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North West Russia

SEA CLUSTER Business Map


Finpro St. Petersburg 2011

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CONTENTS Government policy ........................................................................................ 5 Main elements and expected transformation of protectionist policies ........................ 5 Investor relations as managed by the state within a strategic industry ...................... 6 Government policy on ports and shipping companies ................................................. 8

Oil and Gas Sector Overview ...................................................................... 12 Development Trends ...................................................................................................... 12 Exhaust of existing oil fields and rising demand for offshore ................................................................ 12 Main challenges of offshore oil&gas mining ............................................................................................. 13 Possible threats of changing global markets: US shale gas alternative ................................................ 15

Major offshore fields in Russia ...................................................................................... 17 Sakhalin megaproject .................................................................................................................................. 17 Kirinskoye gas and condensate field ......................................................................................................... 18 Shtockmann gas and condensate field ...................................................................................................... 19 Prirazlomnoye oil field ................................................................................................................................. 20 Filanovskoye field ........................................................................................................................................ 20 Shatsky Shaft ................................................................................................................................................ 21 Bovanenkovo gas field (Yamal project) ..................................................................................................... 21

Potential Demand and Challenges of Offshore Drilling ............................................... 22

Shipbuilding Cluster Overview ................................................................... 26 Shipbuilding Industry Outlook....................................................................................... 26 Challenges of the industry .......................................................................................................................... 26 From military to civil shipbuilding .............................................................................................................. 28 State call for revival of the industry ........................................................................................................... 30

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North Western cluster characteristics ....................................................................................................... 31

Role and Structure of the state-governed Intergated Shipbuilding Company (OSK) 33 Pre-conditions for the state monopoly ............................................................................................................ 33 OSK as a driver for industrial development .............................................................................................. 34 Present-day structure of the company....................................................................................................... 34

Sea Cluster Overview .................................................................................. 36 Shipping Sector Outlook ................................................................................................ 36 Strategic Goals of the State Policy ................................................................................................................. 36 Challenges of the industry .............................................................................................................................. 38 The main development trends in marine shipping ......................................................................................... 40

Ports and Port Equipment Suppliers ............................................................................ 41 Challenges of the industry .......................................................................................................................... 41 trends in port development ......................................................................................................................... 41 The development of ports ........................................................................................................................... 42 Ust-Luga Port ................................................................................................................................................ 44 Primorsk Port ................................................................................................................................................ 45 St. Petersburg Port ....................................................................................................................................... 46 Vyborg Port ................................................................................................................................................... 47

Opportunities for Finnish Companies ........................................................ 49 State Companies ............................................................................................................. 49 Novatek .......................................................................................................................................................... 49 Rosneft .......................................................................................................................................................... 50 OSK ................................................................................................................................................................ 51 Russian Maritime Register of Shipping ..................................................................................................... 54

Shipbuilding and Design ................................................................................................ 56 Admiralty Shipyards..................................................................................................................................... 56 Malakhit ......................................................................................................................................................... 57

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Sredne-Nevsky Shipyard ............................................................................................................................. 59 Nerpa Shipyard ............................................................................................................................................. 60 Shipbuilding & Shiprepair Technology Center ......................................................................................... 61

Ports and Port Equipment Suppliers ............................................................................ 62 Murmansk Sea Port ...................................................................................................................................... 62 Murmansk Shipping Company.................................................................................................................... 64 Balttelekomport ............................................................................................................................................ 65 Port of Kaliningrad ....................................................................................................................................... 66 Port of Primorsk ........................................................................................................................................... 68 Administration of the Big Port of St. Petersburg ...................................................................................... 70 North Western Shipping Company ............................................................................................................. 71 Technoros ..................................................................................................................................................... 73 Port Ust-Luga ................................................................................................................................................ 74

Prospects for Finnish Companies ................................................................................. 77 Summary of Major Findings ........................................................................................................................ 77

Particular Potential for Finnish suppliers ..................................................................... 77

APPENDICES ............................................................................................... 81 Appendix I – List of Key Players.................................................................................... 81 Oil and Gas sector companies .................................................................................................................... 81 Oil and Gas Industry Suppliers Associations ........................................................................................... 93 Shipbuilding Companies ............................................................................................................................. 95 Engineering Companies ............................................................................................................................ 107

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GOVERNMENT POLICY MAIN ELEMENTS AND EXPECTED TRANSFORMATION OF PROTECTIONIST POLICIES The state exerts great influence on the industry development. The state carries out activities aimed at supporting Russian companies operating in the industry. But the necessity to attract foreign investments for off-shore works is evident. One of the most important steps was amendment of the Subsoil Law in 2007 restricting the number of potential users only with two state companies. But at present the need for foreign investments for shelf development is evident. In the beginning of 2010 the Ministry of Natural Resources and Ecology declared its intention to suggest liberalized access for foreign companies to Russian off-shore fields development. To boost shelf development it is necessary to expand the list of bodies allowed to work off-shore. According to Deputy Minster of Natural Resources and Ecology, Sergey Donskoy, it should be possible to engage foreign partners in exploration and development of oil fields with up to 50% participation share. The Ministry of Natural Resources and Ecology suggests that not only ‖Gasprom‖ and ‖Rosneft‖ can be subsoil users, but also their subsidiaries and foreign partners attracted by them with up to 50% participation share. The estimated income will, on the one hand, attract the necessary funds and technologies for shelf exploration and development, and on the other hand, ensure state control of implementation of a project. Thus, not only financing is expected from foreign partners, but also technological means and solutions. The idea to make amendments in the law is explained by the too slow working pace of Russian companies off-shore. Moreover, it is necessary to boost hydrocarbons extraction offshore because otherwise Russia risks to stop being competitive on the global market. As said by S.Donskoy, state companies alone will solve the problem of shelf development in 165 years only. At the same time, according to Minister of Natural Resources and Ecology, Yury Trutnev, it is preferable to invest in development of oil fields and oil production increase than in gas production since substantial investments are not reasonable in the conditions of unstable market and decreased demand in the Russian gas. To support domestic manufacturers of oil and gas equipment and to protect the domestic machine building market, a non-governmental leasing program supporting oil and gas suppliers becomes valid in 2010. A relevant agreement was signed by the Union of Manufacturers of Oil and Gas Equipment and ―Clients Leasing Company‖ CJSC. Relevance of the Program is related to the fact that construction of oil and gas pipelines, development of continental shelf, new fields, and other large infrastructure projects implemented in Russia do not bring about relevant increase in

Ministry of Natural Resources and Ecology suggests that not only Gasprom and Rosneft can be subsoil users, but also their subsidiaries and their foreign partners attracted with up to 50% share in equity

To support geological survey and exploration offshore, certain tax incentived were introduced in 2009, e.g. null tax rate for offshore mining operations at the Arctic, Caspian, and Azov shelves

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supplies of Russian machinery. One of the main reasons is impossibility for Russian companies to attract financing to comply with tender conditions. The Program will allow Russian companies use leasing both for upgrade and renovation of their productions and for promoting sales of ready equipment to oil and gas companies. To support geological survey and exploration offshore, ―tax holidays‖ were initiated in 2009 – a zero tax rate for mining operations offshore at the arctic, Caspian, and Azov shelves. The zero rate is valid given that the field development period does not exceed 10 years or is equal to 10 years for the subsoil use license for exploration and extraction of fossils. The rate is also applied if the field development period does not exceed 15 years or is equal to 15 years for the subsoil use license for concurrent geological survey and mining operations.

Crude Urals Price, USD/bbl 160 140 120 100 80 60 40 20 0 1999 2001 2003 2005 2007 2009

Since 2010 such tax exemptions become valid for the Okhotsk and Black Seas, the draft bill was passed by the State Duma in the first reading in September 2009. The tax holidays can be used at the initial stage of exploitation of mineral resources only. The tax holidays for the Black Sea shelf will last 10 years or until the accumulated reserves amount to 20 mln. tons. The limit for the Okhotsk Sea is higher – 30 mln. tons. If a company executes the whole range of works at the field – from survey to extraction – for both seas these tax holidays may be prolonged by 5 years more. If the bill is passed it will be in force from the say of its official publication and will have retroactive force. The government plans to put it into force from January 1, 2009. Tax relieves in this case are necessary. Without such relieves development of the Caspian shelf is profitable only if oil prices are minimum 80-100 USD per barrel, works on the arctic shelf – minimum 120140 USD per barrel. However, as experts think, even despite tax exemptions investments in development of new Russian oil resources is lower than in other countries.

INVESTOR RELATIONS AS MANAGED BY THE STATE WITHIN A STRATEGIC INDUSTRY In the beginning of 2010 an intention of the Russian Government became known to simplify customs regulations for high-tech foreign equipment and non-primary goods, and also visa and migration regulations for foreign specialists participating in investment and high-technology projects in Russia. Dmitry Medvedev, President of Russia, announced that ―a series of measures is under way aimed at attracting investments in modernization and innovative projects.‖ According to experts‘ opinion, the mentioned measures are supposed to encourage transfer of foreign technologies in Russia, in particular, simplifying customs procedures and development of international cooperation in terms of off-shore oil and gas production. Investments attracting measures can be taken not only on the federal but also on the regional level. Thus, the authorities of the Arkhangelsk region see increased investment attractiveness of the region

Government calls for measures to encourage transfer of foreign technologies to Russia, facilitate customs control, and develop international cooperation in offshore oil and gas production

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and attraction of heavy capital for construction, reconstruction and modernization of main facilities in the Arkhangelsk region as their top-priority task. At present the region is working on the law ―On the state policy of the Arkhangelsk region in investment activities‖ which will establish single norms and rules of investment activity in the region. This law is to provide investments in development of the oil and gas industry of the Arkhangelsk region and facilitate implementation of projects on the Arctic shelf. At present being developed is a mechanism of providing benefits for land rent in the region for investors for the period of the investment project. On March 2, 2010 the authorities of the region passed the Procedure of supporting of investment projects, implemented and to be implemented in the Arkhangelsk region. It establishes a single universal procedure for supporting investors and investees during their cooperation with the executive authorities of the Arkhangelsk region in terms of implementation and preparation for implementation of investment projects. A regional law passed in June 2009 ―On tax relieves for investment activities on the territory of the Arkhangelsk region‖ is also meant to increase the investment attractiveness of the region. Under this law companies incorporated as legal entities on the territory of the Arkhangelsk region are subject to income tax relief in case of large-scale investment projects. This law will help investors significantly cover their expenses for capital investments due to income and property tax relief, which strongly increases investment attractiveness of the Arkhangelsk region in general. In Q3 2009 prime minister Putin declared in an internal government discussion, that Yamal Peninsula can be one of prospective offshore fields in the focus. According to his words, a lot of geological works, substantial funds were invested in training, building the necessary infrastructure, including transportation system in the period of the Soviet era and continued in recent history through the history of modern Russia. For instance, there is a newly commitioned 3.9 km long railway bridge built to latest technology standards; constructed railway line 572 km long. This, according to the prime minister, is the necessary infrastructure for fully fledged development of the Yamal Peninsula and it can lay a start for further development of Yamal. The discovered field on the peninsula is to become a new oil and gas province. Government is considering Yamal deposits as a potential stabilizer in the global natural gas markets. The capacity of the largest of these deposits, Bovanenkovo is estimated 5 trillion cubic meters of gas. Gazprom began development of this field with estimated start of production in Q3 2012. Total estimated capacity of Yamal Peninsula, as proven by documented researches, is approximately 12 trillion cubic meters of gas. But the government is expecting this figure to increase significantly upon further development. During his speech, the prime minister called for practical scheduling and planning of further works on the penninsula in order for foreign partners to coordinate their plans for participation in the Yamal project.

