplating another one along the Barents Sea coast, will jointly develop the Arctic deposits.
Frank said the Sovkomflot-Novoship merger would make it possible to more effectively support ambitious projects on the Russian continental shelf involving both liquefied natural gas and pipeline development.
President Putin has set a number of objectives for Russian ship-owners in the last few months. The new corporation will have to support the national shipbuilding industry and place most of its orders with struggling Russian companies.
Until now, Russian shipyards operated below capacity, because it was cheaper to order ships from foreign companies, which have the most advanced equipment and technologies. Novoship, for one, does not have a single Russian-made vessel.
In May 2007, Putin told a conference in Murmansk that the Russian merchant marine must start flying the national flag once again. Out of the 1,500 ships controlled by Moscow, only 170 fly the Russian flag and therefore pay taxes. Sovkomflot has not registered any large ships in Russia, while only six Novoship vessels are registered domestically.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
