sea cluster business map summary final alexey zak

8/2/2019 Sea Cluster Business Map Summary Final Alexey Zak

1/76

Final Report - Summary

North-West Russia

Sea Cluster

2011 Finpro rySaint Petersburg

Business Map


2/76

Project Objectives

INTRODUCTION

2 2011 Finpro ry


3/76

Presentation Structure

Introduction of Project Objectives and ParticipantsI. Oil and Gas Sector Overview

Offshore Oil and Gas Development in Russia Major Offshore Oil and Gas Fields in NW Russia

II. Business Mapping Value Chain: Concept and Roles of Key Players Business Maps of Offshore Fields: Prirazlomnoye, Shtockman, Yamal Assessment of Demand for Vessels and Equipment for Offshore Projects

III. Shipbuilding Cluster Overview

Facts, Trends and Challenges of NW Shipbuilding Cluster Government Policy on Shipbuilding and Sources of Financing Role and Structure of OSK (United Shipbuilding Corporation)

IV. Major NW Ports Overview Ports Map and Profiles Modernization Programs and Port Development Cargo Turnover Statistics

V. Shipping Companies Overview Development Trends of Marine Shipping Main Challenges of Shipping Companies State Policy on Marine Shipping

VI. Opportunities for Finnish Companies Potential for Finnish-Russian Cooperation in Information Exchange Opportunity Chart and Identified Potential Projects Manual for Identifying Opportunities in the Report

VII. Success Stories

Contents

3 2011 Finpro ry


4/76

Project Objectives

Study the potential and main development trends of off-shore gas and oilfields of the NW Russia

Study the government policy in terms of the shipbuilding and off-shore cluster(state influence in the industry, role and structure of state corporations)

Identify main participants at the macro-level: oil and gas companies, shipyards,ports, port equipment manufacturers, services suppliers and prepare mainparticipants profiles, incl. est. business size for major shipbuilders

Define main strategic challenges for the key the macro-level players

Identify main suppliers of the first and second levels for the mentioned macro-level market players

Generate a cluster map with the scheme of mutual influence of the mainmarket players, study the value chain in the industry

Study the current role of Finnish companies in the shipbuilding cluster ofRussia, explore the possibilities to expand cooperation between Finnish andRussian companies in this sphere

Study backgrounds for establishment of a joint Russian-Finnish group or agroup for solving design and technical problems of the cluster

Project Tasks Set Forth by Steering Group

4 2011 Finpro ry


5/76

Project Participants

Project Team

Special thanks for expert comments to:

1. Mikko Niini, Acer Arctic Oy

2. Kim Jansson, Wrtsil Oy3. Jouko Kunnari, STX Europe

4. Mervi Pitknen, Koneteknologiakeskus

1. Virpi Herranen, Finpro2. Ivan Nokhrin, Finpro3. Alexey Zak, Finpro4. Ekaterina Malevskaya-Malevich, Finpro5. Natalia Bolshevikova, Finnish-Russian Chamber of Commerce6. Timo Koponen, Finnode

5 2011 Finpro ry


6/76

Project Implementation Plan

Stage 1

Desk study

Stage 2 Interviews with market experts, participation in industry events

Stage 3 Interviews with Finnish Sea Cluster companies

Stage 4 Reporting

Stage 5 Dissemination

6 2011 Finpro ry


7/76

Oil and Gas Sector

OVERVIEW

7 2011 Finpro ry


8/76

Russia on the World Stage

Russia has significant share in the worlds gas reserves (est. 25% to 28%) Total proven reserves in crude oil in Russia amount to approx. 6% of the worlds

(various estimations up to 10%)

24 %

17 %

14 %

4 %

4 %4 %

3 %

30 %

World's natural gas reserves

Russia Iran

Qatar Turkmenistan

Saudi Arabia United States

United Arab Emirates Others

Source of estimations: Ministry of Natural Resources and Ecology, BP Statistical review of world energy 2010

Russian Oil and Gas Reserves

20 %

13 %

10 %

8 %8 %

7 %

6 %

3 %

3 %

22 %

World's oil reserves

Saudi Aravia Venesuela

Iran Iraq

Kuwait United Arab Emirates

Russia Libya

Kazakhstan Other

8 2011 Finpro ry


9/76

Depletion of onshore fields

Major part of profitable hydrocarbons onshore reserves is under exploration Offshore fields development is vital after 2015 in the light of exhaust of

onshore reserves

82 %

70 %40 %

18 %30 %

60 %

0 %

20 %

40 %

60 %

80 %

100 %

NorthCaucasus

Ural-Volgaregion

WesternSiberia

Depletion of onshore reserves by regionleft

depletion

Currently explored onshore reserves almost depleted

9 2011 Finpro ry


10/76

Budget planning is influenced by oil and gas: 34% of Russian Federal budgetincome is generated directly and indirectly by the sector At present oil and gas sector accounts for 25% of GDP, hence it is key to

Russian industrial development and is recognized as strategic for the state Arctic offshore oil and gas development is the key driver for other sectors, in

particular, shipbuilding (initial investments are est. USD 15 bn for primary fields rough estimation for 3-5 yrs)

In practice only state owned Gazprom and Rosneft (and their subsidiaries)have a legal right to exploit offshore carbon resources of Russia in accordancewith the effective law which allows access to offshore reserves solely toRussian legal entities with a major share of the state

Operators of offshore fields can be companies with control share owned by thestate, e.g. Shtockman Development AG (shareholders are Gazprom, Total,Statoil) which acts as operator for Shtockmanovskoye offshore gas field

Novatek, a private gas production company participates in smaller scaleonshore projects in Yamal (e.g. construction of LNG plant in Yamal) andcurrently has no plans to participate in offshore projects

Zarubezhneft is a state-owned oil and gas company established in 1967,active in international oil and gas projects and petroleum production incountries like Vietnam, Iraq, Iran, Cuba, Libya, Syria, Bosnia and Herzegovina.In Russia the company is developing Kharyaginskoye oil field in NenetskyDistrict (in partnership with Total, Norsk Hydro Sverige)