In 2009 Prime Minister Putin called for practical scheduling and planning of further works on Yamal peninsula in order for foreign partners to coordinate their plans for participation in the project. Putin: “Yamal Peninsula can be one of prospective offshore fields in the focus”

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State strategic programs concerning port development currently include:  

Strategy of Russian Sea Port Infrastructure Development up to 2030 Federal Target Program ―Development of Russian Transportation System‖ (2010-2015)

Government policy is intended to increase port capacities:   

by 2015 est. cargo turnover 600-750 mln tons, aggregate capacity of sea terminals 950 mln tons; by 2020 est. cargo turnover 700-900 mln tons, aggregate capacity of sea terminals 950 mln tons; by 2030 with demand 1-1.1 bln tons, supply of port infrastructure 1.2 bln tons

Federal State Unitary Enterprise Rosmorport is assigned to manage federal property in sea ports, including 521 mooring berths  

101 berths are used by Rosmorport independently for fleet anchorage; 422 berths are rented by Rosmorport to private stevedoring companies. Currently there‘re 111 rent contracts with private companies Based on Rosmorport the state plans to create 6 Sea Port Administrations: Kaliningrad, Gulf of Finland, Northern (based in Murmansk port), Far Eastern, Southern, and Caspian For the needs of sea port administrations it is planned to build 50 rescue ships.

The key goal of Rosmorport is to contribute into development of the Russian sea transport infrastructure and higher competitiveness of the Russian seaports, by means of effective use, maintenance and development of the assigned federal property in the seaports. Rosmorport is aimed to take active part in realization of federal target programs of the Russian sea transport development. The representatives of Rosmorport are members of Advisory Council under the Competitive Commission of Ministry of Economic Development of the Russian Federation for Selection of Applications for Free Port Zones Creation. Stock of 25.49% shares of Murmansk Sea Trade Port is planned to be privatized. Currently the shares are under federal property and managed by Rosmorport.

A number of state strategic programs concerning port development is in progress, including “Strategies of Russian Sea Port Infrastructure Development up to 2030”, Federal Target Program “Development of Russian Transportation System” (2010-2015)

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The development of marine shipping and ports are progressing in accordance with the federal target program "Development of Transport System of Russia (2010-2015). Program objectives include:     

Integrated development of transport hubs, including the terminal and logistics centers; Improving the competitiveness of international transport corridors; Renewal of the fleet, new construction of marine and fluvial vessels; Ensuring transport security; Development of an integrated safety control system for transport.

Certain lag in the development of transport and logistics infrastructure of the Russian Federation has led to the fact that the most important international trade routes bypass the country. The creation of international transport corridors (ITC) is expected to facilitate the integration of Russia into the global system of freight. This is expected tol provide independent transportation links with foreign partners. In the future it will attract transit through the territory of Russia of additional freight traffic that will significantly increase the country's revenues from transit operations. In this regard, Russia's most urgent is the development of projects such as the ITC "North-to-South" (with extension to Iran and beyond), ITC "East-to-West with an increase in bandwidth and speed of delivery of goods by Trans-Siberian Railway, Belkomur and deep-water port of Arkhangelsk region, the Northern Sea Route. The rail way network development of Russian European North, liquidation of infrastructural dead-ends, reduction of transportation distances, a creation of a new Russian crossing for international cargo, creation of a new international track within Euro-Asian transport corridor, shorter connections for the country regions, economical use of idle territories, rail way transportation costs reduction, increase competitiveness for adjusting enterprises. In 1995 a large scale meridional project was proposed - a rail way connecting Arkhangelsk, Syktyvkar, Kudymkar and Perm with the name Belkomur (White Sea-Komi-Urals). The General Rail Ways Scheme Development for Russian European North (1994) was the basis of the project, it contained necessary technical and economical grounds. The General Scheme was considered and supported by Komi Government, Arkhangelsk and Perm regional administrations, Komi-Perm Autonomous District. To implement the project in September 1996 in Syktyvkar a company project operator was established called Interregional JSC Belkomur. Its main share holders were the Russian Federation and its subjects as the Republic of Komi, Arkhangelsk region, Komi-Perm Autonomous region, Perm region and a number of large enterprises of those regions.

Government policy is intended to increase port capacities: by 2015 est. cargo turnover 600-750 mln tons, aggregate capacity of sea terminals 950 mln tons; by 2020 est. cargo turnover 700-900 mln tons, aggregate capacity of sea terminals 950 mln tons; by 2030 with demand 1-1.1 bln tons, supply of port infrastructure 1.2 bln tons

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Institutes Lengiprotrans and Uralgiprotrans with participation of Giprotrans TEI began to develop the project. In the beginning of 1998 JSC Belkomur began to construct a Northern link of the new rail way from opposite directions simultaneously: from Arkhangelsk region, from Karpogory to Sharda 22.2 km by Sevtransstroy as a contractor and from the Republic of Komi ErtomVendinga 17.85 km by JSC Pechorskoye Stroitelstvo as a contractor. JSC Komistroymost built 290 m long bridge over the Vashka river. For the Southern link Syktyvkar-Perm a feasibility study was made and positive expertise was received. The project of the new rail way Arkhangelsk-Syktyvkar-Kudymkar-Perm within the Northern Transport Corridor Finland-Urals-Far East and Middle Asia will serve a quicker economic development of Russian North-West regions, business, foreign trade expansion of the Republic of Komi, Perm region, Arkhangelsk and Sverdlovsk regions. The rail road will involve into economical use territories with a huge potential, assist integration into the world economy.

On September 6, 2007 the Government of the Russian Federation approved the project "Russian Federation Rail Way Transport Development Strategy till 2030". The construction of the links Syktyvkar-Perm 579 km, Karpogory-Vendinga 215 km are included into the strategy as a part of minimum and maximum options for the rail way transport development till 2030

The project of Belkomur, the new rail way Arkhangelsk-SyktyvkarKudymkar-Perm within the Northern Transport Corridor Finland-Urals-Far East and Middle Asia will serve a quicker economic development of Russian North-West regions, business, foreign trade expansion of the Republic of Komi, Perm region, Arkhangelsk and Sverdlovsk regions

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Increased use of the Northern Sea Route is more profitable and fast alternative to sea transport routes bypassing the Eurasian continent. In particular, one such example is the posting of the tanker "Baltic", owned Sovcomflot, with a cargo of gas condensate (The Merchant - Novatek) from Murmansk port in Ningbo (China). Nevertheless, in this situation it is obvious that the business needs are ahead of the public reaction: there is still no new legislative framework governing the development of the Northern Sea Route, is not organized by the administration of the NSR, is not established cooperation of interested companies and regional administrations. The region will create a special economic zone of the port type. Moscow signed an agreement between the Ministry of Economic Development of Russia, the Government of the Murmansk region and the municipal administrations The Kola region and the city of Murmansk. It is planned that in the Murmansk region will invest around EUR 4 billion, plus significant federal funds to federal property, (in the words of Governor Dmitry Dmitrienko). Will construct a new container terminal and modernize existing and built new port facilities for receiving, handling and loading of bulk and liquid bulk cargoes.

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OIL AND GAS SECTOR OVERVIEW Hydrocarbon reserves of Russia are an essential element of the global oil and gas system. According to different estimates, Russia possesses 25 to 28% of the global gas reserves and up to 10% of oil reserves, produces over a quarter of the global gas and 10 to 14% of oil. Russia is a large oil exporter, with its share of the world‘s export amounting to 8-9%.

Russia possesses over 25% of the global gas reserves and up to 10% of oil reserves World's natural gas reserves

The oil and gas industry is crucial for the Russian economy. During recent years hydrocarbon reserves and their products have accounted for nearly two thirds of Russia‘s export. Thus, oil export in January – April 2010 amounted to 81,4 mln. tons – 34,6% of the total export of Russia, and 48% of fuel and energy resources export. At present the oil and gas sector totals 25% in the GDP of the Russian Federation and, according to the opinion of A.Kudrin, Minister of Finance of the Russian Federation, during the next 10 years budget revenues from the sector will be gradually decreasing – down to 14%.

24 %

30 %

3% 14 %

4% 4%

17 %

4% Russia Iran Qatar Turkmenistan Saudi Arabia United States United Arab Emirates Others

Implementation of oil and gas projects significantly impacts development of other sectors. The oil and gas sector gives work to hundreds of related industries and is currently of the utmost economical and political importance.

DEVELOPMENT TRENDS EXHAUST OF EXISTING OIL FIELDS AND RISING DEMAND FOR OFFSHORE Main oil and gas fields on the territory of Russia were discovered and aggressively developed during the XX century. During the last few years the problem of depletion of hydrocarbon resources has become evident. Dynamic growth of industrial production in various sectors increases consumption of energy resources. Within a decade global consumption of oil, gas and coal increased almost twice and need for energy increases every 12-14 years. Over 75% of oil and gas fields have already been involved in industrial exploitation, and their mean depletion is close to 50%, including the North Caucasus – over 82%, in Ural-Volga region – about 70%, in the Western Siberia – about 40%. Thus, according to data of the Fuel and Energy Complex of the Krasnodar Territory, over 85% of oil and 72% of gas fields discovered earlier have been depleted. Oil production slowdown has been observed during the last few years. Experts believe that in years 20152020 abrupt decrease of liquid hydrocarbons output should be expected

Over 75% of oil and gas fields are 50% depleted, including those in North Caucasus – over 82%, in Ural-Volga region – about 70%, Western Siberia – about 40%

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which is related to depletion of giant fields producing the main volume of oil and to lack of new similar fields ready for developing. During the first several years after the breakup of the Soviet Union practically no funds were allocated for geologic exploration and producer companies in their operation relied basically on results of researches made in the perestroika times. The major part of profitable hydrocarbons reserves produced on-shore, discovered last century, is under exploration. The industry experts believe that reserves of traditional oil fields of Russia are close to depletion and producer companies should look for new resources off-shore. Evidently after year 2015 the focus will have to be made on offshore fields. The Russian continental shelf covers 6,2 mln. sq. km. and 4 mln. of them, as estimated by scientists, are prospective for oil and gas development. Total reserves of perspective shelves are evaluated by the Ministry of Natural Resources and Ecology of the Russian Federation as amounting to about 100 bln. tons of fuel equivalent. The major part of the reserves is located on the arctic shelf, including basins of the Barents and the Kara Seas. Gas takes the majority of the shelf‘s resources – 76 trn.cubic meters. Gas and condensate prevail in the Barents and the Kara Seas; oil predominates in the Pechora Sea. However, at present Russia is having its ―shelf debut‖: off-shore oil production accounts for about 3% of the total volume in the country.

Evidently after 2015 the focus will have to be made on off-shore fields

Present-day offshore oil production accounts for about 3% of the total volume in Russia

MAIN CHALLENGES OF OFFSHORE OIL&GAS MINING One of the off-shore hydrocarbons production problems is significantly high cost and complexity of these works if compared to onshore extraction. Development of off-shore fields requires substantial investments and application of state-of-the-art technologies. Thus, as evaluated by experts, an off-shore prospecting well costs 10-20 times as much as a continental well. Technical and environmental drilling risks and, therefore, costs for preventive actions are much higher. Environmental problems in oil and gas production areas, as a rule, are acute issues at every stage of exploration, prospecting, and exploitation works. The cost of the required equipment is also incomparably higher. According to the senior analyst of ―Metropol‖ financial-investment company Alexander Nazarov, ―a floating drilling unit for an off-shore field costs 250-300mln.USD. Similar equipment for an on-shore project would cost maximum 20mln.USD‖. Investments required for off-shore fields development are so high that the crisis brought about a question of the payback of such expenses given the current market situation. Deputy Prime Minister, Igor Sechin, who

A floating offshore drilling unit costs $250-300mn as compared to similar onshore equipment costsing maximum $20mn

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oversees the oil and gas sector of Russia, in 2009 spoke about sanity of postponing off-shore projects ―until better times‖. Additional difficulties connected with development of the arctic shelf are related to remoteness and severe climate conditions. Extraction will be carried out in areas with low temperatures, storm winds, quick freezing. Besides, at some parts of the shelf where works are to be carried out 1,5 meter ice can be drifting over 200 days a year. The above mentioned circumstances also boost the cost off-shore projects and provide for high requirements to technical means used for works.

