Samsung Heavy Industries is likely to sweep orders from Russia for ice-breaking LNG carriers to be used for its Yamal LNG project.
Novatek, a state-run Russian energy company, recently asked the Russian government to approve its plan to place an order for 10 additional icebreaking LNG carriers worth US$3 billion on an overseas shipyard. If the Russian government approves the scheme, the number of LNG carriers to be used for Russia’s Arctic LNG project will increase to 25, including the 15 units that will be built by Zvezda, a state-run Russian shipyard. The Russian government allowed Zvezda to build the 15 units jointly with a foreign partner, which is required to transfer its technology to the Russian shipbuilder.
Zvezda selected Samsung Heavy Industries as its design partner and placed an order for five vessels (US$1.5 billion) on it in November 2019. Once completed, the five ships will transport 19.8 million tons of LNG a year from gas fields on the Gyda Peninsula in the Arctic Circle.
Zvezda has highly appreciated Samsung Heavy Industries' technological prowess and rich experience in building icebreakers. Icebreakers can move forward, breaking layers of ice more than two meters thick under extreme conditions of minus 52 degrees Celsius. Advanced technologies are required to build these vessels, such as cold protection design as well as propulsion systems for icebreaking at the front and back end of a vessel. An icebreaker costs US$300 million per unit. With this technology, Samsung Heavy Industries built three units of the industry’s first two-way icebreaking oil tankers for Russia's Soveclot in 2009.
In 2014, Russia signed a lump-sum contract with Daewoo Shipbuilding & Marine Engineering (DSME) in Korea to build all 15 icebreaking LNG carriers for the first Yamal project. This time, Zvezda is highly likely to make a similar contact with Samsung Heavy Industries.
It is good news to Samsung Heavy Industries that Novatek may scratch off a condition that the icebreakers be built in Russia. Tradewinds, a shipping-specialized media outlet, predicted that Russia may put the icebreakers’ normal delivery before a technology transfer in order to keep up with rapidly growing demand for LNG. If so, Samsung Heavy Industries' concerns about a shipbuilding delay will be significantly reduced.
If Samsung Heavy Industries succeeds in landing the entire icebreaking LNG carrier order for the second Yamal Project, the shipbuilder’s total orders for icebreaking LNG carriers are expected to hit US$8 billion (approximately 9.34 trillion won). This amount exceeds the shipbuilders order target of US$7.8 billion for 2019.