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The development of the Arctic: shipbuilding ahead of the curve

Will Russia be able to compete with the giants of shipbuilding in Asia at the expense of the Far East

At the end of July, Vladivostok hosted the first International Far East Marine Salon, in the fields of which key players and industry experts discussed the prospects for the development of Russian shipbuilding. The Arctic agenda was also touched upon - the development of this promising region requires the creation of a unique Arctic fleet. The head of the Far Eastern practice of KPMG and the moderator of one of the sessions of the salon, Olga Surikova, tells how the shipbuilding industry of a new type can ensure Russia's position in the Arctic.

The development of the Arctic: shipbuilding ahead of the curve

Olga Surikova

Head of Far Eastern Practice KPMG in Russia
Arctic shipbuilding is a narrow high-tech segment of the market, which has no analogues in the world. With the general world trends of the "deficit in surplus conditions", when the amount of the world commercial fleet by tonnage exceeds the transportation needs by 20%, and the situation in the oil and petroleum products market slows down the demand for tankers, which causes shipowners to write off the fleet and reduce freight rates for the main popular types Aframax, arctic shipbuilding remains one of the few unfilled niches with growing demand, and for the Russian shipbuilder there is a favorable market situation for increasing technological activity in this segment.
A key prerequisite for the development of the shipbuilding industry is the growth of maritime trade and the active development of Arctic shipping. In 2017, the main transport artery of the Arctic Sea of ​​the Northern Sea Route (SMP) showed record 10,7 million tons of cargo transportation, and for 8 months of the current year the cargo turnover has already amounted to 9,95 million tons, and there is every reason to predict that 2018 will also show a historical record. At the same time, taking into account the development of the existing Arctic projects that presuppose a maritime transportation scheme, the peak cargo traffic on the NSR is expected to reach 2023-2025, and in the long term there are economic prerequisites for increasing cargo turnover in 8-10 times to 2030-2035.
With regard to the structure of the cargo base and the forecast of the demand for the Arctic fleet, taking into account the world market situation and the growing demand for energy from the developing countries of Asia, it is expected that the volume of LNG will grow steadily in the structure of the Arctic freight turnover, and the volumes of oil and coal will stabilize to 2025- 2030 year. Taking into account the forecasted expectations of the cargo base of the Arctic basin, there is a steady demand for powerful new-generation icebreakers capable of providing year-round navigation and wide wiring of large-capacity Yamalmax vessels and increasing the speed of their passage, ice-class sea transport vessels - gas carriers, tankers, bulk carriers - bulk carriers and specialized vessels with increased ice patency, bunkering for refueling, research vessels of new purpose and offshore platforms, for working in difficult ice loviyah Arctic. With the growth of the freight base, the development of infrastructure and the availability of NSR, the demand may also appear on containerized ice-class containers for the transit transportation of goods along the ice track.
Today, Russian shipbuilding is taking on challenges - ambitious projects are being implemented aimed at ensuring the development of Arctic potential and navigation in the difficult conditions of the NSR.
First of all, in the focus of projects in the field of nuclear shipbuilding, since it is the nuclear icebreaker fleet that allows solving the problems of ensuring the presence in the Arctic. Key players in this segment are the shipyards of the United Shipbuilding Corporation (USC). Three universal high-powered nuclear icebreakers of the 22220 project are being built at the Baltic plant by order of Rosatom, two of which, the Arctic and Siberia, have already been launched - they have no analogues in the world. The OSK portfolio of orders also includes the creation of the floating power unit "Akademik Lomonosov" as an integral part of the future floating nuclear thermal power plant. This is a unique project from the technological point of view, which allows to provide energy for remote areas of the Russian Federation and the Far East.
At the same time, the competence center for shipbuilding of a new type to meet the growing needs of the Arctic is being formed in the Far East. So, within the framework of the salon it was announced that the flagship of the Arctic shipbuilding - a unique superpowerful icebreaker "Leader" - will be built by 2027 at the Far East shipyard Zvezda. The 120 MW icebreaker capable of moving at the speed of 10-12 units with an ice thickness of up to 4 m and a navigable corridor up to 50 m wide will provide year-round navigation in the high latitudes of the Arctic and meet increasing requirements for wide wiring with an increased speed of caravan passage in the NSR. The design characteristics of the "Leader" will significantly increase the efficiency and profitability of the increasing freight traffic in the NSR.  
Also, an important area of ​​Arctic shipbuilding is projects on the development of technology for the development of shelf deposits. According to the Ministry of Industry and Trade, the need of domestic ship owners and extracting companies to replenish their fleet with ships and offshore equipment to develop offshore fields to 2035 is about 100-140 units of equipment. However, the forecast for engineering units is unstable due to market turbulence, high level of uncertainty and risks inherent in projects being implemented in the Arctic, inaccessibility of advanced foreign technologies for exploration and development of deposits in the Arctic due to sanctions imposed on Russia. Despite the limitations, the Arctic continental shelf is one of the priority areas for project development, many licenses have been issued for its development, including in the Eastern Arctic. The only platform to date, the leading production of hydrocarbons on the Arctic shelf in conditions of drifting ice fields, the Prirazlomnaya platform, was also built in Russia at the Sevmash shipyard.
