Samsung Heavy Industries (SHI) is highly likely to win another big shipbuilding order from Russia.
Russian state-run energy company Novatek, which is participating in Arctic LNG 2, a major liquefied natural gas (LNG) development project located on the Gydan peninsula, Russia, is in eleventh-hour negotiations with SHI to order 7 ice-breaking shuttle tankers and six ice-breaking LNG carriers (including two optional vessels).
This order will be made by multiple clients, and the value of the order has not yet been finalized. Yet the total value is expected to reach at least US$2.6 billion (about 3.42 trillion won), given that each vessel exceeds US$200 million. The contract can be signed as early as next month.
If SHI wins this order, the shipbuilder’s 2021 order-taking performance will improve significantly. Its annual order intake will exceed its target of US$9.1 billion set for 2021. This year, SHI’s annual order receipts reached US$7.1 billion (about 54 ships), 78 percent of the target.
SHI is highly likely to win the big order as it has a partnership with Zvezda, a state-run dockyard located in Vladivostok, Russia. SHI signed a joint design contract on ice-breaking LNG carriers with Zvezda in September 2019. The Russian shipyard highly praised SHI's ice-breaking technology. SHI won the world's first bidirectional icebreaker in 2005. In 2019, SHI also established a joint venture with Zvezda. So far, it has signed a joint construction contract with Zvezda for one ice-breaking shuttle tanker and 15 ice-breaking LNG carriers. Ice-breaking LNG carriers are 50 percent more expensive than general LNG carriers.
SHI plans to focus on the Russian market as it is expected to place orders for icebreakers and LNG carriers in the future. Novatek chairman Leonid Mikhelson said in a meeting with Russian President Vladimir Putin in May that the company planned to build four additional LNG production facilities from 2024 to 2030, which would require construction of 26 to 30 ships.
To preemptively respond to this, SHI established a local corporation (SHI-RUS) with a 100 percent stake in 2020.