Difficulties connected with development of the arctic shelf are related to remoteness and severe climate conditions

The first projects on Sakhalin identified the main problems related to off-shore development: seasonality of exploration works and field facilities construction, lack of required technologies and equipment for drilling and extraction, unresolved issues of transportation and processing of extracted raw material. Off-shore development is substantially restricted by the applicable law. In spring 2008 the law on access to subsoil resources and on continental shelf was amended. These amendments allow access exceptionally for legal entities of the Russian Federation, 50% of shares of which minimum are owned by Russian legal entities, and moreover, only the Russian Federation, directly or indirectly, is the major shareholder, and shelf development consortiums of the Russian Federation can be headed by state companies only. Plus subsoil users must have at least five year experience of operating at the continental shelf. Only two companies conform to these parameters – Rosneft and Gasprom. However, to implement complicated shelf projects companies require significant investments. In the middle of 2009 Minister of Natural Resources and Ecology, Yury Trutnev, noted that amendments should have been made in the legislation to increase the investment appeal of the subsoil use area, including for foreign companies. With the global crisis when many Russian companies rejected their upgrade and development plans conditions of entry to costly shelf project for foreign companies should be eased. Thus, it is a vicious circle: Russian companies cannot develop offshore fields on their own due to high costs and complexity of works, without any involvement of foreign companies – either financial or technological. But foreign participation in such projects is restricted by the law. Nevertheless, at present large-scale projects are being implemented on the territory of the Russian Federation, which are related to construction of facilities for extraction, transportation, and processing of raw hydrocarbons both on-shore and on continental shelf. Hundreds of billions of rubles are spent on products and services for construction of facilities for deposits development, pipeline systems, and processing facilities. The total amount of investment programs of natural monopolies initiated by the Government of the Russian Federation accounted for 2 trn. RUR.

Russian companies are unable to develop offshore fields due to high costs and complexity of works, but foreign participation is restricted by the law

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POSSIBLE THREATS OF CHANGING GLOBAL MARKETS: US SHALE GAS ALTERNATIVE Within the last year the global gas market has undergone changes related to an alternative to natural gas – shale gas. According to the 2009 results, Russia went down to rank the second in terms of gas output, with the United States ranking the first. The reason for this change was a boost in gas production at shale deposits. The technological breakthrough allowed companies extract gas from reserves which were supposed to be inaccessible. In 1990 the United States produced only 10% of unconventional gas, but now this figure, according to some estimates, exceeds 40%, and by 2020 it will come up to 60%. In general, according to experts‘ estimates, shale gas production in the United States in 10-20 years will increase by three-four times. Further production increase will allow the United States to completely terminate gas import.

Shale gas production in the United States brought the global gas market to uncertainty yet became a global trend of the industry

The boost in shale gas production in the United States brought the global gas market in the state of uncertainty. The USA managed to significantly reduce gas import and, therefore, LNG from the Middle East designated for the American market turned out to be not in demand and was sold to Europe at damping prices. Shale gas production has become a global trend of the industry. Resources are being actively developed in China. The largest energy company PetroChina evaluates its shale gas reserves as 45 trn. cubic meters. According to a Statistical Review of World Energy report, this is more than proven gas reserves in Russia in 2009. China hopes to bring its shale gas share to 25% of the total gas production by 2030. A number of the largest oil and gas companies got a license for shale gas prospecting in Europe. In early April it became known that large reserves of shale gas had been discovered in Poland – about 1,36 trn. cubic meters. An American ConocoPhillips will start their development in May. If the reserves in Poland are proven, the country will become a large gas producer in Europe and total EU gas reserves will increase by 47% right off. Experts think that European projects on shale gas production can within a decade become a serious threat for the Russian Gasprom which might loose its position in the European market. However, the volume of unconventional gas reserves in Europe is not proven. According to assessments of the International Energy Agency (IEA), they amount to 35 trn. cubic meters. This is less than in the United State or in Russia but 6 times exceeds the reserves of conventional gas in Europe. About a half of all reserves are shale deposits, others are in coal beds and sandrocks. As assessed by IEA, this is enough to cease gas import for 40 years.

Russia has no own shale gas production technologies since the focus has been set on conventional gas production. Many Russian experts were skeptical about its perspectives in the world.

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Russia does not produce shale gas. The country has no own shale gas production technologies since the focus has been made on conventional gas production. And until recently many Russian experts were skeptical about its perspectives in the world. ―Gasprom‖ and other Russian gas producers have not made any large purchases on the shale gas market and are not yet planning to develop this business activity. In the opinion of ―Gasprom‖ representatives, conventional gas production will remain competitive and, moreover, the most popular technology in the world. However, influence of this trend on development of the industry in Russia is evident. Shale gas threat for Gasprom and Russia was officially acknowledged by experts in the beginning of 2010. In particular, the Minister of Natural Resources and Ecology, Yury Trutnev admitted that ―possibilities of gas market change under the influence of shale gas do exist‖, and Minister of Energy, Sergey Shmatko, confirmed that the growing shale gas export from the United States in Europe were of a concern for Russia. Even three years ago the United States discussed possible import of LNG from abroad, including from Russia, but now such plans are not considered any more.

Shale gas threat for Gasprom and Russia was officially acknowledged by experts in the beginning of 2010. Minister of Natural Resources Trutnev: “possibilities of gas market change under the influence of shale gas do exist”

As said by Yury Komarov, former CEO of Shtockman Development AG, ―The market has become too volatile, supply significantly exceeds demand, partly due to the shale gas boost in the United States.‖ While assessing the perspectives of shale gas, the following 3 main problems become evident: Technological complexity of production. Due to specifics of shale deposits, the final technology used depends on a certain deposit. Beside that, wells must be constantly drilled. And the money invested now will pay back in 10-15 years only. The technological breakthrough took the United States about 20 years. Environmental issue. Shale gas can be produced only close to rivers and lakes. But some grey water will remain on land and after the explosion it can get to water intake through cracks. That was a reason why shale gas production was forbidden close to large cities in the United States. An advantage of the USA is a possibility to produce shale gas in deserted areas. Europe has no such areas and it is pretty much concerned with environmental protection issues. Density of population in Europe makes the process of obtaining a drilling license more complicated. According to a forecast of the Oxford Institute for Energy Studies, Europe will start shale gas production minimum in 10 years. High gas cost. As estimated by Russian experts, cost of shale gas production exceeds the cost of conventional gas production about by seven times. American estimations show that development of new shale gas deposits in the United States will be profitable at a market price of 210-250 USD per a thousand cubic meters. Shale gas production expenditures account for about 100-150 USD per a thousand cubic meters. High cost of

Shale gas perspectives, however, face evident problems: technological complexity of production, high cost of gas and serious environmental issues

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production is explained by technological features of the works: shale gas is highly unstable, pressure in the conventional gas well can remain unchanged for decades but stays the same only for a month for shale gas; after that hydraulic fracturing must be repeated up to 10 times per year. And even more often drilling new wells, 2,5 – 4 mln.USD each. The lifetime of a gas shale well is 8 to 12 years. While for a conventional gas well lifetime is 30-40 years. However, an advantage of shale gas is that it is produced at areas of consumption which helps to minimize transportation costs; also due to an extensive pattern of gas pipelines transportation costs in the United States take an insignificant share in the gas cost while new facilities and pipelines must be constructed at remote Russian gas deposits, and the transportation costs are high. Shale gas production also helps to decrease geologic exploration expenses. At present global shale gas reserves have not been studied yet completely, as well as production technologies. It is not yet possible to make definite conclusions about perspectives of shale gas. This business is too young and it is not still possible to evaluate long-term consequences of this type of gas production – changes of profitability at later stages of production, impact on the environment, and chances of shale gas to drastically change the world‘s energy policy.

U.S. Natural Gas Wellhead Price (Dollars per Thousand Cubic Feet) 10 8 6 4 2 0

MAJOR OFFSHORE FIELDS IN RUSSIA SAKHALIN MEGAPROJECT The first large offshore oil projects in Russia were prospecting and developing of hydrocarbon resources of the Sakhalin shelf. The Sakhalin shelf has nine oil-and-gas properties with total reserves of 1,19 trn. cubic meters of gas, 394,4 mln. tons of oil, and 88,5 mln. tons of gas condensate. For development of these fields a number of projects have been developed during the last decades of the XX century bearing the common name ―Sakhalin‖. In early 1990s these projects were supposed to be developed by foreign investors and developers under production sharing agreements. A number of such agreements were concluded but only ―Sakhalin-1‖ and ―Sakhalin-2‖ project were ultimately implemented. Sakhalin-1 Under this project oil and gas reserves are being developed at the north-western shelf of Sakhalin Island. The project covers Chaivo, Odoptu, and Arkatun-Dagi fields. Total reserves under ―Sakhalin-1‖ project amount to 307 mln.tons (2,3 bln. barrel) of oil and 485 bln. cubic meters (17,1 trn. cubic meters) of gas. The initial stage of the project was development of the Chaivo deposit – in 2005 oil and gas production started here. Stage-to-stage

The Sakhalin shelf has nine oil-and-gas fields with total reserves of 1,19 trn cubic meters of gas, 394,4 mn tons of oil, and 88,5 mn tons of gas condensate

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implementation of later stages of the project is supposed to ensure oil and gas extraction until 2050. The operator of ―Sakhalin-1‖ consortium is ―Exxon Neftegas Limited‖ (30% of shares belong to Exxon Mobil Corporation). Consortium partners are affiliate companies of ―Rosneft‖ – ―RN-Astra‖ (8,5%) and ―Sakhalinmorneftegas-Shelf‖ (11,5%), ―SODECO‖, a Japanese consortium (30%), and ―ONGC Videsh Ltd.‖, an Indian state petroleum company (20%). Sakhalin-2 The operator of ―Sakhalin-2‖ project is Sakhalin Energy Investment Company Ltd. (Sakhalin Energy). Shareholders of Sakhalin Energy: ―Gasprom‖ OAO (50% plus one share), Shell Sakhalin Holdings B. V. (subsidiary of Royal Dutch Shell plc., 27,5% minus one share), Mitsui Sakhalin Holdings B. V. (subsidiary of Mitsui & Co. Ltd., 12,5% of shares), Diamond Gas Sakhalin B. V. (subsidiary of Mitsubishi Corporation, 10% of shares). The ―Sakhalin-2‖ project provides for stage-to-stage development of Piltun-Astokhskoye oil and Lunskoye gas fields. Both fields are located 1316 km from the north-eastern shore of Sakhalin Island. Total hydrocarbons reserves developed under the ―Sakhalin-2‖ project exceed 600 bln. cubic meters and 170 mln. tons of oil and condensate. The first stage of the project was completed in 1996. In terms of this stage oil production started at Astokhskaya area of the Piltun-Astokhskoye field. In July 1996 first oil was produced. This project was the first project implemented in Russia under a production sharing agreement. In terms of the project the first Russian LNG plant was constructed in 2009. For handling LNG carrying vessels and oil tankers the first specialized Sea Port Prigorodnoye was constructed in 2007, equipped with a LNG loading berth and an oil loading terminal. Sakhalin-3 The ―Sakhalin-3‖ project comprises 3 blocks: Kirinsky, Ayashsky and Vostochno-Odoptinsky, and Kirinskoye gas and condensate field. Licenses for development of the fields were assigned to Gasprom. Reserves and resources of the ―Sakhalin-3‖ project are estimated as about 1,4 trn. cubic meters, with the major part in the Kirinsky block – about 1 trn. cubic meters.

KIRINSKOYE GAS AND CONDENSATE FIELD Discovered in 1992 and located within the Kirinsky block of the ―Sakhalin-3‖ project on the Sakhalin shelf, Kirinskoye field will become one of gas sources for the ―Sakhalin-Khabarovsk-Vladivostok‖ gas pipeline system under construction. Reserves of Kirinskoye gas and condensate field

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(АВС1+С2) amount to 100 bln.cubic meters and 11,4 mln.tons of gas condensate. The field is planned to be paced into exploitation in 2014. In July 2009 ―Gasprom‖ started exploratory drilling at the field.

SHTOCKMANN GAS AND CONDENSATE FIELD The field is located in the center of the shelf zone of the Russian sector in the Barents Sea, about 600km north-east from Murmansk and 300km from the western coast of the Novaya Zemlya archipelago (the Arkhangelsk region). The field was discovered in 1988. Shtokman reserves are supposed to be the largest in the world with about 3,8 trn. cubic meters of natural gas and about 37mln. tons of gas condensate. The development project of Shtokman field provides for annual output of about 70 bln. cubic meters of natural gas. This can be compared with gas production of one of the largest European gas producers – Norway. The first stage ensures natural gas annual output of 23,7 bln. cubic meters.