Offshore Oil and Gas Development in Russia

Oil and gas is strategically important for Russia

10 2011 Finpro ry


11/76

Russian Offshore Perspective

Russian continental shelf covers 6,2 mln sq.km. and 4 mlnof them, are prospective for oil and gas development

The major part of the reserves is located on the arctic shelf,

including basins of the Barents and the Kara Seas Total reserves of perspective shelves are approx. 100 bln

tons of fuel equivalent

Gas takes the majority of the shelfs resources 76 trncubic meters

Main offshore fields are located in the East (Sakhalinmegaproject) and primarily (by reserve volumes) in the NorthWestern part of the country

Present day offshore oil production accounts for about 3% ofthe total volume in Russia

Arctic Shelf

Prospective Offshore Fields

11 2011 Finpro ry


12/76

Oil & gas is of a vital importancefor Russian economy and statebudget

Onshore fields are close to

terminal depletion

Russia is likely to face invariablenecessity to invest significantamounts for the development of

offshore projects

General conclusions

12 2011 Finpro ry


13/76

YAMALKara sea

SHTOCKMANBarents Sea

PRIRAZLOMNOYEPechora Sea

YAMALOb and Taz Bay

Major Offshore Oil and Gas Fields in NW Russia

Murmansk

Archangelsk

13 2011 Finpro ry


14/76

Business

MAPPING

14 2011 Finpro ry


15/76

Value Chain: Process-based Concept

GeophysicalExploration

DrillingTransport &

ShippingProduction &

Delivery

Drilling RigsTechnological Platforms Tankers

Ice-Breakers

TugsService Ships

Supply Vessels

FPSOStorage

TerminalsLNG Plants

Research Vessels

15 2011 Finpro ry


16/76

Value Chain: Roles of Key Players

V A L U E C H A I N

GeophysicalExploration

Drilling Transport & Shipping Production & Delivery

ResearchVessels

DrillingRigs

Techno-logicalPlatforms

Tankers Icebreakers

Tugs ServiceVessels

SupplyVessels

FPSO Storage Terminals LNGPlants

SUPPLY

CHA

IN

Oil & GasCompanies

ShippingCompanies

ShipyardOperators

Engineering,Design, R&DInstitutions

Port Operators

Supplier Associations

State Bodies and StateCorporations

Project Management, Contracting, Financing

Fleet Ownership and Operating

Engineering and Design, Blueprints, Makers Lists

PortManagement

Services for Vessels, Fastening,Traffic Handling

Storage andServiceOperations

Shipbuilding, Construction, Engineering and Design

B2B Information Support, Market Analysis, Contact Events andConferences

Federal Budget Financing, Coordination, Corporate Management,Strategizing

16 2011 Finpro ry


17/76

Prirazlomnoye

Discovery: 1989

Operator: Gazprom Neft Shelf OOO(Gazprom OAO subsidiary)

Proximity to shore: 60 km

Sea depth: 20 m

Type of reserves: crude oil

Reserves: 46.4 mln tons

Est. extraction: 6.5 mln tons p.a. Est. fully fledged production start: 2011

Development period: 25 years

Prospective port for product delivery:Varandey/Murmansk

Type of delivery transport: shuttletanker DW 70000 tons

Key Data

17 2011 Finpro ry


18/76

Prirazlomnoye Business Map

VALUE CHAIN

Drilling & Extraction Transport & Shipping Production & Delivery

Drilling RigsTechno-logical

PlatformsTankers

Ice-

breakersTugs

Service

Vessels

Supply

VesselsStorage Terminals

SUPPLYCHAIN

Oil & GasCompanies

Gazprom Dobycha Shelf

n.a.

ShippingCompanies

Sovkomflot Varandey

ShipyardOperators

Zvezdochka SevmashAdmiraltyShipyards

BaltiiskyZavod,

AdmiraltyShipyards,

VyborgShipyards

Pella,Sredne-NevskiyZavod

Severnaya Verf,Vyborg Shipyards,

Yantar

Engineering,Design, R&D

CNII Krylova, Malakhit,Rubin, Korall

Sevmash Malakhit TBD Malakhit

Port OperatorsMurmansk Commercial Seaport,

Archangelsk Commercial Seaport,Varandey Terminal (TBC)

MurmanskCommer-

cialSeaport

NaryanmarNeftegaz(LUKOIL+ConocoPhillips)

SupplierAssociations

Murmanshelf, Sozvezdie

State Bodies andState Corporations

OSK, Regional administrations, Ministry of Industry and Trade

18 2011 Finpro ry


19/76

Shtockman

Discovery: 1988

Operator: Shtockman DevelopmentAG (Gazprom, Total, Statoil)

Proximity to shore: 600 km (to Kolapeninsula)

Sea depth: 350 m

Type of reserves: gas condensate

Reserves: 3.9 trillion m3

(gas), 56mln tons (condensate)

Est. extraction: 23.7 bln m3 p.a. (71bln m3 p.a. after 2020)

Est. production start: 2016

Development period: 50 years

Prospective port for product delivery:

Teriberka / Murmansk Type of delivery transport: TBD

Key Data

19 2011 Finpro ry


20/76

Shtockman Business Map

VALUE CHAIN

Drilling & Extraction Transport & Shipping Production & Delivery

Drilling

Rigs

Techno-logical

Platforms

TankersIce-

breakers

TugsService

Vessels

Supply

Vessels

Storage TerminalsLNG

Plants

FPSO

SUPPLYCHAIN*

Oil & Gas Shtockman Development AG (JV Gazprom, Total, Statoil)

