DSME did not disclose the shipowner, but sources say that the client is Russia’s state-run energy company Novatek. In October 2020, Novatek placed an order for three LNG carriers worth 1.013 trillion won to promote the Arctic LNG-2 project, a large-scale LNG development project in Russia. DSME was slated to deliver the vessels to the client by the end of 2023. The orders for the other two carriers remain in place, Business Korea reports.
The canceled order is an ice-breaking LNG carrier worth 337.9 billion won. Usually, building a ship goes through five stages, and the shipowner reportedly missed the payment deadline in the second stage. The payment deadline for the other two vessels has not yet arrived, but they are said to be in a similar situation.
Shipbuilders mainly sign heavy-tail contracts with shipowners, under which they receive a small advance payment and a large delivery payment, so if the financial sanctions against Russia are prolonged, they could face a situation where they cannot receive the rest of payments.
DSME, Korea Shipbuilding & Offshore Engineering (KSOE) and Samsung Heavy Industries have received orders for a total of seven LNG carriers from Russian shipowners since the end of 2020. In addition, Samsung Heavy Industries signed a long-term facility supply contract with Russia’s Zvezda Shipyard. The aggregate value of transactions between Korean shipbuilders and Russia tops US$7.15 billion (about 9.18 trillion won). They are US$5 billion for Samsung Heavy Industries, US$1.6 billion for DSME and US$550 million for KSOE. Despite concerns about contract cancellations, Samsung Heavy Industries said it will build three ice-breaking LNG carriers as originally planned.
“Ice-breaking LNG carriers are not easy to resell as they are expensive and used for special purposes,” an industry insider said.
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