Shtockman reserves are considered the largest in the world with approx. 3,8 trn cubic meters of natural gas and 37mn tons of gas condensate

Gas production at the field will be arranged with the use of subsea production units and special vessels. The extracted raw material will be transported through subsea pipelines to the shore of the Tereberskaya bay where the following facilities will be located: LNG plant, port transportationprocessing system, gas processing facility and other production facilities. For gas transportation to the Unified system of gas supply of Russia a gas pipeline ―Murmansk-Volkhov‖ is planned to be constructed. The license for exploration and extraction of gas and gas condensate at Shtokman field is owned by ―Gasprom Neft Shelf‖ Ltd. (former name – ―Sevmorneftegas‖), a 100% subsidiary of ―Gasprom‖ OAO. Total and StatoilHydro (now Statoil) became partners of Gasprom for development of the field. On February 21, 2008 a Shareholders Agreement was signed on establishment of a special purpose entity Shtokman Development AG. ―Gasprom‖ owns 51% of the company‘s capital, Total — 25%, Statoil — 24%. In general, up to 1000 companies can be involved in facilities construction at Shtokman field. A certain hierarchy exists for them: 40 large contractors, sub-contractors which, in turn, will involve middle and small scale businesses. The Sktokman gas and condensate project is of strategic importance for ―Gasprom‖. This field was supposed to become a resource base for supplies of Russian gas, both pipeline and produced with application of LNG technologies (LNG – liquid natural gas), to the Atlantic markets. But the boost in shale gas production in the United States prospective to supply the Russian gas to the American market became much less realistic and the field development plans were adjusted. Shale gas production can substantially influence prices on the global market and question profitability of the Shtokman field development. According to a forecast of the

Development project of Shtockman field provides for annual output of est. 70 bn cubic meters of natural gas

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International Energy Agency (IEA), increase in the shale gas production in the United States will not allow the LNG price get over 240 USD until 2030, while the cost of Shtokman LNG will amount to 270 USD per a thousand cubic meters. Representatives of Shtokman Development AG suggested postponing works on the project for 3 years but, according to Prime Minister Vladimir Putin, development of Shtokman gas and condensate field will start, as planned, in a year. The decision on the field development is of political importance. However, the question concerning construction of an LNG plant is still unsolved. The final decision on construction dates will be made in the end of 2011 with consideration of the current market situation.

PRIRAZLOMNOYE OIL FIELD Prirazlomnoye is the first Russian project on development of the arctic shelf resources. The field was discovered in 1989 and located on the Perchora Sea shelf 60 km from the coast (Varandey). The sea depth at the field is 19-20 m. Reserves extracted from the Prirazlomnoye field account for 46,4 mln.tons. The planned oil extraction at Prirazlomnoye field is 6,5 mln. tons per year. Development period – 25 years. Development of Prirazlomnoye oil field is the first project on hydrocarbons extraction at the arctic shelf of Russia. Beginning of oil production at Prirazlomnoye field will initiate development of the richest hydrocarbons reserves in the Barents, Pechora, and Kara Seas. Oil production at Prirazlomnoye oil field is planned to be started in 2011. Construction of Prirazlomnaya oil platform has been under way for several years already at Sevmash plant. Gasprom is in charge of the field‘s development.

FILANOVSKOYE FIELD The oil and condensate field is located in the northern part of the Caspian Sea. The field was discovered in 2006 and is planned to be placed into exploitation by 2015. Oil reserves amount to 220 mln. tons, gas – 40bln.m3. In terms of prospective oil production this field is supposed to be the largest of all fields discovered in Russia in the XXI century. Estimates show that the maximum oil extraction level at the new field will exceed 5 mln. tons per year, cumulative production – about 80 mln. tons. The operator of the field is Lukoil.

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SHATSKY SHAFT Val Shatskogo (Shatsky Shaft) is a field at the Black Sea shelf located in the eastern part of the water area, with the area of 8,6 thousand square meters. Reserves of the field account for about 860 mln. tons of oil under international classification. The field‘s development is being started by Rosneft together with Chevron company. Chevron will finance the initial geological exploration, seismic and prospect drilling. The share which Chevron will get is not known. A single holding will be established and, under the Subsoil Law of the Russian Federation, the license will be possessed by Posneft. At the geological exploration stage up to 1 bln. USD will be invested in shelf development in the Black Sea. According to Deputy Prime Minister Igor Sechin, if in the course of geological exploration a go decision is made, over 1 trn. rubles will be invested in the project. The first well is planned to be drilled in the end of 2011. The project is also likely to get tax relieves. Shatsky Ridge and other off-shore projects of Rosneft in the Black Sea can turn out to be more costly and complicated in comparison with projects in the Caspian Sea due to deeper waters of the Black Sea. The total cost of the Shatsky Ridge development project was roughly estimated as 2030 bln. USD. However, a substantial resource base, favorable climatic conditions, vicinity to export markets, developed infrastructure (Rosneft owns Tuapse oil refinery plant and an oil shipment terminal at the Black Sea coast) are significant advantages of the project.

BOVANENKOVO GAS FIELD (YAMAL PROJECT) Yamal project, also referred to as Yamal megaproject, is a long term plan to exploit and bring to the markets the vast natural gas reserves in the Yamal Peninsula, Russia. The project is developed by Gazprom. Preparations for the Yamal's development started 1990s. According to the original plans, drilling work on the Bovanenkovo field was to have started in 1997. In January 2002, Gazprom identified the Yamal Peninsula as a region of Gazprom's strategic interest. Preparatory works started in 2007 with the construction of auxiliary infrastructures, such as staff buildings and transport facilities. In July 2008 Gazprom launched the construction of the Bovanenkovo–Ukhta gas trunkline at the submerged crossing via the Baydaratskaya Bay. The project was officially inaugurated on 3 December 2008. On the Yamal Peninsula and its adjacent offshore areas have been discovered 11 gas fields and 15 oil, gas and condensate fields. They consists of 16 trillion cubic meters (tcm) of explored and provisionally evaluated gas reserves and nearly 22 tcm of in-place and forecast gas reserves. Condensate reserves are estimated to consists of 230.7 million

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tonnes and oil reserves to consists of 291.8 million tonnes. The largest gas fields, for which Gazprom owns the licenses, are Bovanenkovo, Kharasavey, Novoportovo, Kruzenshtern, Severo-Tambey, Zapadno-Tambey, Tasiy and Malygin fields.

The Bovanenkovo gas field is the largest gas field on the Yamal Peninsula with estimated reserves of 4.9 tcm. It is expected to be put in operation by 2011 with the annual production of 8 billion cubic meters (bcm), which will increase to 75-115 bcm by 2015. Several pipelines are envisaged for delivery of the Yamal gas. A joint project (Yamal-Europe pipeline) between gas transportation companies of Russia, Belarus, Poland and Germany was agreed in 1993 and commissioned in 1999. After commissioning of the Bovanenkovo–Ukhta gas trunkline it will deliver Yamal's gas to Europe. Construction of this pipeline started in July 2008 and was officially launched on 3 December 2008. The 1,100 kilometres (680 mi) gas pipeline is to connect the Bovanenkovo gas field with the Russian gas hub at Ukhta. First deliveries of over 15 bcm per year are expected to start by the end of 2011. In November 2008, Gazprom announced that it prepares a list of potential partners for the Yamal LNG project. Although the list is not disclosed yet, Gazprom indicated that ExxonMobil and ConocoPhillips are included on the list. Also Royal Dutch Shell, Repsol YPF and Petro-Canada have been mentioned as potential partners.

POTENTIAL DEMAND AND CHALLENGES OF OFFSHORE DRILLING Development of continental shelf resources requires heavy investments and negotiating a number of challenges. As estimated by the Ministry of Economic Development and Trade, further exploration and development of the shelf will require over 9,3 trn. RUR (approx. EUR 240 bn) until 2040. Despite the fact that Russia started systematic areal surveys for oil and gas about at the same time as Norway, for example, its shelves are still poorly explored. For the whole exploration period only about 200 deep prospecting and appraisal wells had been drilled by year 2007, totally amounting to 500 thousand meters. Low level of shelf exploration offers huge opportunities for resource base buildup and production of hydrocarbon reserves with substantial increase of sea geological exploration. Needed are considerable geophysical surveys and higher degree of resources geological exploration. For successful implementation of shelf projects a large number of new technological means is required, and some of these means have not

Insufficient resource exploration in Russia as compared to e.g. Norway and lack of technology means: to unlock the huge potential of Russia in off-shore development of hydrocarbons fields it’s necessary to arrange development and construction of special marine equipment in Russia

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been manufactured in Russia and cannot be manufactured at the existing capacities. To unlock the huge potential of Russia in off-shore development of hydrocarbons fields it‘s necessary to arrange development and construction of special marine equipment in Russia. Large-scale shelf development requires application of a large amount of off-shore producing platforms, subsea pipelines covering large areas, increase in tanker transportation, construction of off-shore and on-shore terminals, processing plants in the coastal zone. According to assessments made in 2008 (note, that these estimations were made prior to the evident concequences of the shale gas developments), the largest companies with resources at the shelves of the North, the Far East, and the Caspian Sea are ―Gasprom‖, ―Rosneft‖ and ―Lukoil‖; shelf development by 2030 will require equipment for producing and transportation of up to 110 mln. tons of oil and up to 160 bln. cubic meters of gas per year, with the required service infrastructure. In particular, Gasprom only by year 2030 will need 30 fixed platforms for shelf development in the arctic and far eastern seas, and 10 for Shtokman. The need of Russia for gas carriers will be 17 units with capacity of 90 thousand cubic meters until 2015, and over 40 units of large vessels with capacity of 150 thousand cubic meters (each costing over 200 mln. USD) after 2015. Shtokman project alone will require gas carriers totally costing over 7 bln. USD. It will also require 700 large dump trucks which is 20% of the total world‘s fleet of trucks. Planned to be used are: two cranes with lifting capacity of 1250 tons, three cranes – 800 tons capacity, and 70 cranes – less than 400 tons capacity, 120 trucks, 20 bulldozers, 40 excavators, 200 motor vehicles, 240 buses. CEO of Shtokman Development AG, Yury Komarov, noted in the beginning of 2010 that works at the shelf will require not one but several complex supply bases in the Arkhangelsk and Murmansk regions. In May-June 2010 planned to be placed into operation the first Russian plant for concrete coating of pipes for subsea oil and gas pipelines.

Russia lacks environmental protection fleet which would solve oil spillage problems in case of emergency

According to estimates of another leading company, ―Rosneft‖, needs of already launched shelf projects alone by 2020 will include 49 producing platforms and 203 staples totally costing about 2 trn. RUR. One of the major risks of northern seas development is the economical risk. Such projects not only require high cost and hightechnology infrastructure facilities but also a large amount of highly experienced specialists. Another problem is lack of environmental protection fleet in Russia which would solve oil spillage problems in case of emergency. Moreover, lack of such fleet brings about another problem: Rosprirodnadzor (the Federal Service for Supervision of Natural Resources Usage), in terms of information about the state of the environment, strongly depends on oil and gas companies providing this information to Rosprirodnadzor. Thus, even though Russia has the world‘s strictest environmental requirements to oil and gas companies which drill wells off-shore, the country is far behind in terms emergency response.

Lack of the technologies and equipment necessary for offshore works, demand for investments in related industries creates favorable conditions for foreign companies

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Lack of the technologies and equipment necessary for off-shore works, need for heavy investments in related industries created favorable conditions for foreign companies which actively participate in the projects at various stages of their implementation. A good example of cooperation between a Russian and a foreign company is Shtokman field development project in which companies from different countries were involved. Thus, Norwegian participation is planned for the complex supply base for the Stokman gas and condensate field.