Shipping Sovkomflot, Gazflot

ShipyardsSevmash, Zvezdochka, Admiralty Shipyards, Baltiisky Zavod,

Vyborg Shipyards, Pella, Sredne-Nevskiy Zavod, Severnaya Verf, Yantar

Engineering,Design, R&D

CNII Krylova, Malakhit, Rubin, Sevmash, Shipbuilding & Shiprepair Technology Center

Ports Teriberka, Murmansk Commercial Seaport, Archangelsk Commercial Seaport

SupplierAssociations

Murmanshelf, Sozvezdie

State Bodies andState Corporations

OSK, Regional administrations, Ministry of Industry and Trade

* Companies presented here are anticipated as most probable project participants, however, the business map is subject to change upon SDAG decision20 2011 Finpro ry


21/76

Yamal

Tchugoriakhinskoye

Severo-Kamennomysskoe

Kamennomysskoe-more

Parusovoye

Obskoe

Tota-Yakhinskoye

Antipayutinskoye

Semakovskoye

Yamburg

Cape Kamenniy Cape Parusniy

Severo-Kamennomysskoe:primary gas field on the Ob shelf

Discovery: 2000

Operator: Gazprom DobychaYamburg OOO (Gazprom OAOsubsidiary)

Proximity to shore: 50 km Sea depth: 11-14 m

Type of reserves: gascondensate Reserves: 350 bn m3 Est. extraction: 15,3 bn m3 /year Est. fully fledged production start:

2018 Development period: 7-8 years

Type of delivery: gas pipeline toParusniy cape

Key Data

21 2011 Finpro ry


22/76

Offshore Oil and Gas Development in Russia

Financial crisis triggered economic development downturn and may causepotential delays in complex and expensive offshore projects

Shale gas production in the United States brought the global gas marketto uncertainty yet became a global trend of the industry

Russia has no own shale gas production technologies since the focus hasbeen set on conventional gas production. Many Russian experts were

skeptical about its perspectives in the world

Development of offshore technologies raises demand for presently non-existent modern marine fleet, subsea technologies and creates necessityfor major upgrade of production facilities in shipbuilding

Russia lacks environmental protection fleet which would solve oil spillageproblems in case of emergency

Lack of the technologies and equipment necessary for offshore works,demand for investments in related industries creates favorable conditions forforeign companies

Challenges for offshore projects

22 2011 Finpro ry

A f d d f l d i l


23/76

Assessment of demand for new vessels and terminalsfor continental shelf development in Russia until 2030

FLOATING DRILLING RIGS34 UNITS

PLATFORMS55 UNITS / $43 bn

RESEARCH VESSELS39 UNITS

TANKERS58 UNITS / $9.5 bn

ICE-BREAKERS46 UNITS / $4 bn

LNG TANKERS27 UNITS

TRANSSHIPMENT TERMINALS2 UNITS / $4.3 bn

SERVICE VESSELS93 UNITS / $ 0.9 bn

LNG PLANTS &TERMINALS39.5 mn.t/yr / $0.85 bn

23 2011 Finpro ry

Demand for complicated floating technical


24/76

Demand for complicated floating technicalequipment of near-term prospects

Shtockman field LNG tankers (capacity150-200 th.m)27 units required

Offshore floating system for gas intake, preparation, and transferfrom Shtockman field by pipelines to shore3 units required

Offshore ice-resistant drilling rig for exploratory drilling in shallowice regions1-3 units required

Semi-submersible drilling platforms5-7 units required

A prerequisite for construction in Russia construction of a shipyard with a drydock with the following measurements: length about 400m, beamabout 80m

24 2011 Finpro ry


25/76

Shipbuilding ClusterOVERVIEW

25 2011 Finpro ry


26/76

Shipbuilding Cluster: Facts and Trends

Historically shipbuilding industry in Russiawas driven by demand from the militaryand defense

Collapse of Soviet Union destroyedhorizontal industrial chains, mostmodern and technologically advancedshipyards were in Ukraine

Russian maritime cluster lies mostly inarctic climate zone and the fluvialshipbuilding is limited by relatively shortnavigation periods

In present day civil shipbuilding is mainlydriven by oil and gas sector, specifically

due to the development of offshore fields State support is intended to attract

private investments in the industry whiledeveloping international cooperation tobring production capacities up to date

Shipbuilding Cluster Overview

Photo: Admiralty Shipyards in St Petersburg

51 %34 %

6 %4 %

2 %1 % 3 %

World ShipbuildingProduction, 2008

South Korea

China

EU

Japan

Philippines

Russia

Rest of the World

26 2011 Finpro ry


27/76

North Western Shipbuilding Cluster

25% of countrys largest

shipyards are located in theNorth West Russia, i.e.industrial potential inshipbuilding and ship repair ofthe region is about 60% of thecountrys total

North Western cluster isprimarily concentrated in St.Petersburg hosting:

40% of the countrys R&D

institutions accounting for

80% of all shipbuilding-related R&D works

65% of shipbuildingworkforce

shipbuildingworkforce

all works

65 %

40 %

80 %

100 % 100 % 100 %

St Petersburgs Share in CountrysShipbuilding Workforce

Share of St.Petersburgall Russia

Photo: Shipbuilding Berth at Admiralty Shipyards in St Petersburg

North Western Shipbuilding

Cluster

R&D workforce

27 2011 Finpro ry


28/76

2007 2008 2009 2010 (3Q)

AdmiraltyShipyards

259.8 101.3 147.2 n.a.

Baltiiskiyzavod

115.3 111.3 81.3 16.4

VyborgShipyard

45.3 283.7 585.8 191.5

Sevmash 197.2 372.5 69.6 n.a.

Zvezdochka n.a. 342.6 170.6 n.a.

