Nikolai Kolesnikov, executive vice president and CFO at Sovcomflot says the company is "comfortable" with where it is given the cyclical nature of the conventional tanker business.
Income from its offshore and harsh environment business provided protection for the Russian tanker operator Sovcomflot (SCF) in the “worst year for tankers since 1992,” according to executive vice-president and CFO Nikolai Kolesnikov.
In an interview with Fairplay Kolesnikov said that the company’s project business is stable and is projected to deliver USD8.1 billion in income over the coming 25 years through the existing contracts.
Income from these projects will cushion the effect of the cyclical tanker market which in the first nine months of this year has seen the Russian company sustain USD6.8 million losses from last year’s profits of USD218.1 million over the same period last year.
However, new deliveries of platform supply vessels into long term time charters have seen revenue from the offshore sector soar by 55.9% to USD 274.6 million and operating profits leap 50.5% to USD131.2 million.
“A steady cushion of cashflow in the coming years will protect our conventional tanker business when the markets are not good,” said Kolesnikov. He added that the company does not have the flexibility to move in and out of the conventional tanker business, but the project businesses provide a steady income that can cushion the effects of the cyclical maritime industry.
One of its harsh environment projects, the Yamal LNG development on the Yamal Peninsula in the Kara Sea, which is within the Arctic Circle, is expected to deliver its first cargo of LNG before the end of the year and the company’s Christophe de Margerie, will transport the first cargo from the development as the first LNG train becomes operational.
“Christophe de Margerie will transport the first cargo from the Port of Sabetta before the year end, it will be a major milestone for the company, because of the scale of the project, the challenges and the complexities,” claimed Kolesnikov.
Built by Daewoo Shipbuilding & Marine Engineering, Christophe de Margerie is itself a major success story for SCF, the vessel is the first in a series of 16 vessels and is the first LNG tanker to be ice classed. Delivered in March this year the ship has four GazTransport & Technigaz (GTT) No 96 membrane tanks giving the ship a total cargo capacity of 172,600m3. The vessel made the news in August when it became the first commercial vessel to navigate the Northern Sea Route without ice breaker assistance.
The total order, made in March 2014, for the Christophe de Margerie class of vessels was put at USD5.12 billion and was considered to be a statement of intent by SCF at the time.
“We have repositioned the business substantially over the last 10 years,” explained Kolesnikov, we have transformed from just a conventional tanker business to one with an expanding scope,” he added.
Essentially SCF see their business model as a “wholesale” business and the dozen or so customers, mainly national and international oil majors, that the company services offer stable volumes. Those customers have gone through their own consolidation, points out Kolesnikov, and the projects that they are involved with are increasing in size “and they want their service providers to be able to follow them.”