There are no obligations and norms for purchase of Russian machinery by subsoil users, often declared “high entry cost to participate in Russian industry” are a sheer fiction

In Arkhangelsk a design agency is under establishment now which will design off-shore extraction equipment; a Russian-French engineering joint venture Sevmash-Doris‖ has been already established for this purpose. Shtokman Development AG assigned development of a concept and engineering project of a floating production platform for the Shtokman field to Aker Solutions (Norway) together with Technip (France) and SBM Offshore (Netherlands). Foreign specialists generate the concept of the platform, preliminary design the body of the platform, and work on the mooring system. At different stages of the project implementation such companies as Siemens, Italian Saipem, and Japanese Mitsui will take part in the project. Russian experts note that this approach of Shtokman Development AG will ensure application of western equipment well-known to the foreign specialists. It is assumed that in terms of the project machinery will be imported in huge amounts. Negotiations are being held concerning tax concessions for the machinery import. Distribution of contractor works of the Russian shelf brings about concern of the Union of Manufacturers of Oil and Gas Equipment. No obligations and norms for purchase of Russian machinery by subsoil users exist. In some cases ―heavy rates of Russian industry participation‖ are declared which is a sheer fiction. Large-scale infrastructure projects are implemented through general contractors and their sub-contractors are not controlled. Not a single infrastructure project has norms of Russian participation applied to it. Natural monopolies prefer not to ―mess about‖ with Russian plants but purchase equipment of foreign manufacture. High cost of foreign equipment, in comparison with Russian analogues, is of no great importance. The value of the investment program grows and all the related costs become a burden for the industry and the population through tariffs increase. ―Gasprom‖ OAO and ―Transneft‖ stock company do not fix the norms of involvement of Russian manufacturers in infrastructure projects and contractors purchase foreign equipment in large amounts, i.e. they don‘t limit the acquisition of large quantities of dump trucks, pipe layers, bulldozers, cranes, excavators, lift trucks of foreign make. Contactors are not obliged to

Gasprom and Transneft do not fix any minimum for national manufacturers in infrastructure projects, i.e. they don’t limit the acquisition of large quantities of dump trucks, pipe layers, bulldozers, cranes, excavators, lift trucks of foreign make

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publicly declare their tenders, therefore, transparency is very low. A natural monopoly, having assigned a contractor agreement for a large sum of money to a company incorporated in Russia supposes that these funds can be attributed to the ―Russian involvement‖ category. Further transfer of money abroad by the contractor is not taken into consideration, which results in a feeling of a large-scale Russian participation. In fact, the contractor expands its fleet not with Russian but with foreign trucks. No restrictions are set by natural monopolies. It is often practiced that the sum to the Russian general contractor is announced while the money transferred to other countries is not. Thus, in 2007 ―Gasflot‖ Ltd. entered into an agreement with the Vyborg plant costing 59 million RUR, which at that moment exceeded two billion USD. The contract value and name of the Russian plant were loudly announced by ―Gasprom‖. But over a half (according to experts‘ assessments, over 70%) of this amount was transferred abroad. Topsides are purchased from Samsung Heavy Industries (Southern Korea), and drilling equipment from National Oilwell Varco (USA). Use of foreign equipment in the largest projects also brings about technological dependence of the Russian fuel and energy complex since this will require import of spare parts from abroad, maintenance and involvement of foreign specialists. Thus, a trend has developed to actively involve foreign partners for implementation of oil and gas projects and to use foreign technologies and equipment.

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SHIPBUILDING CLUSTER OVERVIEW SHIPBUILDING INDUSTRY OUTLOOK CHALLENGES OF THE INDUSTRY Shipbuilding is one of the top-priority sectors in the industrial development of the country, along with aerospace and aviation industries. Shipbuilding is an industry with a great scientific and technical and production potential and can influence technologies development in related industries. At present there are 170 shipbuilding companies in Russia, the industry employing 160 thousand people. During the last several years one can see stable turnover increase. In 2008 the total revenues of shipbuilding enterprises accounted for 150 bln. RUR, and preliminary estimates show that in 2009 it amounted to 180 bln. RUR.

Today 170 shipbuilding companies in Russia employ 160’000 people, overall turnover is est. RUR 180bn (~EUR 4.5bn)

Utilization of capacities

Utilization of capacities of enterprises, despite of stable growth within the last few years, is not high enough. In 2005 it was 19,5%, in 2007 2025%, but in the beginning of 2010, according to Vladimir Putin, the industry‘s workload exceeded 50%.

60 %

Only about 4000 enterprises and companies of various specializations to a certain degree produce goods and render services in terms of equipment for continental shelf exploration, as well as economic and military activity at internal and international waters.

20 %

50 % 40 % 30 % 10 % 0% 2005 2007 2010

The following main activities of these companies can be mentioned:    

shipbuilding and ship repairing (over 200); manufacturing and supply of spare parts and units (over 400); design and scientific-research works (about 50); services (over 3000);

The main problems interfering with development of domestic civil shipbuilding today are: High degree of wear of fixed assets. Until recently there were practically no investments in modernization of shipyards, therefore, a great part of main production assets is about 70% worn out. And this is a problem not of main manufacturers of end products only but also of related producers manufacturing spare parts and equipment. In general, the major production facilities of the industry, including machine building and instrument making, are completely outdated. Production facilities over 20 years old account for 65% in the total machining facilities.

As little as 4’000 various companies are involved in economic and military activities, manufacturing and services connected with continental shelf exploration

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Technological inferiority. The general level of technologies, design decisions and works arrangements is significantly inferior to western advanced enterprises. As a result, labor intensity of the industry is 3-5 higher than that abroad and the time consumed for vessels construction is 2-2,5 times as much. Shipbuilding plants rarely apply modern methods of prefabricated large-block construction due to absence of high lifting capacity cranes (600, 900, 1100 tons). There is no specialized organization in Russia which would design platforms for offshore works, and all projects, according to which the center of shipbuilding and ship repair ―Zvezdochka‖, in particular, builds its platforms, were developed by foreign specialists. However, on the grounds of the ―Ship Repair Center‖, together with a Norwegian Aker Solutions company, a Russian-Norwegian agency for designing off-shore production platforms is being under establishment now. Loss of highly qualified staff. No demand and low salary were the reasons for worsened staff potential at many enterprises of the industry. Staff reduction was mainly due to leave of young and prospective employees aged 30-40. Lack of young employees breaks intergeneration continuity and this continuity has been already broken at the majority of enterprises. Unfavorable financial environment. Cost of borrowed capital in Russia is rather high, credits are short-term with unfavorable conditions. Russian shipping companies have to take credit abroad, but creditors often abide credits of foreign banks with compulsory orders of spare equipment from the West and registration of vessels built under this credit under a foreign flag. Limited production capacities of the existing shipyards. In civil shipbuilding the industry is able to satisfy the needs of the state and domestic companies in small and medium tonnage ships of practically all classes. But demand for heavy-tonnage vessels can be satisfied partially only, due to absence of necessary capacities. Production facilities of Russian shipyards allow building ships of 70-90 thousand cubic meters tonnage only, while growing is demand for ships with higher tonnage, for 150 thousand and even 200 thousand cubic meters. The Russian industry has not a single shipbuilding complex for transport ships with displacement over 100 thousand tons. Modern shipyards are also necessary for building other large marine equipment for offshore fields development. Thus, new shipyards are to be constructed and relevant technologies are to be acquired for a breakthrough in civil shipbuilding and entry into the global market. These problems of the industry result in importing of all more or less complicated equipment and technologies from CIS and non-CIS countries. The current situation is favorable for foreign companies operating both in equipment and parts supplies and technological and design solutions. The importance of cooperation with foreign partners was mentioned in the shipbuilding development strategy until 2020, which provides for large-scale cooperation in shipbuilding with foreign partners (Shell, BP, etc.) in terms of creation of means of shelf development on the North and the Far East of Russia. At present a British ―Sea Dragon Offshore‖ company intends to build, together with FSUE ―PO ―Sevmashpredpriyatiye‖, drilling rigs and oil platforms adapted to climatic conditions of the Barents Sea. The lower part

Shipbuilding industry development is significantly impeded by extremely worn out PP&E, loss of technological integrity and qualified personnel, insufficient production capacities and obstacles for comfortable financing

Intricate situation in the shipbuilding industry in Russia is favorable for foreign companies operating both in equipment and parts supplies and technological and design solutions

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of such platforms will be constructed in Russia, and the upper at shipyards of Britain. Purchase of the most essential state-of-the-art foreign technologies is also one of the elements of the state policy in terms of the industry support. In the beginning of 2010 the Ministry of Transport developed a draft bill aimed at development of shipbuilding, which provides for establishment of shipbuilding zones with a special tax and customs treatment, exemption from import levies for equipment which is manufactured and has no analogues in Russia but used on a vessel. This can foster cooperation between Russian shipbuilders and foreign companies.

FROM MILITARY TO CIVIL SHIPBUILDING One of the main features of Russian shipbuilding is focus on production of military purpose goods. Civil production takes only 30% of the total production. The reasons are historical: in the Soviet times all shipbuilding plants were constructed with consideration of a military order, and civil orders were placed exceptionally for optimal utilization of shipyards‘ capacities. Almost everything that was not related to defense went to the Ukraine. In terms of division of labor in the Council for Mutual Economic Assistance European socialist states – Poland, German Democratic Republic and Romania – were specializing in civil shipbuilding; ships were also purchased from Finland. In the times after perestroika the military part of the industry developed due to state defense order and orders in terms of military and technical cooperation with foreign countries. In fact, at that time Russian shipbuilding was a segment of the military-industrial complex, and until 1997 the volumes of military orders were heavily decreasing. Russia did not have any need in such amount of military ships any longer which its shipbuilding could produce. Military shipyards can be hardly converted into civil ones since the military and commercial shipbuilding are conceptually and technologically very different. However, development of civil shipbuilding is necessary due to the current global market situation. During the recent year the growing demand for products of civil shipbuilding contributed to development of construction of transport means and oil platforms. Development of this activity is strategically important for Russia as it is considered as an opportunity to make a huge breakthrough in shipbuilding in general. Substantial growth is possible if shipbuilding is provided with orders in terms of implementation of arctic and far eastern projects of shelf development, in particular, ice breakers and ice-class vessels building. Another perspective sector in terms of development is the market of LNG carriers, the most rapidly growing and high-priced segment of the global shipbuilding, the demand for these ships now exceeds the offer. However, Russia has neither experience of nor technologies for building such ships and production opportunities of shipyards are limited. Therefore,

Soviet militarization preoriented all shipbuilding plants in Russia, but growing demand for products of civil shipbuilding contributes to development of transport means and oil platforms construction

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for a breakthrough in this field and entry into the global market new shipyards are to be built and relevant technologies are to be acquired. According to the ―development strategy of shipbuilding in Russia until 2020 and for longer term‖, passed by the government in 2007, the toppriority civil marine projects are:  

  

LNG carriers for transportation of liquefied natural gas from gas production sites at the Arctic shelf; icegoing large capacity tankers with new lines, construction and body material ensuring reduced energy consumption and weight characteristics by 10-15%, 20-25% enhanced icebreaking capability, with 1,2-1,4 times increased economic efficiency of transportation of oil and condensate produced at offshore fields in the Kara Sea; new generation atomic ice-breakers with improved ice breaking capability and operating performance; container ships for transport services for the Northern Sea Route, including transit navigation; producing platforms and special equipment for development of oil and gas fields at the arctic shelf, including subsea and subglacial complexes; modern scientific-research vessels for geophysical, geological, oceanographic, meteorological, biological and other surveys in the World ocean, including the Arctic; offshore technical equipment for energy generation in the coastal area of the Arctic and the Far Eastern districts, including from recoverable sources of energy (tides, streams, wind) and for gas processing in these districts for its transportation by sea; new types of engines, power units and auxiliary power plants, automatic control systems and other equipment of enhanced reliability, failure-free, and with extended lifetime, including electric propulsion power units for icegoing vessels and ice breakers.

According to experts‘ opinion, despite of the complicated situation in the industry, the present scientific and industrial potential of the Russian shipbuilding in terms of marine engineering is, in general, quite high and can be efficiently used for shelf development projects, in particular: 

  

for construction of filed facilities (ice-resistant platforms, raw material transport systems, including ice oil ships, ice breakers, offshore terminals and oil storages, etc.), as well as auxiliary fleet; for design works on subsea units meant for development of fields under ice and for subsea oil and gas transportation; for development of means and methods of oil spillage management, and efficient preventive measures; for development of structural solutions of offshore ice-resistant and earthquake-resistant facilities.