(cont.) North Western Shipbuilding Cluster

Main NW Shipyards Turnover

Volumes, EUR mln

Photo: Vyborg Shipyards

Photo: Baltiiskiy Zavod

28 2011 Finpro ry


29/76

Challenges for Shipbuilding Industry

High degree of wear of fixed assets greatpart of main production assets is up to 70%worn out

Technological inferiority labor intensity ofthe industry is 3-5 higher than that abroad,outdated technologies are still used

Loss of highly qualified staff low general

demand and incompetitive salary levelworsen staffing potential

Unfavorable financial environment lackof sophisticated long-term financing facilitiesin Russia makes it almost impossible to raisefunds inside the country

Complicated taxation and customs duties,esp. for equipment import

Limited production capacities of theexisting shipyards existing facilitiesprovide only partial supply for heavy tonnagevessels, i.e. no shipyard in Russia can buildships with DW over 100 thousand tons

Challenges for Shipbuilding Industry

Photo: Ship Repair Plant in Archangelsk

Photo: Zvezdochka Shipyards in Severodvinsk

29 2011 Finpro ry


30/76

Government Policy on Shipbuilding

State recognizes the need for renewal of arctic fleet before 2020 Total number of vessels to be built by 2020 is ranging from 1400 to 1500

In 2-3 years time its necessary to build at least 13 offshore platforms, 9icebreakers and servicing fleet (tankers and supply vessels)

Existing Federal programs for financing shipbuilding industry allocatefunding for 560 ships, 150 of which cannot be built in Russia due to limitedproduction capacities of shipyards

Strategic program for development of three shipbuilding centers acrossRussia: West, North and East is being enforced

East center is actively developing (ongoing cooperation with KoreanDaewoo to build ice ships)

West and North centers are currently being re-organized under centralmanagement by OSK (state-owned shipbuilding corporation)

Goal for Russian shipbuilding industry is set for reaching 2% in global civilshipbuilding in 10 years (i.e. double current export volumes to USD 2bn., and triple in 20 years)

Internal civil shipbuilding market in Russia is estimated to reach USD 23bn in 5-7 years

Strategic goals for industrial development

30 2011 Finpro ry


31/76

Sea-cluster related legislative measures tosupport industrial development:

Strategy of shipbuilding industrydevelopment until 2020

Federal law on State support forshipbuilding industry of Russia

Various initiatives for creating technical and

institutional infrastructure (e.g. leasing andlong-term investment schemes)

Federal programs (state-financed):

National technology base

Development of civil shipbuilding in2009-2016

Development of transport system ofRussia in 2010-2015

Support for effective production infishing industry in 2009-2013

(cont.) Government Policy on Shipbuilding

31 2011 Finpro ry

S f Fi i f Shi b ildi


32/76

Sources of Financing for Shipbuilding

FederalPrograms

(DirectState

Financing)

National Technology Base 2007-2011

Development of civil shipbuilding in 2009-2016

RUR 150bn Engineering & Design:Production facilities

planning, RND, EnergyEfficiency, Blueprint

Shipbuilding:Platforms, Drilling ships

and rigs, Tankers,Service and Supply

Vessels

Gazprom,

Rosneft,Sovkomflot,

etc.(Indirect

StateFinancing)

Direct orders from state-ownedcompanies and corporations

RUR 1700bn

Development of transportsystem of Russia in 2010-2015

RUR 268bn

Support for effective productionin fishing industry in 2009-2013

RUR 25bn

~800vessels

~260vessels

~300vessels

NOTE: All figures presented here as planned and estimated

32 2011 Finpro ry

D i i M ki P i Shi b ildi


33/76

Production

Implementation

Supply

Planning

Engineering

Design

Financing

Order PlacementProject Management

Oil and gascompanies

Shippingcompanies

Engineering and Design CompaniesR&D Institutions

Shipyards

EquipmentManufactures

Suppliers

Decision Making Process in Shipbuilding

Makers Lists

BlueprintsProjects

OrdersContracts

33 2011 Finpro ry

R l f U it d Shi b ildi C ti (OSK)


34/76

Role of United Shipbuilding Corporation (OSK)

Vertically integrated state-owned United Shipbuilding Corporation, OSK, isexpected to facilitate control of funds allocated for the industry development and

to limit excessive competition in the market.

The main target

The most critical problems to be solved

fastest and profound upgrade of production facilities technical retooling

optimization of economy schemes in shipbuilding.

Development, design, production, supply, warranty and service maintenance,upgrade, repair, disposal of shipbuilding equipment of military and non-militarynature, and facilities for continental shelf development, implementation of newtechnologies in shipbuilding.The corporation plans to establish new design agencies, construct andupgrade new shipyards.

Top-priority activities of OSK and its subsidiaries

34 2011 Finpro ry

St t f OSK


35/76

Structure of OSK

AdmiraltyShipyards

Sredne-Nevsky

ShipbuildingPlant

ShipyardYantar

KrasnoyeSormovoShipyard

KronshtadtMarine Plant

Sevmash

SPOArctica

Zvezdochka

SRY Nerpa

Baltiiskiy zavodIceberg CentralDesign Bureau

KhabarovskyShipbuilding

Plant

Far EasternPlant

Zvezda

DalzavodHolding

R&DInstitute

Bereg

Nikolaevsky-na-

Amure ShipbuildingPlant

NorthernCenter of

Shipbuilding

Far EastCenter of

Shipbuildingand ShipRepair

United ShipbuildingCorporation

SvetlovskEnterprise

ERAWestern Center

of Shipbuildingand Ship Repair

SevernayaVerf

35 2011 Finpro ry


36/76

Major NW PortsOVERVIEW

36 2011 Finpro ry

M j NW P t L ti d L i ti


37/76

Major NW Ports Location and Logistics

Logistic sea lines for major NW ports(as viewed by North Western Shipping Company)

Vyborg Port

Primorsk Port

St Petersburg Port

Ust-Luga Port

37 2011 Finpro ry

Major NW Ports Cargo Structure


38/76

921

128

29107

Vyborg Port1185

Bulk

General

Others (forest,containers)