We see that in the nuclear and offshore shipbuilding for the development of Arctic projects, Russia has undoubtedly occupied its niche, but as regards the construction of commercial commercial vessels of the Arctic class of the Russian Federation, it is still uncompetitive, and the absence of a stable order for mass production does not allow to increase this competence. As for the world shipbuilding market, currently three countries provide 90% of global production and export of cargo ships - these are South Korea, Japan and China. At the same time, Korea is consistently the main exporter specializing in the production of high-tech large-capacity vessels, including LNG tankers, in contrast to Chinese and Japanese shipbuilders, more focused on satisfying domestic demand. According to Russian industry players and key customers, depending on the specification of the vessel, the term of its construction in Russia is longer at 2-3, the cost is higher by 30-40% of the Korean counterpart, and lack of experience and necessary competencies does not guarantee high-quality operation. In order to compete with Asian leaders and meet domestic demand in large-capacity ice-class vessels, Russian shipbuilders will have to work ahead of schedule - if in South Korea the construction of commercial vessels has been developing since 70-ies of the last century, in China since 2000-ies, then domestic shipyards will have to master unique competencies in the next decade.
How to make such a leap and make Russian shipbuilding more competitive? To answer this question, first, it is necessary to understand what the industry needs. Today, shipbuilding has developed a trend towards directive, restrictive measures. A striking example is the bill of the Ministry of Trade and Trade, which proposes to close XMP for foreign-built vessels from 1 2019 on 2020 in order to provide a firm order at Russian shipyards. The business is skeptical and cautiously looks at this initiative, since it is difficult to wait for the implementation of the required volume in extremely short terms for 2022-60 years, and there are objective reasons for this. For the development of Russian construction of ships that will operate in the water area of ​​the Northern Sea Route, it is also necessary to correct the definition of the classification of the ship built at the Russian shipyard. According to the current version, for the recognition of the vessel in the RF, its hull and propulsion system should be built. At the same time, considering that domestic shipbuilding is an import-dependent industry, on average more than XNUMX% of components, including engines, are imported from abroad, it will not be possible to implement planned limitations in practice without reviewing the proposed criteria.
At the same time, it is unlikely to achieve ambitious goals in shipbuilding by imposing restrictions. Where more effective for the industry can be the transition from prohibitive measures to stimulating measures. Demonstrative practice in this part is the utilization grants from the Ministry of Industry and Trade, on the one hand, which save up to 10-15% of the cost of a new vessel when the old ship is disposed of, and on the other, the generation of a responsible full cycle production in this industry, which is no less important if we speak about consistent development. Another good example is the zeroing of the profit tax for coasters built at Russian shipyards. 
Also very urgent is the question of financing the construction of the Arctic fleet, since the construction of tankers requires colossal investments. Ensure the inflow of capital investments into the industry is possible through the creation of favorable conditions for investors or the development and support of project financing mechanisms.  
Clustering can also become an industry driver. In a broad sense, the shipbuilding industry, in addition to the direct construction of ships, includes such related industries as ship repair, ship instrument making, mechanical engineering, and electrical installation. One of the methods to ensure the effectiveness of interaction between various enterprises of the shipbuilding infrastructure in this case may be the creation and support of special economic zones (SEZs), technoparks, today there is the experience of TOSER "Bolshoy Kamen", the anchor investor of which was the shipbuilding complex "Zvezda". Participants of these regimes are granted tax privileges and other preferences. At the same time, the creation of such territories in the regions of concentrated location of enterprises in the shipbuilding industry through synergy can create an impetus for the accelerated development of the industry.
It should be noted that the industry requires constant development of the technological base - already now efficient shipbuilding is impossible without digital engineering, which allows creating digital counterparts, smart shipyards that allow automating and robotizing production, additive technologies for growing the required structure. For the development of digital marine technology and shipbuilding technological thought, it is necessary to adapt the existing legislation. Already today, this work is carried out within the framework of the "Marinet" segment of the National Technological Initiative in the near future, it is planned to give an interpretation and determine the legal status of a "bezekipazhnogo (autonomous) vessel" or an "external captain", to form a regulatory and legal basis for introducing the application of new technologies in marine engineering, to develop environmental standards.
Obviously, the Arctic is a challenge for the domestic shipbuilder and it is worth fighting for the primacy in this segment of the economy. If we approach the development of the Arctic shipbuilding systematically and systematically, the Russian shipbuilding industry will be able to meet the needs of rapidly developing projects in the Arctic zone of the Russian Federation.
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