Russia possesses no experience or technologies for LNG carriers building and its shipyard capacities are limited, hense there is strong demand for shipyards to be built and relevant technologies to be acquired

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STATE CALL FOR REVIVAL OF THE INDUSTRY Shipbuilding is a special sector which cannot efficiently develop without the state‘s support. The state, together with OSK, takes a number of measures to bring shipbuilding out of its crisis. The industry development strategy has been developed and steps to improve operating conditions for Russian companies and cooperation with foreign partners have been specified. 1. On September 6, 2007 an order of Minister of Industry and Energy of the Russian Federation approved the ―Development strategy of shipbuilding in Russia until 2020 and for longer term‖. Shipbuilding is planned to be strategically developing due to the inner market. The Russian shipbuilding will focus on hydrocarbons transportation and on construction of drilling rigs, ice breakers and heavy-tonnage ships of enhanced ice class for oil and liquefied gas transportation. The first stage of the strategy provides for restructuring of shipbuilding, reforms of the normative-regulatory base, initiating new technologies. At the second stage modernization and technical re-equipment of the industry‘s facilities are to be carried out, construction of main prospective ships and vessels and works on the shelf and the Northern Sea Route are to be started; the stage also provides for increase in the annual output of Russian shipbuilding products by 2015 by nearly two times. At the third stage the output is to be increased by 3 times. 2. The Law on the Russian International Register of Vessels. Under the Russians law which came into force on January 2006, vessels registered in the Russian International Register of Vessels do not pay 4 taxes: property and income, transport tax and VAT. Therefore, the tax burden on shipowners is reduced, on average, by two times. At the same time, unlike offshore registration, registration in the Russian International Register of Vessels does not exempt ship-owners from the unified social tax. But a ―hidden rock‖ here – instead of these taxes ship-owners pay duties: registration and annual duties. Their rates are calculated per gross register tonnage and differ tonnage-wise. The majority of Russian small and medium-size ship-owners are not covered by the ―second‖ register law. The ―second‖ register law covers also only international vessels. 4. According to plans and suggestions under the system of state support of the industry in 2007-2008, amendments in the Fiscal Code, the Budget Code, Law of the Customs Tariff, and Merchant Marine Code were to be made, and a number of preventive measures were to be taken providing priority for Russian shipbuilders in construction of shelf development equipment, coastal traffic, fisheries within the exclusive economic zone. However, no relevant decisions were made in Russia in 2007 and not a single mechanism was put into operation which would help Russian shipbuilding enterprises to be competitive. 5. Plans to acquire licenses from abroad announced by the government late 2007 – early 2008: large-scale state funding for purchase of technologies where Russia is most inferior, and development of Russian

State attempts to revitalize the industry by acquiring licenses abroad (France and Norway) and by establishing shipbuilding clusters via amendment of the legislation in regards to special economic conditions, customs and tax regimes inside specifically allocated shipbuilding zones

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technologies meeting the modern needs. It is planned to acquire Norwegian and French licenses for ships construction which are highly needed but not built in Russia. This mainly concerns heavy-tonnage ships for transportation of liquefied gas in arctic conditions. 6. Draft law on establishment of shipbuilding zones with special tax and customs treatment developed by the Ministry of Transport is at present provided for consideration of the interested executive authorities.

NORTH WESTERN CLUSTER CHARACTERISTICS A quarter of shipyards, the largest and most significant, are located in the North-West of Russia. Therefore, the industrial potential in shipbuilding and ship repair of this region is about 60% of the total potential. Production facilities located in the region allow building and repairing vessels with up to 90 thousand tons displacement. Besides shipbuilding plants and dockyards, instrument making machine building enterprises are also located in the region which suppliers of ship associate equipment, as well as the Russian design scientific-research base – dozens of design bureaus and research development institutes.

and are and and

St.Petersburg has the main scientific potential of the Russian shipbuilding. First of all, these are research and development institutes and design bureaus, and institutes of the Russian Academy of Sciences, institutions of higher education and other governmental agencies operating in the interests of the Russian shipbuilding. 40% of all research and development institutes and design bureaus of Russia are located in the city, they employ 65% of the industry‘s workforce and execute about 80% of all works. The majority of organizations managed to retain highly-qualified workforce and unique experimental equipment.

North Western cluster is primarily concentrated around St. Petersburg, hosting 40% of the country’s R&D institutions and accounting for appox. 80% of all Russian shipbuildingrelated R&D works

100 %

100 %

100 % 80 %

65 %

40 %

Institutes and design bureaus of the city execute practically the whole range of works related to building sea equipment of various types and designations – from profound studies and surveys to detailed engineering. The following large research and development fields can be named:  research guidelines on fleet and shipbuilding development, vessels hydrodynamics and reliability issues, marine power engineering and environmental issues, management physical fields of offshore facilities;  research and developments in marine tool engineering (navigation and sonar systems, radar systems, communications, vessel control systems, etc.);  research and developments in marine engineering and electric engineering;  development of shipbuilding and materials technologies;  ships, vessels, and offshore facilities design.

shipbuilding workforce

research and development companies

all works

Share of St. Petersburg all Russia

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St.Petersburg manufactures surface ships and vessels of all types (from tankers and ice breakers to missile cruisers), underwater technologies (submarine vessels and deep-sea submersibles), and special naval means. The leading shipbuilding enterprises of Russia are located here – Admiralty Shipyards, Baltiysky Zavod, Northern Shipyard. Another large shipbuilding center of the Northwest region is Severodvinsk, the Arkhangelsk region, with its largest enterprises – the largest shipbuilding enterprise PO Sevmash, and ―Zvezdochka‖ Shipbuilding and Ship Repair Center‖. The region is working on being the main supply base for the Shtokman field. Estimated turnover of main North-West Russia shipyards, EUR mn. 2007



2010 (3Q)

Admiralty Shipyards





Baltiiskiy zavod





Vyborg Shipyard















St. Petersburg is home for leading shipbuilding enterprises, capable of producing various types of vessels, underwater technologies and special naval means

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PRE-CONDITIONS FOR THE STATE MONOPOLY Development of new hydrocarbon fields on the continental shelf gave a powerful impulse to development of the global shipbuilding. Especially high was growth of demand for oil and gas carrying vessels, and in the coming decades a strong development of the commercial shipbuilding market will be related to production and transportation of hydrocarbons from the Arctic region and traditional transportations by the Northern Sea Route. The equipment will be primarily meant for maritime operations on field facilities construction on the shelf and adjoining territories. To unlock the huge potential of Russia in off-shore development of hydrocarbons fields development and construction of special marine equipment is to be arranged in Russia. According to Victor Khristenko, the total need for vessels is over 500 units totally costing 22,8bln. USD. Now the shipbuilding of Russia faces serious tasks and its development potential is enormous. However, until recently the country had no shipbuilding commercial companies or production clusters which would be competitive on the global market. In the beginning of the century the Russian shipbuilding was an expensive production, a heritage of the centrally planned economy of the USSR, and was non-competitive due to strong technological inferiority of the domestic industry to foreign manufacturers and market demands. Under the present-day conditions only large corporations can afford complete upgrade, re-engineering and reequipment of their production. The country lacked a common information analysis center for strategic development of the industry which could analyze, develop and implement a common strategy for shipbuilding clusters in every established integrated center. Evident is the necessity for high priority measures to be taken to overcome this situation, to integrate shipbuilding enterprises, ensuring technical modernization and innovative development, production of competitive goods and highly-qualified workforce.

Offshore fields development drives commercial shipbuilding, rapidly growing demand for oil and gas carrying vessels

In present-day Russia only large corporations can afford to complete upgrade, re-engineering and re-equipment of their production, hense it is necessary to integrate USSR-inherited shipbuilding enterprises

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OSK AS A DRIVER FOR INDUSTRIAL DEVELOPMENT To solve these problems the Government of the Russian Federation established a Joint Stock Company ―United Shipbuilding Corporation‖ (OSK) in 2007. The company is 100% federally owned. The main target of OSK is tackling the problem of excessive competition in the shipbuilding market, establishing vertically integrated communications between companies, and facilitating control of funds allocated for the industry development. The most critical problems to be solved by the corporation were:   

fastest and profound upgrade of production facilities, technical retooling, optimization of economy schemes in shipbuilding.

The top-priority activities of OSK and its subsidiaries were: development, design, production, supply, warranty and service maintenance, upgrade, repair, disposal of shipbuilding equipment of military and nonmilitary nature, and facilities for continental shelf development for state and other customers, including foreign customers, and also implementation of new technologies and developments in shipbuilding.

PRESENT-DAY STRUCTURE OF THE COMPANY Establishment of OSK helped to unite state financial assets in shipbuilding. Given the potential of St.Petersburg, both as a shipbuilding scientific and design center, this city was chosen as the ―residence‖ for OSK. OSK comprises three large holding companies as its affiliates: JSC ―Western Center of Shipbuilding‖, JSC ―Northern Center of Shipbuilding and Ship Repair‖ and JSC ―Far East Center of Shipbuilding and Ship Repair‖. The companies comprised in OSK are Federal State Unitary Enterprises or stock companies, partly or completely owned by the state. The fact that the corporation is 100% owned by the state is a guarantee of reliability to its partners. JSC ―Western Center of Shipbuilding‖ includes: FSUE ―Admiralty Shipyards‖, FSUE ―Sredne-Nevsky Shipbuilding Plant‖, JSC ―Shipyard Yantar‖ (51%), JSC ―Shipbuilding Plant ―Severnaya Verf‖ (20,96%), JSC ―Svetlovsk enterprise ERA‖ (100%), JSC ―Krasnoye Sormovo Shipyard‖ (33,53%), ―Kronshtadt Marine Plant of the Ministry of Defense‖. JSC ―Northern Center of Shipbuilding and Ship Repair‖ includes: FSUE ―PO ―Sevmash‖, FSUE ―SPO ―Arctica‖, FSUE ―Scpecial electrochemistry design and technological bureaus‖, FSUE ―Zvezdochka‖, FSUE ―SRY ―Nerpa‖, FSUE ―research and Development Company ―Vint‖, etc.

Vertically integrated stateowned United Shipbuilding Corporation, OSK, is expected to facilitate control of funds allocated for the industry development and to limit excessive competition in the market

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JSC ―Far East Center of Shipbuilding and Ship Repair‖ includes: FSUE ―Far Eastern Plant ―Zvezda‖, FSUE ―Khabarovsky Shipbuilding Plant‖, JSC ―Dalzavod Holding‖ (20%), JSC ―Research and Development Institute ―Bereg‖ (100%), JSC ―Nikolaevsky-na-Amure Shipbuilding Plant‖ (10%). The corporation plans to establish new design agencies, construct and upgrade new shipyards. The development concept of shipyards in Russia provides for establishment on the north, the west and the east of the country of three new shipyards for building civil vessels with deadweight over 200 thousand tons and offshore platforms. In 2009 OSK‘s turnover amounted to 150 bln. RUR, profit – 92 mln. RUR, while year 2008 ended with a 9bln. RUR loss which is an evidence of the industry leaving its crisis. In 2008 the enterprises of OSK manufactured about 50% of the total industry products.