Inlet

8 356

173831

998Ust-Luga Port

10358

Bulk

General


Inlet

74 891

4 266

Primorsk Port79157

Oil

Diesel Fuel

8 032

11 649

14 819

15 908

St. Petersburg Port50408

Bulk

General


Inlet

Major NW Ports Cargo Structure

Aggregate volumes for 2009 cargo turnover,thousands of tons

38 2011 Finpro ry

Main Trends in Port Development


39/76

Main Trends in Port Development

Increase in transloading: In 2009 the volume of transloaded cargo inRussian Seaports reached 496 mln tons. As per various estimationstransloading volume can reach 774 mln tons by 2015

Productive capacity of Russian Ports will rise to 454 mln tons per year by2015

Capacity reserve of the seaports are estimated to increase by 15% and

this will let Russian foreign trade cargo from neighboring states proceedto Russian Ports

Development of deep-water ports of Murmansk, Ust-Luga, Kaliningrad isexpected to increase their role as international transportation hubs

Improvement of logistic infrastructure is expected via construction oftransshipping complexes with vehicle and railway access

Budgetary support for port development is expected to be supplementedby Public Private Partnership (PPP)

Port construction projects are planned to have special economic zonesstatus with particular preferences from authorities and potential taxincentives from the state

Main trends in port development

39 2011 Finpro ry

Main Challenges of NW Sea Ports


40/76

Main Challenges of NW Sea Ports

Most ports are situated in shallow water area and are connected to thesea by a ship approaching channel: e.g. St. Petersburg sea channellength is 47 km, Kaliningrad sea channel length exceeds 41 km

Annual expenses for dredging reach up to EUR 13 mln

Due to climate conditions in ports locations, ice escorting is required,icebreaker ship maintenance costs reach EUR 38 mln per year

Logistic infrastructure of port surrounding area remains poorly developed.Vehicle and railway access capacity is low. Railway workload to ports ofMurmansk, St. Petersburg, Ust-Luga, Vysotsk will continually grow

Limited space for container reception in the ports results in relatively lowcontainerization level (30-40% in Russia as compared to 80-90% inEurope)

Lack of port capacities for coal and grain is another remaining challenge

Idle time of vessels waiting for commission inspection is relatively highwhich is a result of ineffective procedure of crossing the state border ofRussia

Main challenges of the Sea Ports in the North-West of Russia

40 2011 Finpro ry

State Policy on Ports


41/76

State Policy on Ports

State strategic programs concerning port development include:

Strategies of Russian Sea Port Infrastructure Development up to 2030 Federal Target Program Development of Russian Transportation System

(2010-2015)

State policy is intended to increase port capacities: by 2015 est. cargo turnover 600-750 mln tons, aggregate capacity of sea

terminals 950 mln tons; by 2020 est. cargo turnover 700-900 mln tons, aggregate capacity of sea

terminals 950 mln tons; by 2030 with demand 1-1.1 bln tons, supply of port infrastructure 1.2 bln

tons

Federal State Unitary Enterprise RosMorPort is assigned to managefederal property in sea ports, including 521 mooring berths

101 berths are used by RosMorPort independently for fleet anchorage; 422 berths are rented by RosMorPort to private stevedoring companies.

Currently therere 111 rent contracts with private companies Based on RosMorPort the state plans to create 6 Sea Port Administrations:

Kaliningrad, Gulf of Finland, Northern (based in Murmansk port), FarEastern, Southern, and Caspian

For the needs of sea port administrations it is planed to build 50 rescueships

Stock of 25.49% shares of Murmansk Sea Trade Port is planned to be

privatized. Currently the shares are under federal property

State Policy on Port Development

41 2011 Finpro ry

Ust Luga Port


42/76

Ust-Luga Port

Construction of multifunctional port in Ust-Luga

is one of the major infrastructural projects inNWAs per general plan Ust-Luga port will have 16overload complexes with total cargo turnover120.6 mln tons:

84.6 mln tons of dry cargo;36 bln tons of oil cargo

Ust-Luga port will become the final point ofBaltic Pipeline System-2 (BPS-2).

Development plans for Ust-Luga

formation and development of port industrial-and-manufacturing zone;

construction of new housing facilities for 34.5thousand people; creation of recreational and tourism zones; corresponding development of external and

internal engineering and transportcommunications;

providing necessary social conditions for work,dwelling, and recreation

Port Profile

Photo: Ust-Luga Port, cargo terminal

Photo: Overlooking Ust-Luga Port

42 2011 Finpro ry

Ust luga Port


43/76

692

685

993

87

7

1034

1395

9

12

847

9

07

1374

1027

0

200

400

600

800

1000

1200

1400

1600

January

F

ebruary

March

April

May

June

July

August

Se

ptember

October

November

De

cember

Ust-Luga port argo turnover 2008-2010thousand tons

2008 2009 2010

Ust-luga Port

43 2011 Finpro ry

Ust Luga Port


44/76

Ust-Luga Port

Currently 6 out of 16 terminals operate in

Ust-Luga port; each terminal continues toincrease its capacities

Developer: Ust-Luga Company, OAO

Dredging works are being conducted in

order to allow super-ships with deadweightup to 160 thousand tons enter the port.Dredging works are financed according toFederal Target Program Development ofRussian Transportation System (2010-2015)

In 2011 construction of the second sea

channel in Ust-Luga port, 205 m wide andup to 18 m deep is planned

In 2011 it is planned to deliver twomanipulators and two loaders with cargocapacity 2 and 10 tons. Around 46 mlnrubles are forwarded for purchasing of

technological equipment

Construction and Modernization Plans 2011-2012

Photo: Construction site at Ust-Luga Port

Photo: Loading activities in Ust-Luga Port

44 2011 Finpro ry

Ust Luga Port


45/76

Ust-Luga Port

In 2011 works on berth Ug-2 arecontinued (transshipment ofrolling cargo automobiles);currently 12 000 cars can bestores on the berthsimultaneously, in 2011 thisnumber will be increased up to

13 000 cars In the beginning of 2011 Gunvors

complex of inlet cargo will belaunched. Itll be used foroffloading of oil and marine fuelfor export. Maximum cargoturnover is 30 mln tons of fuel oil

and light petroleum products perannum

Launch of first order of bunkercomplex related to Baltic PipelineSystem 2 is planned for 2012

Construction and Modernization Plans 2011-2012 (cont.)

