Block and equipment production stopped for 10 out of 15 ships
Aftermath of the Ukraine War… Consider canceling the contract
As the possibility of Russian shipyards being subject to sanctions by the U.S. Treasury increases in the aftermath of the war between Russia and Ukraine, Samsung Heavy Industries has suspended construction of liquefied natural gas (LNG) carriers under contract with a Russian shipyard.
According to the shipbuilding industry on the 26th, Samsung Heavy Industries stopped manufacturing ship blocks and equipment for 10 of the 15 LNG carriers contracted with Russia’s Zvezda Shipyard in August.
This move is due to the growing possibility that the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) will list the Zvezda Shipyard on the Specially Designated Sanctions List (SDN) within this month in connection with Russia’s invasion of Ukraine. Once on the SDN list, all assets of the company are frozen and transactions with foreign countries are prohibited.
Samsung Heavy Industries signed a contract to build 15 icebreaking LNG carriers to be used in ‘ARCTIC LNG-2’, a large-scale LNG development project promoted by Russia at the end of 2019 and 2020. The contract amount was known to exceed 4 trillion won, making it the largest contract ever in the shipbuilding industry at the time.
A Samsung Heavy Industries official explained, “All the blocks and equipment for building five ships have been handed over to a Russian shipyard and all payments have been received,” adding, “We have stopped manufacturing blocks and equipment for the remaining 10 ships.” Samsung Heavy Industries is reportedly considering canceling this contract.
Zvezda Shipyard is one of the largest local shipyards in Bolshoi Kamen, Russia’s Far East. Arctic LNG-2 is the name of a gas field located on the Gidan Peninsula in Siberia, Russia, and refers to a large gas field project that Russia is developing to produce 19.8 million tons of LNG per year by 2025.
Separately from Samsung Heavy Industries, Hyundai Samho Heavy Industries, an affiliate of HD Korea Shipbuilding & Marine Engineering, also created a joint venture called ‘Zvezda-Hyundai LLC’ in 2017, but currently has no shipbuilding contracts with Russia.
Daewoo Shipbuilding & Marine Engineering, the predecessor of Hanwha Ocean, also signed a contract with Russia to build three LNG carriers by 2021. However, after the Ukraine War, the contracts were terminated sequentially, and the sale of the three ships under construction is being discussed with other ship owners.
Reporter Lee Je-hoon
2023-12-26 14:54:58
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