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SEA CLUSTER OVERVIEW SHIPPING SECTOR OUTLOOK STRATEGIC GOALS OF T HE STATE POLICY Sea transportation is very important for the development of the economy of the Russian Federation and is crucial where securing the country‘s foreign economic connections is concerned. Over 60 percent of all Russia‘s imports and exports are delivered by sea. Russia is a natural bridge between Europe and Asia. The backwardness of her transportation and logistical infrastructures and legal obstacles have resulted in our country‘s being bypassed by the most important trade routes. Beginning 2010, the federal special purpose program entitled ―The Development of the Transportation System of the Russian Federation over the years 2010 through 2015‖ has been implemented. A considerable number of measures is taken in order to assure the overall development of transportation nodes, including the construction of both reloading terminals and rail and truck access ways. The measures provided for in the program are supposed to assure the transfer of over 770 million tons of cargoes annually by 2016. Those measures include the creation of a 15% reserve of seaport capacities, which must be enough to redirect Russia‘s exports and imports from seaports of neighboring states to our country‘s own. Special attention is paid to developing such deep-water seaports as Murmansk, Ust-Luga and Kaliningrad. They are expected to be used as hubs engaged, among other things, in servicing international transportation corridors. Over the years 2010 through 2015, the total financing of the ―Sea Transportation‖ subprogram should amount to about RUR 630 billion, which will include a budgetary financing of RUR 180 billion. At the same time, plans are made to create an inflow on non-budgetary financing. This should be assured by the anticipatory development of project documentation and the use of state/private partnerships-based project financing methods. The development of Russia‘s seaports, being directly related to the condition of the country‘s industrial infrastructure, is a priority state objective. Early in 2011, ―The Strategy of Russia's Seaport Infrastructure for the Period till the Year 2030" will be discussed. The strategy is for the Western, Southern, Far Eastern and Northern seaport basins and covers such types of transportation streams as containers, general cargoes, dry and liquid bulk cargoes, ro-ro and passengers. The document will define the basic placement of seaport infrastructural elements, such as access canals, piers, lots of land and dry land infrastructures. It will also regulate seaport operations and added,

Vladimir Putin has demanded that in the way of preparing for Russia’s joining the WTO, the possibility was considered of admitting foreign carriers to the country’s domestic waterways

Page 37 of 115

included environmental, services. The authors of the strategy that is being developed believe that the basic principle of the of the placement of seaport infrastructures should be the excess of supply over demand. For instance, by the year 2015, cargoes turnover being between 600 million and 750 million tons, the combined capacity of sea terminals should come to 950 million tons. By 2030, projected turnover being between 1.0 and 1.1 billion tons, the ports‘ infrastructure should have a capacity of 1.2 billion tons. An infrastructural company should be created on the basis of the Rosmorport federal state unitary company in order to provide the development and administration of Russia‘s seaports and improve the efficiency of their use of federal properties. As of now, according to the law entitled ―On Seaports‖, 521 seaport piers are nominally managed by the Rosmorport company. Over 80% of those piers (422) are leased out, while the rest are used by Rosmorport for mooring purposes. Private stevedoring companies lease federal properties, such as piers, from Rosmorport. At this time, 111 leasing agreements are in force, providing for lease payments determined by the findings of an independent committee. The Government is considering a bill ―On the Support of Russian Shipbuilding and Navigation". When this bill, drafted by the Ministry of Transportation, The Ministry of Trade and Industry and the United Shipbuilding Corporation, becomes a law, it should resolve the problems of the industry. Over the following ten years, at least 8 thousand river craft, of a total of 9.500 must be decommissioned or discarded. If such a great loss is to be counterbalanced, about 800 vessels must be launched annually, while no more than 30 are built per year. Vladimir Putin has demanded that in the way of preparing for Russia‘s joining the WTO, the possibility was considered of admitting foreign carriers to the country‘s domestic waterways. Opening Russia‘s domestic waterways to foreign companies will make the situation of our country‘s shipbuilders and river carriers worse. The objective of the bill ―On the Support of Russian Shipbuilding and Navigation" is as follows: 

Bringing the prices of vessels built by Russian wharves for Russian clients down by 20% as compared with those paid to South Korean shipbuilders. This will be made possible by the cancellation of duties paid on imported ship equipment and considerable tax privileges for shipbuilders provided for in the bill as well as measures directed towards the creation of shipbuilding clusters. According to the bill, in Russia, special economic zones must be created and stay in place for the following 20 years. The residents of such zones will be Russian shipbuilders. Those residents will enjoy both the existing and newly established customs and tax preferences. For instance, in the way of investment tax credit, they

Page 38 of 115

should be relieved of VAT, land, water, property and transportation tax payments, also from VAT on equipment imported with the purpose of modernizing their production lines and building ships, their depreciation charges will be calculated non-linearly and profit tax they pay will not exceed 6%. On the whole, measures provided for in the bill must serve as incentives for domestic ship lines to order their vessels from domestic manufacturers. However, the bill does not resolve the problem of financing ship lines and shipbuilders. Those problems include the following. 

Shipbuilding loan programs are unprofitable. Russia has the highest APR rates, 12% to 14% for 4 to 5 years.


Leasing programs are as good as non-existent. In 2008, a nine billion dollar leasing program was launched under the auspices of the United Shipbuilding Corporation. However, just one contract was completed under it, between the Volzhsky shipping lines and the Oka shipbuilding yards, for 10 dry bulk carriers together worth RUR 4.72 billion.

If the problem with financing this industry is resolved, then this bill may work. Relieved of taxes, companies will grow very fast. However, if the financing problem is not resolved, while our domestic waterways are made accessible to foreign ships, the new law will prove stillborn.

CHALLENGES OF THE INDUSTRY In 2009, the navy fleet of Russia added 24 new vessels with a total deadweight of about 2 million tons, of which 3 vessels registered under the Russian flag. Number of ships of the marine transport fleet controlled by Russia, at the beginning of 2010 amounted to 1,403 vessels with total deadweight of 17 million tons. Russian International Ship Registry includes 347 vessels with total tonnage of 1,430,000 tons. Shipments of goods by sea in 2009 totaled 38 million tons, which is higher than in 2008 by 6%, including transportation to foreign-going rose 7% to 29 million tons, the coastal trade remained stable and amounted to 8.3 million tons. Throughput of maritime transport rose by 15.7%. The main goods carried on Russian tankers are metals and coal. In the Far North regions and such localities sea import is about 4 million tons with estimated annual growth of about 2.5%. The negative trend of increasing fleet under foreign flags still remains. Most of the shipping fleet is classified as dangerous and unsatisfactory technical conditions. Ship owners and their associations are not active on bringing the internal security standards in line with international levels. Still the fleet in use continues to be older than 30 years. Work

Proceeds of Murmansk Shipping Company under RU GAAP for 9 months of 2010. increased by 7,24% to EUR 100 million Net loss of Murmansk Shipping Company amounted to EUR 9 million (as compared to net profit for the same period in 2009 of EUR 7 million)

Page 39 of 115

bunkering companies and associations are not aimed at upgrading their bunker fleet, and are seeking ways to get deferments from fulfilling treaty obligations of the Russian Federation. Attempts in order to increase the number of ships under the Russian flag lie in the field of improvement of the legislation on the register. In 2010 it was expected that new 14 ships with total deadweight of more than 1.5 million tons would have been registered. According to expert estimates, the turnover of Russian seaports in 2010 could reach 520 million tons. A significant number of activities will be directed to the comprehensive development of transport hubs, which provides as construction of transshipment complexes, as well as rail and road connections. By 2016 it is planned to provide cargo handling in the amount of more than 770 million tons per year, including a creation of a 15% reserve capacity of sea ports which is expected to re-orient Russia's foreign trade goods from the ports of neighboring countries to the Russian ports. Total funding for routine naval operations for 2010-2015 amounts to about EUR 16 billion, including government funding of about EUR 5 billion. Rescue fleet is expected to be fully upgraded before 2015, it will receive additional new 41 units. In order to improve the technological infrastructure of the state emergency rescue teams, specialized vessels are planned to be built at the Russian shipyards. Main challenges of the shipping industry may be summarized as follows: •

Negative tendency to increase the number of ships under foreign flags due to flaws in legislation and bureaucracy. Nine out of ten Russian ships, including the ones owned by the government companies operate under foreign flags

Use of the obsolete fleet. Age of the fleet 15 years and over; around 50% of the ships were build over 20 years ago

Obsolete navigation communication systems on board of the ships and on shore do not correspond to the international standards

Low safety level of navigation and environmental protection. No legislative regulation

Low ships turnover of transshipment complexes

No credit and leasing programs for ship builders and shipping companies






Proceeds of the Northern Shipping Company under RU GAAP for 9 months of 2010. decreased by 13.5% to EUR 53 million Net loss of Northern Shipping Company reached EUR 215 thousand (as comparef to profit for the same period in 2009. of EUR 3 million)

Page 40 of 115


Total dead-weight tonnage of the marine transport fleet controlled by the Russian Federation is extected to increase by 24%

Dead-weight of the marine transport fleet under the Russian flag is expected to rise 2.2% via improvements in legislation concerning the Marine Register

Systematic work to improve safety of navigation and seafaring

Introduction of the regulatory framework for investment attractiveness of the industry, comfortable environment for business

Before 2015 rescue fleet will increase by 41 unit, and will be fully updates

Federal Target Program ―Development of Russian Transportation System‖ (2010-2015) is expected to bring significant positive effect. 20102015 total financing volume for sub-program is estimated at EUR 15.7 bn, including: • •

Russian Federal Budget EUR 4.5 bn; Private investments EUR 11.2 bn

Allocated amount is primarily targeted at direct capital investments, less than 1% is intended for scientific research and design & development works. Social effect of the program is expected to result in budgetary efficiency of state investments and creation of 14‘000 new working places in sea ports. Principle goals of the program can be summarized as follows: Goals Tonnage of sea transport fleet controlled by the Russian Federation, mn tons of deadweight Tonnage of sea transport fleet under the Russian Federation state flag, mn tons of deadweight Construction of ships for operations on socially significant routes Increase in production capacity of Russian ports, mln tons p.a.































Input into transport fleet, thousand tons of DW













Construction of supportive fleet ships

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PORTS AND PORT EQUIPMENT SUPPLIERS CHALLENGES OF THE INDUSTRY Many ports are sitting on shallow harborages, being connected with seas only through access canals. This prevents modern large-capacity ships from being processed there. For instance, St. Petersburg‘s seaport is accessible through a 47 km-long access canal. Access canal leading to the port of Kaliningrad is over 41 km long. The annual cost of maintenance dredging is about EUR 13 million. Most Russia‘s ports are situated on congealing seas. The only Russia‘s ice-free foreign trade seaport is Kaliningrad. The rest require icebreaker services for between 2 and 6 months annually. Ports pay a total of RUR 1.5 billion annually for icebreaker maintenance. Maintenance dredging and icebreakers are mostly paid for by ship owners. These are canal tolls and icebreaker fees. For instance, at the port of St. Petersburg, these tolls and fees amount to 52% of all port dues. 1. The backwardness of logistical infrastructures at the ports. Low capacities of rail and truck access ways. The increase of demand for railway throughput capacities is presently expected at the seaports of Murmansk, St. Petersburg, Ust-Luga and Vysotsk. 2. The ports have insufficient container processing areas. In Europe, 80% to 90% of all cargoes are transported in containers, while in Russia this amounts to just between 30% and 40%. 3. The coal and grain transshipment capacities of the ports are insufficient. 4. The typical scheme of state border crossing is very complicated. It includes the commissioning of the cargoes of all ships. Long time waiting for commissions results in large loss.

TRENDS IN PORT DEVELOPMENT According to the Federal Special-purpose Program entitled ―The Development of the Transportation System of Russia over the Years 2010 through 2015‖, the most attention is going to be paid to the development of the ports situated on the traditional cargo routes, including the North–South and West–East international transportation corridors and the Arctic Seaway. The deepwater Murmansk seaport, situated at the non-freezing Cola Bay, will take part in serving all three these routes. 

By 2015, the transshipping volume of Russia‘s ports will 1.5 times exceed that of 2009.

The combined annual cargo processing capacity of Russia‘s ports will be increased by 454 million tons.

Most ports are situated in shallow water area and are connected to the sea by a ship approaching channel: e.g. St. Petersburg sea channel length is 47 km, Kaliningrad sea channel length exceeds 41 km Annual expenses for dredging reach up to EUR 13 mln Due to climate conditions in ports’ locations, ice escorting is required, icebreaker ship maintenance costs reach EUR 38 mln per year

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‖Russia‘s Ports for Russia‘s cargoes‖. Plans are being made to create a 15% reserve of seaports‘ throughput capacity, which will allow to redirect Russia‘s imports and exports from the ports of the neighboring countries to Russia‘s ports.

Conditions will be created for the development of international transportation corridors and such deep-water seaports as Murmansk, Ust-Luga, Kaliningrad and Vanino in order to turn them into ocean transport hubs.

The program includes the enhancement of the logistical infrastructures of the ports and the construction of transshipping terminals with rail and truck access ways.

It also includes the creation of an inflow of non-budgetary investments through the use of financing methods based on state/private partnerships.

There are also plans to create special economic zones at ports.

The law limits the area of a special economic zone at a port to 50 square kilometers. These zones are created for 49 years and that time limit may not be extended. Each resident of a port special economic zone must make a capital investment of at least EUR 100 million into the construction of the infrastructure of a new seaport, EUR 50 million into the infrastructure of a new river port or airport and at least EUR 3 million into the reconstruction of an existing port. THE DEVELOPMENT OF PORTS

The development of ports in accordance with the Federal Specialpurpose Program entitled ―The Development of the Transportation System of Russia over the Years 2010 through 2015‖. A Special Economic Zone will be developed in Murmansk Port due to the construction of:    

new railroads, highways and rail and truck access ways, road interchanges, port terminals and the informational/communications infrastructure of the Murmansk transportation node.