Photo: Construction site at Ust-Luga Port

Photo: Oil Transfering Base at Ust-Luga Port

45 2011 Finpro ry

Primorsk Port


46/76

Primorsk Port

Port Profile

Primorsk Port is an oil-loading portwith its loading capacity about 30%of exported oil produced in Russiaand 37% of oil exported via RussianSea Ports

Port Primorsk is an inseparable partof Kstovo-Yaroslavl-Kirishi -Primorskpipeline (Project "North"), and a partof Baltic Pipeline System (BPS-1)operated by OAO AKTransnefteproduct

Starting December 2001 the new oilport of Primorsk began its operation.

The most advanced technologieswere applied while constructing portand shore facilities

Primorsk Port

General Plan

Photo: Tankers at Primorsk Port

46 2011 Finpro ry

Primorsk Port


47/76

Primorsk Port

Port Development Projects

Boostering bunker supply capacity in thePort of Primorsk so the Port will becapable for loading a number of tankersat a time

Strengthening of railway approaches tothe Port

The port operation technique is to bebased on microprocessor equipment

Construction of the railway spur to Port ofPrimorsk

Upcoming: the construction of the 2nd portregion Vysokinsky between lakesVysokinskoe and Finskoe.

Expected rise in cargo capacity ofPrimorsk port is up to 50 million tons

The total cargo capacity of the area willreach 250 million tons a year

Photo: Primorsk Port

47 2011 Finpro ry

Primorsk Port


48/76

6635

5

284

6814

6087

6918

6550

6658

6715

6069

6991

5991

5 000

5 500

6 000

6 500

7 000

7 500

January

February

March

April

May

June

July

August

September

October

November

December

Primorsk port argo turnover 2008-2010thousand tons

2008 2009 2010

Primorsk Port

48 2011 Finpro ry

St Petersburg Port


49/76

St Petersburg Port

Map of St Petersburg Port

49 2011 Finpro ry

St Petersburg Port


50/76

St Petersburg Port

Modernization and

Development

Port infrastructure developmentprogram of the group of companiesSea Port of Saint-Petersburgconsists of:

Construction of the high-technologycargo transshipment terminal

Modernization of the terminals for cargohandling from vehicles

Reconstruction of the aquatic area andberth

Passenger Terminal construction

In 2010 the group of companies SeaPort of Saint-Petersburg transferredmore than EUR 20 mln for theimplementation of the developmentprogram

Photo: St Petersburg Port

Photo: Container Terminal at St Petersburg Port

50 2011 Finpro ry

St Petersburg Port


51/76

St Petersburg Port

Reconstruction of the terminalequipment for larger capacities

Construction of the railway spur,warehouse and other maintenancepremises

IT- and document-flow systems testing

Reconstruction of the open storagegrounds 9, 10

Berthing line reconstruction

Procurement of the video monitoringequipment

Development of pre-design documentsand for environmental survey of the siteto be used for construction of therefrigerated terminal

Construction of the container terminal

Construction Plans 2011

Photo: St Petersburg Port Aerial View

Photo: St Petersburg Port Terminal

51 2011 Finpro ry

St Petersburg Port


52/76

3516

3407

4323

4507

5131

5467

12774

13184

12712

14182

12109

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

January

February

March

April

May

June

July

August

September

October

November

December

St. Petersburg Port argo turnover 2008-2010thousand tons

2008 2009 2010

St Petersburg Port

52 2011 Finpro ry

Vyborg Port


53/76

Vyborg Port

The commercial sea Port of Vyborg is animportant transport junction in the Northwestregion of Russia with capacity of up to 3 milliontons of cargo per annum.

Vyborg Shipping Company, Ltd (VSC Ltd) andVyborg Port, OOO are established by Oslo

Marine Group, OMG) On May 29, 2009, Vyborg Shipping Company,

Ltd asked Arbitrage Court of St. Petersburgand the Leningrad region to acknowledge thecompany a bankrupt

On July 6, 2010, Federal State UnitaryEnterprise RosMorPort received a banktransfer from Port of Vyborg as earlier thecompany had not in spite of an earlier March19th court ruling, left 9 RosMorPorts berthsand had not paid money for the facilitiesleasing. The amount paid out by Vyborg Portwas EUR 0.313 mln

Profile & Bankruptcy

Photo: Vyborg Port

53 2011 Finpro ry

Vyborg Port


54/76

95

74 7

674

97

76 7

8

125

105

118

96

0

20

40

60

80

100

120

140

160

January

February

March

April

May

June

July

August

September

October

November

December

Vyborg Port argo turnover 2008-2010thousand tons

2008 2009 2010

Vyborg Port

54 2011 Finpro ry


55/76

Shipping CompaniesOVERVIEW

55 2011 Finpro ry

Shipping companies


56/76

Shipping companies

The main development trendsin marine shipping Total dead-weight tonnage of the marine

transport fleet controlled by the RussianFederation is expected to increase by24%

Dead-weight of the marine transport

fleet under the Russian flag is expectedto rise 2.2% via improvements inlegislation concerning the MarineRegister

Systematic work to improve safety ofnavigation and seafaring

Introduction of the regulatory frameworkfor investment attractiveness of theindustry, comfortable environment forbusiness

Before 2015 rescue fleet will increaseby 41 unit, and will be fully updates

56 2011 Finpro ry

Shipping companies


57/76

Shipping companies

Main Challenges for the

Shipping Companies

Negative tendency to increase thenumber of ships under foreign flags dueto flaws in legislation and bureaucracy.Nine out of ten Russian ships, includingthe ones owned by the governmentcompanies operate under foreign flags

