Russia to Order 13 LNG Tankers from South Korea

Signs Raft Of MOUs

Published Nov 13, 2013 8:11 AM by The Maritime Executive

Russia plans to award South Korean shipbuilders a contract to build 13 or more liquefied natural gas (LNG) carriers as part of efforts to increase business between the world's top gas producer and the second biggest LNG buyer.

The announcement from South Korea's presidential office on Wednesday came during Russian President Vladimir Putin's trip to Seoul for a summit with South Korean counterpart Park Geun-hye.

As part of the agreement, Russian energy giant Rosneft , Russian vessel operator SovComFlot, Gazprombank and South Korea's Daewoo Shipbuilding & Marine Engineering Co Ltd (DSME) agreed to set up a ship building yard in Russia.

Russia and South Korea also agreed that potential supplies of natural gas to Seoul via pipeline would be driven by "economic viability" without elaborating. Talks about such a pipeline have previously seen little progress because it would likely have to pass through North Korea.

"The decisions to supply Russian pipeline gas to South Korea in the mid-term and long-term prospective will take into account the availability of resources, economic viability and other preconditions necessary for the fulfillment of this project," a separate joint statement by the two parties said.

State-run Korea Gas Corp, the world's largest corporate buyer of LNG, currently has a deal to import 1.5 million tonnes of LNG a year from the Pacific Island of Sakhalin through 2028, the company and government data showed.

South Korea imported over 36 million tonnes of LNG last year. Russia accounted for 6 percent of the total.

To enhance bilateral business, the two countries also agreed to allow visa-free visits for 60 days.

RAFT OF MOUs

Russian delegates have signed a raft of MOUs, including one between Russian state development bank Vnesheconombank, or VEB, and Korea Exim Bank (KEXIM) to set up a $1 billion fund for energy, infrastructure, shipbuilding and other projects, according to the statement from the Korean presidential office.

State-run Russian Direct Investment Fund (RDIF) and Korea Investment Corp (KIC) will also set up a joint investment fund initially for $500 million and to exceed $1 billion in the future, the statement and a source close to the deal said.

Cash from the RDIF and KIC fund will be used to support the shipbuilding deal to produce vessels in partnership with Koreans as agreed on Wednesday.

"We are looking at the project where SovComFlot will in partnership with the Koreans produce vessels that are of interest to Yamal LNG," said the source, adding that the tankers produced will be leased to Yamal LNG.

Yamal LNG by Russia's Novatek, France's Total and China National Petroleum Corp (CNPC), is set to start producing LNG in 2016 with a view to supplying 16.5 million tonnes of the tanker-shipped fuel by 2018.

State-run Russian Railways, POSCO, Korea Railroad Corp and Hyundai Merchant Marine Co Ltd also agreed to develop train and port businesses for the transhipment of goods in Rajin and Khasan, the Korean presidential office statement said.

Russia re-opened a railway link from the Russian eastern border town of Khasan to the North Korean port of Rajin with North Korea in September, holding out the prospect of increased trade for the reclusive nation with its biggest neighbors after years of international sanctions.