South Korean yard cancels order on Russian Arctic tanker

Daewoo Shipbuilding and Marine Engineering said in a financial filing that Sovcomflot failed to make a payment.

By Atle Staalesen, The Independent Barents Observer - May 25, 2022
The DSME has built the tankers used in Novatek’s Yamal LNG project. (DSME via The Independent Barents Observer)

Daewoo Shipbuilding and Marine Engineering has announced cancellation of an LNG carrier ordered for the Russian Arctic LNG 2 project.

The carrier is the first in a series of three vessels ordered by Russian shipping company Sovcomflot.

In a stock exchange filing, South Korean shipbuilder said that the customer has failed to make an installment payment on a contract that it received in October 2020, iShipNet informs.

The vessel is worth $270 million and is part of a larger $800 million order. Unless the Russian customer meets its payments requirements, the Daewoo Shipbuilding would ultimately have to cancel also the second and third vessel.

The powerful carriers are to be built for the Arctic LNG 2, the major liquified natural gas project on the far northern Gydan Peninsula. They are based on a unique ship design developed by Finnish firm Aker Arctic, enabling year-round shipping through the most icy parts of the Northern Sea Route.

In addition to the three carriers ordered by Sovcomflot, another three similar ships were ordered by Mitsui O.S.K. Lines. The carriers were to become part of a major fleet serving the Arctic LNG 2 project.

The situation follows Russia’s war against Ukraine and the major sanction regime imposed on Russia by the international society.

The EU’s fifth sanctions package bans exports to Russia of key industry components and companies like Linde are suspending its business development activities in Russia.

The sanctions now threaten to paralyze Novatek’s major industrial projects in the Arctic.

Daewoo Shipbuilding is a key partner for Novatek in several of the company’s Arctic projects. The Korean company is also to build Novatek’s floating LNG storages facilities near Murmansk.

A deal worth $748.2 million was signed by Daewoo and the Russian State Transport Leasing Company in June 2020. It includes the building of two 380,000-cubic-meter floating storage facilities. When ready, one was to be towed to a projected LNG terminal site in Vidyaevo on the Barents Sea coast and another to Kamchatka on Russia’s far eastern coast.