Use of the obsolete fleet. Age of the fleet

15 years and over; around 50% of theships were build over 20 years ago

Obsolete navigation communicationsystems on board of the ships and onshore do not correspond to theinternational standards

Low safety level of navigation andenvironmental protection. No legislativeregulation

Low ships turnover of Russian ports, lackof specialized transshipment complexes

No credit and leasing programs for shipbuilders and shipping companies

57 2011 Finpro ry

Federal Target Program Development of Russian

Transportation System (2010 2015)


58/76

Transportation System (2010-2015)

Goal 2010 2011 2012 2013 2014 2015

Tonnage of sea transport fleetcontrolled by the RussianFederation

18,7 19 19,8 20,2 21,7 22,6

Tonnage of sea transport fleetunder the Russian Federationstate flag

7,2 9,3 10,4 11,7 13,1 14,6

Million tons of deadweight

58 2011 Finpro ry

2010-2015 total financing volume for sub-program is estimated at EUR 15.7

bn, including: Russian Federal Budget EUR 4.5 bn; Private investments EUR 11.2 bn

Allocated amount is primarily targeted at direct capital investments, less than1% is intended for scientific research and design & development works

Social effect of the program is expected to result in budgetary efficiency of stateinvestments and creation of 14000 new working places in sea ports

Expected Effect from the Program

Federal Target Program Development of Russian

Transportation System (2010 2015)


59/76

Transportation System (2010-2015)

Goal 2010 2011 2012 2013 2014 2015

Construction of ships foroperations on sociallysignificant routes

- 1 8 8 1 3

Increase in production capacity

of Russian ports, mln tons p.a.

24 8 53,2 59,6 117,2 192

Input into transport fleet,thousand tons of DW

902,2 634,8 1054,4 615 1742,7 1167,4

Construction of supportive fleetships

10 14 14 17 15 20

59 2011 Finpro ry

State Policy on Shipping Companies


60/76

State Policy on Shipping Companies

Creation of international transportation corridors (ITC) ITC North-South and ITC North-West with extension to Iran and further ITC East-West, Northern Sea Way as an alternative for sea transport

routes beyond Eurasian continent Creation of Special Economic Zone of port type in Murmansk In 2011 Prime Minister of Russia assigned to consider the possibility of

opening Russias internal waterways for foreign shipping companies (asa part of preparative actions of Russia to enter WTO)

Government prepared a draft document On Support of Russian Ship-Buildingand Navigation which is intended to solve the following problem:

in the upcoming 10 years out of 9500 ships of Russian river fleet no lessthan 8000 ships should be written out due to high depreciation, around 800ships should be launched annually while no more than 30 of the latter arebuild per year

Expected solutions: creation of conditions under which ship-building on Russian shipyards

for Russian customers would be 20% less expensive than ordering shipsfrom South Korean shipyards;

special economic zones must be created in Russia for a period of 20years, and Russian ship-building organizations can become residents ofsuch zones.

State Policy on Sea Steamship Companies

60 2011 Finpro ry

Shipping companies


61/76

pp g p

North-Western Shipping Company

Profile

North-Western Shipping Company - the largest carrier in the systemof water transport in Russia.North-Western Shipping Company is a part of the VBTH holding, themajority shareholder of which is an international transportation groupUniversal Cargo Logistics Holding, which consolidates a number ofRussian shipping, stevedoring and shipping companies.

Volume of services

Shipbuilding and ship repair subsidiary companies under theshipping company in 2009 made the volume of services(shipbuilding, ship repair, sludge vessels, machinery) of $ 838.5 mln.

Development PlansPriority for the company is to upgrade the fleet:in 2002-2008, commissioned 7 new shipsin 2010 - a new rescue ship "Rescue Karev with the power of 4 MW

61 2011 Finpro ry



62/76

International Transport Lines of


62 2011 Finpro ry


63/76

for Finnish CompaniesOPPORTUNITIES

63 2011 Finpro ry

Perspectives of Joint Russian-FinnishWorkgroup for Technical Solutions in Sea Cluster


64/76

Workgroup for Technical Solutions in Sea Cluster

Shipbuilding cluster development issues are widely addressed on the

strategic level by a special workgroup within Russian-FinnishIntergovernmental Commission on Economic Cooperation since1992

Most companies in shipbuilding cluster (engineering & design as wellas shipyards) have long history of cooperation with Finnish partnersdating back to Soviet period, hence most of production potential is well

recognized by the industry specialists State-run oil and gas companies have their own infrastructure for

handling liaisons with foreign producers and suppliers and are notinterested in practical participation in such workgroup

OSK as consolidated state management is planning to establish TradeCenter for tendering and subcontracting purposes based on Federal-

owned FGUP Sudoeksport, i.e. OSK indicated no particular necessity forextensive joint cooperation with Finnish companies proposing technicalsolutions for the industry

Background for Joint Finnish-Russian Efforts

64 2011 Finpro ry

(cont.) Perspectives of Joint Russian-FinnishWorkgroup for Technical Solutions in Sea Cluster


65/76

Workgroup for Technical Solutions in Sea Cluster

Cross-border efforts for information exchange are highly valued by localexperts, i.e. potential further development of information channels ispossible

Existing facilities for information exchange in regards to partner search,technological updates dissemination, conferences and theme events mustbe further improved

Potential for Further Information Exchange

Potential improvement of research and development cooperation betweenFinland and Russia via establishment of new joint facilities (e.g.companies, institutions and organizations) for education and

scientific research Labor force training possibilities can be beneficial in terms of

competitiveness of Finland due to its immediate proximity (e.g. ascompared to Korea)

Other Perspectives

65 2011 Finpro ry

Potential Opportunities for Finnish Companies


66/76

Vessels for drilling and extraction, transportation and pipelineconstruction, service vessels (oil&gas, shipyards, shipping)

Metal constructions, warehouses and storages (ports and shipyards)

