South Korean shipbuilder Samsung Heavy Industries is anticipating that its contract to build a further 10 Arc7 LNG carrier hulls and assist in ship construction at Russia’s Zvezda Shipbuilding Complex for newbuildings to serve Novatek’s Arctic LNG 2 project could be cancelled.
Local reports in South Korea quoted SHI as saying work on the remaining 10 of the 15 ships covered by the original contract has been “frozen”, although negotiations are said to be continuing.
These said international sanctions against Russia in the wake of the country’s invasion of Ukraine in February 2022 have complicated payments between the yard and the Russian contractor of the vessels.
Sovcomflot signed up for the first of the 15 ships, with Smart LNG — a joint venture of Sovcomflot and Novatek — taking on the remaining 14.
To date, five hulls have been built by SHI under the original contract.
All five of these have now been delivered to Zvezda, which recently announced the launch of a third vessel.
But TradeWinds has been told by sources following this project that while the first two ships are largely complete, there is still considerable outfitting to be done on the third and fourth ships which is complex as foreign contractors have withdrawn from the work due to international sanctions.
A fifth ship is less advanced. Its cargo tanks are installed but it is missing its accommodation, propulsion and specialised ice bow.
Aside from the Zvezda ships, there is also interest in another three Arc7 LNG carriers being built at Hanwha Ocean.
Originally ordered by Sovcomflot, which later cancelled all three newbuildings under sanctions pressures, the yard is now completing the ships for its own account.
But TradeWinds has learned that Sovcomflot and the yard — formerly Daewoo Shipbuilding & Marine Engineering — had gone to arbitration in Singapore over the three LNG carriers.
At least one high-profile Russian shipping face is also known to have visited the yard’s management in South Korea to discuss the vessels.
Sovcomflot did not comment when asked about the arbitration process.
In Russia, Zvezda is working to complete the three Arc7 hulls it has received from SHI. But in 2022, GTT — the key LNG cargo containment system designer for the ships — withdrew from the business due to sanctions and their delivery schedule was delayed.
Zvezda took delivery of the first hull from SHI in October 2021.
This vessel — the Aleksey Kosygin — for Sovcomflot is set to be the first LNG carrier completed by a Russian shipyard.
It was originally due for delivery in March this year, with a plan for the vessel to make its maiden voyage through the Northern Sea Route.
A sister ship, the Pyotr Stolypin — the first in the series for Smart LNG — was also scheduled to follow this year.
In August, Zvezda announced the launch of the third Arc7 at its yard — the Sergei Witte.
The newbuildings are the next generation of Arc7 LNG carriers and follow the 15 South Korean-built ice-breaking LNG carriers that currently serve Novatek’s Yamal LNG project.
Novatek and its partners have recently indicated that the first train of the 19.8 million tonnes per annum Arctic LNG 2 project will start by the end of this year.
The first gravity-based structure housing this liquefaction unit recently arrived on site on the Gydan Peninsula in the Russian Arctic.
This article has been updated since it was first published
