On 23-24 September 2017, SCF Group (PAO Sovcomflot) held its 16th annual Business Partners Meeting, which this year took place in Moscow.
About 200 delegates attended, from organisations including: major Russian and international oil & gas companies; Russian ministries and governmental agencies; investment and finance; insurance, legal and other specialists participated in the conference’s events.
The conference’s plenary session featured presentations by: Sergey Ivanov, Special Presidential Representative for Environmental Protection, Ecology and Transport; Kirill Molodtsov, Russia’s Deputy Minister of Energy; Dmitry Kobylkin, Governor of the Yamalo-Nenets Autonomous District; Jacques de Boisséson, General Director of Total E&P Russie and General Representative of Total in Russia; Igor Bulantsev, Senior Vice-president of Sberbank, Head of Sberbank CIB.
Maxim Oreshkin, Russia’s Minister of Economic Development, sent a special address to welcome the conference delegates.
The meeting programme also included reports from industry experts such as Jørn Bakkelund, Senior Analyst at Clarksons Platou, and Jarand Rystad, Managing Partner of Rystad Energy.
The conference delegates focused on global tanker market trends, the dynamics of oil and other energy pricing, and the prospects for new oil and gas project implementation, including those that involve SCF Group. Special attention was paid to the development of “green” technologies in commercial shipping, and the new international requirements for vessels to comply with strict environmental standards.
In his address to the conference delegates, Sergey Ivanov stressed that for many years Sovcomflot “Has been working hard to develop business streams previously unknown for Russian shipping, has been expanding its fleet, and improving the qualitative indicators of its vessels”. The result of this work, according to Sergey Ivanov, has been to take leading positions in several segments of the energy shipping market, as well as in servicing offshore exploration and oil & gas production.
In his report Sergey Ivanov paid special attention to environmental protection issues. Considering the risks of operating fleet in the Arctic Basin, and taking into account the fragile nature of the Arctic ecosystem, the Russian State requires all companies operating in the Arctic to unconditionally comply with strict environmental standards, possess an appropriate competence level, and demonstrate high levels of social responsibility. “In this sense Sovcomflot, whose key priorities have traditionally been safety, the introduction of advanced technologies, environmental protection and energy efficiency, complies with all these criteria,” said Sergey Ivanov. He also noted a significant contribution from the shipping company to the development of professional Russian maritime education.
Maxim Oreshkin, Russia’s Minister of Economic Development, said in his welcome address: “Sovcomflot successfully achieved the objectives set for the company by its shareholder. The company steadily delivers positive operational and financial results despite a significant slowdown of the world tanker market.”
“The Russian Government and the Ministry of Economic Development give the company priority in integrated servicing of offshore oil & gas projects on the Russian shelf, with a special focus on operations in the adverse climatic conditions of the Arctic and Subarctic seas. As part of Russia’s policy for the development of the Arctic zone, major investments are being made into the development of offshore energy deposits and the modernisation of transport infrastructure. For its part, SCF Group of course makes considerable contributions to this process”, stressed the minister.
Dmitry Kobylkin, Governor of Yamal, said that the active commercial development of Yamal centres on the environmental safety of all processes. He commended Sovcomflot for meeting high environmental standards when constructing new vessels for operation in harsh climatic conditions, with “green” technologies incorporated in the vessel design. “It is extremely important not only for Yamal, Russia but also for a whole world”, said the governor.
In his report Sergey Frank, President and CEO of Sovcomflot, noted that the company is subsequently implementing its development strategy aimed at the greater participation of Sovcomflot in long-term oil & gas projects. One of the major events in this regard was the recent delivery of the unique ice-breaking LNG carrier Christophe de Margerie designed for Yamal LNG. Another milestone event was the start of SCF tankers operating in the Gulf of Ob and the Kara Sea, where they transport crude oil for the Novy Port project. For the first time in history, large-scale year-round oil transportation from the shallow and ice-shackled Gulf of Ob became possible thanks to the new series of Arctic shuttle tankers purpose-designed for this job, said Sergey Frank. Industry professionals gave recognition to theoutstanding technical characteristics of these vessels: in May 2017, judges of the International Marine Propulsion Awards competition named Shturman Albanov, the lead vessel of the series, 2016 Ship of the Year.
Together with SCF’s shuttle tankers, offshore oil & gas projects in Russia are being served with ice-breaking platforms supplying vessels, which represent another growing segment in SCF’s business portfolio. Today the company provides most of the oil and gas shipment capacity under the Sakhalin-1 project, including the round-the-clock operation of vessels for emergency prevention and procurement and supply of production platforms, the transfer of personnel, cargoes and equipment to the facilities. SCF’s vessels also provide the same services for the Sakhalin-2 project. In 2017, SCF Group took delivery of Gennadiy Nevelskoy, a new platform supplying vessel constructed for the Sakhalin-2. Sergey Frank also noted that in 2017 SCF also took delivery of Ivan Gubkin, a state-of-the-art 3D seismic survey vessel which is second to none in Russia.
The environmental agenda remains at the top of SCF’s list of priorities, said Sergey Frank. Step by step, the company is moving towards introducing a breakthrough series of the world’s first Aframax crude oil tankers, purpose-designed to be fuelled by LNG and thus switch the principal fuel of Aframax tankers, the workhorse of the global tanker industry, to LNG.
Commenting on SCF’s results in 2016 and the first quarter of 2017, Sergey Frank stressed that the company has sustained a solid financial performance despite material deterioration of the tanker markets and slumping demand seen in the gas and offshore sectors. While SCF’s 2016 financial results are lower than those from 2015, which was one of the best years for the shipping industry over the last decade, these figures are still higher than those from 2014: net profit amounted to USD 207 million against USD 84 million, EBITDA amounted to USD 707 million against USD 579 million, and net revenue amounted to USD 1.14 billion against USD 1.04 billion.
Igor Bulantsev, Senior Vice-president of Sberbank and Head of Sberbank CIB, said: “Banks are struggling for the best customers, and for the banking sector, Sovcomflot is one of the dream customers, with prospective projects”. The mutually beneficial cooperation between the bank and shipping company has been rapidly developing over the past years and today Sberbank is the largest creditor of Sovcomflot. The Bank is interested in maintaining relationships with reliable clients that have built up a stable business, such as Sovcomflot, while investing in modernising Russia’s infrastructure remains priority for Sberbank, he explained. He added that Sberbank is considering an increase in the share of transport in its loan portfolio, and takes a positive view of financing the shipping industry.
In March 2017 Sovcomflot and Sberbank signed a 15-year USD 174 million credit agreement. SCF Group has used these funds to refinance its existing debts, in particular those connected with the Prirazlomnoye project.