Machine building and equipment manufacturing (shipyards, ports)

Paint and painting services (ports, shipyards)

Technologies, know-how, automation solutions (shipyards)

Engineering, design and planning for parts of platforms, rigs and vessels(engineering, shipyards)

Energy efficiency solutions for production (shipyards)

Ecological solutions (oil&gas, shipping)

Safe work environment solutions (oil&gas, shipyards, shipping)

Potential Areas for Finnish Companies

66 2011 Finpro ry

Opportunity Chart


67/76

Potential for Finnish Companies

DemandforForeignTechn

ologyandProdu

ction

Vessels

DW below100000 tons

LOW

HIGH

HIGH

NOTE: Size of balloons represents estimated relative volume of potential market

Vessels

DW above100000 tons

Machine

Building andEquipmentManufac-

turing

MetalConstructionsWarehouses,

StorageComplexes

Engineeringand DesignSolutions(in part)

ProductionTechology,

Know-Hows,Automation

EcologicalSolutions

EnergyEffi-

ciency

WorkingSafety

Solu-

tions

Paint andPaintingServices

Shipbuilding Industries

Engineering Industries

Production Industries

67 2011 Finpro ry

Potential Opportunities for Finnish Companies


68/76

Novatek Ust-Luga 5-year project for LNG terminal construction is activein tendering: at present seeking suppliers of paint and contractor forpaining works on the berth

Sredne-Nevsky Shipyards have a large pre-paid order to construct 2pilot boats (below 1000 tons) and are seeking to outsource this to aFinnish medium-sized shipyards

Rosneft has internal procedure for assessment of potential suppliers andcontractors. It can consider a group visit of Finnish companies to meetwith heads of specialized departments and tendering departments

Murmansk Commercial Sea Port indicated potential participation forFinnish engineering and design companies as subcontractors to

Norwegian producers of drilling rigs Murmansk Shipping Company mentioned Finnish companies as

potential suppliers of equipment and spare parts for the fleet

Nerpa Shipyards acknowledged Finnish potential in metal constructionsfor fragments of the berth and storage complexes

Sample Cases for Finnish Companies

68 2011 Finpro ry

Specific opportunities for Finnish companies:


69/76

Ust-Luga In 2011 plans to purchase two manipulators and two truckswith carrying capacity of 2 and 10 tons. For the purchase of thetechnological equipment over EUR 1 mln is allocated

RosMorPorts CEO Igor Rusu announced in Nov 2010 interest inforeign designers with experience in the design of ports and hydralic

facilities and invited them to create foreign project offices in Russia Primorsk Port is interested in a visit to the port of Vuosaari in Helsinki

to study history of relationships between the management company ofthe harbor and government and private entities that maintain the port

Technoros manufacturer of cranes is interested in electric equipment,software for cranes, wire rope winches, pneumatic chassis, cables;Technoros produces 3-4 cranes per year

BaltTelecom a telecom operator is interested in IT solutions forstevedoring processes

North-Western Shipping Company is interested in buying shipengines Wrtsil for 10 ships

69 2011 Finpro ry

Sample Cases for Finnish Companies (cont.)

How to Read the Report


70/76

1. Based on the Opportunity Chart acompany can identify their potentialarea(s)

2. Reference is then made to the ValueChain and corresponding BusinessMap

3. Names of Business Map participantsrefer to the company cards in thewritten report

4. Company cards contain primaryinformation as well as particularsrevealed in the interviews, e.g.:

Ownership information

General technical characteristics

Major investment projects

Main suppliers

Strategic challenges

Strengths and weaknesses

Identification of Opportunities

Sample of Company Card from the Report70 2011 Finpro ry


71/76

SuccessSTORIES

71 2011 Finpro ry

Success story: Aker Arctic


72/76

Engineering of 2 arctic tankers by the order of Sovkomflot - tankersMikhail Ulianov and Kirill Lavrov were constructed on Admiralty

Shipyards with patented technology of Aker Arctic Technology DoubleActing Tanker.

72 2011 Finpro ry

Success story: STX


73/76

In the beginning of December, 2010 thejoint-venture company Arctech HelsinkiShipyard Oy, 50/50 owned by STX Finlandand United Shipbuilding Corporation wasformed.

The company has received an order fortwo new Multifunctional IcebreakingSupply Vessels (MIBSV) from its Russiancustomer Sovcomflot. The value of theorder is 150 million euro and the projectstarts immediately. The new vessels willbe delivered from Helsinki shipyard during

spring 2013. Arctech Helsinki Shipyard Oywill build new vessels for Sakhalin-1Arkutun-Dagi gas field where they will beused as supply vessels.

The ice class container ship NorilskiyNikel was built on the shipyard in 2006.

73 2011 Finpro ry

Success Story: Hollming Works


74/76

Supply of wide range of equipment,components and metalconstructions for Russian Shipyards

74 2011 Finpro ry

Success story: Wrtsil


75/76

First representative office in Russia wasopen in 1979. Nowadays more than 130

people work in head office of WrtsilEast in St. Petersburg and also indepartments on Moscow, Vladivostok andMurmansk.

In 2007 Wrtsil and BryanskEngineering Works (BMZ), signed a

license agreement for the manufacture ofWrtsil low-speed marine diesel enginesin Russia

Also Wrtsil supplied marine engines toRussian shipyards, for example, to AlmazShipyard.

On November, 2010 Wrtsil hasannounced signing a Memorandum ofUnderstanding with Russias UnitedShipbuilding Corporation (OSK).

75 2011 Finpro ry

Find Out More!


76/76

Alexey Zak, Senior [email protected]

Finpro St PetersburgBolshaya Konushennaya 4-6-8

Suomi Talo, office A101St. Petersburg, 191186 Russia

Phone:+7 812 325 4483

Fax:+7 812 325 4482

www.finpro.fi

For more information, please contact

sea cluster business map summary final alexey zak

Documents