The development of the port of Murmansk will take place on both the western and eastern shores of the Cola Bay. The key positions in the Arctic Seaway belong to the ports of Archangelsk and Varandei. The development of the seaport of Archangelsk is supposed to be due to the construction of a deep-harborage port at the Sukhoye More bay situated 60 km to the north of the city of Archangelsk. The new port must assure the year-round trans-loading of cargoes onto sips taking loads of up

Page 43 of 115

to 50 thousand tons. The construction of the new deep-harborage port is supposed to be financed through state/private partnerships. The port of Varandei was built with the use of the latest technologies and the latest methods of environmental protection. The port is supposed to process up to 12 million tons of petroleum annually. Port terminals will also be developed at the Yamal Peninsula and the Ob-Tazov Bay. Plans are being made to modernize the principal Arctic Seaway ports at Tiksi, Pevek, Anadyr, etc. The port of Ust-Luga is Russia‘s key point of development on the Baltic Sea. The development of that port will be based on state/private partnerships under the Federal Special-purpose Program entitled ―The Development of the Transportation System of Russia over the Years 2010 through 2015‖. The projected combined annual turnover of its terminals will reach 170 million tons, including 50 million tons of oil delivered through the BTS-2 pipeline. Also terminals for transshipping containers, crude oil, petroleum products, chemical cargoes, coal, sulfur, timber and rolling machinery as well as truck and rail ferries will be set up on the line connecting the Kaliningrad Region with the port of Zasnitz, Germany. Supposedly, ships displacing up to 150 thousand tons will be served thereby. The largest ports in the Northwestern basin are Primorsk and the Large Port St. Petersburg. The Federal Special-purpose Program entitled ―The Development of the Transportation System of Russia over the Years 2010 through 2015‖ provides for the further development of the port of St. Petersburg in the districts of Bronka, Lomonosov and Kronshtadt. Plans are made for the reconstruction of water areas and piers. A project being now implemented that must be noted is the construction, in St. Petersburg, of the St. Petersburg specialized passenger port. The development prospects of the port of Kaliningrad are related to the construction of a deep-water port complex at the gulf of Kaliningrad. The Ministry of Transportation of Russia has coordinated the location of the construction site in the northeastern part of the Balga peninsula. At this time, requirements specification for the construction is being developed and the detailed specializations of terminals and the prospective cargo base are being worked out. The obsolete equipment of Russia‘s ports is gradually replaced. Besides, Russia‘s manufacturers, using new technologies, come up with their own quite competitive port machinery.

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UST-LUG A PORT Construction of multifunctional port in Ust-Luga is one of the major infrastructural projects in NW As per general plan Ust-Luga port will have 16 overload complexes with total cargo turnover 120.6 mln tons, including 84.6 mln tons of dry cargo; 36 bln tons of oil cargo. Ust-Luga port will become the final point of Baltic Pipeline System-2 (BPS-2). Development plans for Ust-Luga •

formation and development of port industrial-and-manufacturing zone; construction of new housing facilities for 34.5 thousand people; creation of recreational and tourism zones; corresponding development of external and internal engineering and transport communications; providing necessary social conditions for work, dwelling, and recreation












1 034


1 374

1 395

Ust-Luga port сargo turnover 2008-2010 thousand tons

1 027

• • •

600 400 200







June 2009









Currently 6 out of 16 terminals operate in Ust-Luga port; each terminal continues to increase its capacities. The port area is under development by Ust-Luga Company, OAO.

As the final point of Baltic Pipeline System-2, UstLuga port is expected to have 16 overload complexes with total cargo turnover 120.6 mln tons, including 84.6 mln tons of dry cargo; 36 bln tons of oil cargo.

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Dredging works are being conducted in order to allow super-ships with deadweight up to 160 thousand tons enter the port. Dredging works are financed according to Federal Target Program ―Development of Russian Transportation System‖ (2010-2015). In 2011 construction of the second sea channel in Ust-Luga port, 205 m wide and up to 18 m deep is planned. In 2011 it is planned to deliver two manipulators and two loaders with cargo capacity 2 and 10 tons. Around 46 mln rubles are forwarded for purchasing of technological equipment. In 2011 works on berth Ug-2 are continued (transshipment of rolling cargo – automobiles); currently 12 000 cars can be stores on the berth simultaneously, in 2011 this number will be increased up to 13 000 cars In the beginning of 2011 Gunvor‘s complex of inlet cargo will be launched. It‘ll be used for offloading of oil and marine fuel for export. Maximum cargo turnover is 30 mln tons of fuel oil and light petroleum products per annum Launch of first order of bunker complex related to Baltic Pipeline System – 2 is planned for 2012

PRIMORSK PORT Primorsk Port is an oil-loading port with its loading capacity about 30% of exported oil produced in Russia and 37% of oil exported via Russian Sea Ports Port Primorsk is an inseparable part of Kstovo-Yaroslavl-Kirishi Primorsk pipeline (Project "North"), and a part of Baltic Pipeline System (BPS-1) operated by OAO ―AK Transnefteproduct‖ Starting December 2001 the new oil port of Primorsk began its operation. The most advanced technologies were applied while constructing port and shore facilities. Boostering bunker supply capacity in the Port of Primorsk so the Port will be capable for loading a number of tankers at a time. A number of upgrades and modernization initiatives is expected to enhance the port operations: • • • •

Strengthening of railway connection to the Port The port operation technique is to be based on microprocessor equipment Construction of the railway spur to Port of Primorsk Upcoming: the construction of the 2nd port region ―Vysokinsky‖ between lakes Vysokinskoe and Finskoe.

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Expected rise in cargo capacity of Primorsk port is up to 50 million tons. The total cargo capacity of the area will reach 250 million tons a year.

5 991

6 069

6 500

6 991

6 715

6 087

6 658

6 814

6 635

7 000

6 918

7 500

6 550

Primorsk port сargo turnover 2008-2010 thousand tons

5 284

6 000 5 500
















5 000


Port infrastructure development program of the group of companies ―Sea Port of Saint-Petersburg‖ consists of: • • • •

Construction of the high-technology cargo transshipment terminal Modernization of the terminals for cargo handling from vehicles Reconstruction of the aquatic area and berth Passenger Terminal construction

In 2010 the group of companies ―Sea Port of Saint-Petersburg‖ transferred more than EUR 20 mln for the implementation of the development program. The modernization plans include reconstruction of the terminal equipment for larger capacities; construction of the railway spur, warehouse and other maintenance premises; IT- and document-flow systems‘ testing; reconstruction of the open storage grounds № 9, 10. Berthing line is also planned for reconstruction. The port is opening a procurement of the video monitoring equipment.

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12 109

12 712

13 184







5 467 2009




5 131 May

4 507 April

4 323 March


3 407

3 516 January

16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0

12 774

St. Petersburg Port Ń argo turnover 2008-2010 thousand tons

14 182

At present, the on-going upgrade process includes the development of pre-design documents and for environmental survey of the site to be used for construction of the refrigerated terminal and construction of the container terminal.

VYBORG PORT The commercial sea Port of Vyborg is an important transport junction in the Northwest region of Russia with capacity of up to 3 million tons of cargo per annum. Vyborg Shipping Company, Ltd (VSC Ltd) and Vyborg Port, OOO are established by Oslo Marine Group, OMG)

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On May 29, 2009, Vyborg Shipping Company, Ltd asked Arbitrage Court of St. Petersburg and the Leningrad region to acknowledge the company a bankrupt.








78 2010






97 2008


74 April





95 January

160 140 120 100 80 60 40 20 0


Vyborg Port Ń argo turnover 2008-2010 thousand tons

On July 6, 2010, Federal State Unitary Enterprise RosMorPort received a bank transfer from Port of Vyborg as earlier the company had not in spite of an earlier March 19th court ruling, left 9 RosMorPort‘s berths and had not paid money for the facilities leasing. The amount paid out by Vyborg Port was EUR 0.313 mln

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OPPORTUNITIES FOR FINNISH COMPANIES NOTE: This section of the report is based on the results of interviews

STATE COMPANIES Oil and gas sector in Russia is highly concentrated. The sector is primarily nationalized, i.e. the largest companies are in part owned by the state. Private companies, have very ―local‖ application – geography-wise as well as job type wise. NOVATEK

Group City Company name Interviewee name Interviewee position Contact details Email Website

Oil and Gas Sector Moscow Novatek Shulyak, Mikhail Aleksandrovich Head of supply, Engineering and investment department 29/22 Ulitsa 1 Brestskaya, Moscow, 125047 Tel: +7(495) 730 6000

For Novatek, gas producer, the geography of its activity is highly concentrated in the Ural region, around Yamal peninsula. Project works of Novatek in Yamal are primarily handled by local subcontractors and suppliers (up to 90% of equipment for the project is Russian made, e.g. Chelyabinsk Pipe Plant, Korvett, Blagoveschensk Plant, Kurganhimmash, Uralhimmash, etc.). Novatek is participating in a number of smaller scale projects, potential cooperation with Finnish companies can be considered in the following areas:   

metal works based on individual drafts, machine building works, painting works

Novatek is not planning to participate in Arctic shelf works directly. However the company is actively realising its project for building a new terminal in Ust-Luga port. The terminal is intended for LNG transportation, estimated capacity 6 mn tons per annum. Ust-Luga is a new region of activity for Novatek, therefore there is no existing connections and the company is actively looking for contractors. Novatek has a special company ―Novatek Ust-Luga‖ which is acting as a project manager for the terminal construction process. The project is planned for the next 5 years. At present the company is constructing the berth, in particular, it would be interesting to contact Finnish companies who produce paint and provide painting works. All project documentation is in Russian, all tender documentation and is available at the company‘s website. Decisions in regards to contractor selections are normally made by the head company, however, the special company ―Novatek Ust-Luga‖ has a threshold for similar types of jobs or products which is RUR 30 mn per single lot.

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The company has connections with engineering and design companies and R&D institutions in Russia in regards to preparing projects of Arctic LNG plants (in particular the company participates in preparing a project for the LNG plant at Yamal). The company has its own small fleet consisting of ice-breakers and shunting vessels. ROSNEFT

Group City Company name Interviewee name Interviewee position Contact details Email

Oil and Gas Sector Moscow Rosneft Shmakov Aleksander Vladimirovich (retired in 2011) First Deputy Director of Material -Technical Resources Department 31A, Dubininskaya str , Moscow tel.: +7 (495) 777 46 36, +7 (495) 223 71 69


Rosneft, being one of the major state-owned oil companies in Russia has previous experience of meeting up with Finnish companies active in various fields in connection to oil and gas sector. One of the largest companions for Rosneft is Wärtslilä who produces transformable and easily erected buildings and premises. The company has a centralized system for supply contracts via its central department of supply. There‘s a limited number of direct contracts with foreign companies (those foreign suppliers and contractors who have a direct contract account only for 9%). In the case of a direct contract, Rosneft is acting as a customs broker itself, if a delivery is expected via local suppliers, Rosneft will consider offers based on DDU for tendering purposes. Every contractor is selected via tendering process. However, the central department has an ―accreditation list‖ of trusted contractors which is revised regularly. The status of trusted contractors is updated once a year. Along with accreditation process and list of trusted contractors, the company has a list of product positions for purchase. The department of supply realises the tendering process and the mechanics of the purchase and contracting. There are companies in the accreditation list which are ―obligatory‖ for participation in certain tenders. The head office of Rosneft has full control over those purchase positions which are small in number but large in amount. Purchases of a lesser financial value but larger in quantity are handled by daughter companies. For example drilling machinery and rigs, as well as equipment for special purposes and for servicing needs is a prerogative of daughter companies to Rosneft. Finnish companies who wish to liaise with Rosneft or offer new solutions, services or products need to act jointly as a group. Earlier the company had a special position who was in charge of establishing contact with new suppliers and contractors. Now this position is eliminated and everything is ―systemized‖. Therefore in order to make an offer, it is advised to collect a joint interest among several Finnish companies, make an official letter in the name of first VP of Rosneft, Mr. Pavel Fedorov with solicitation of a joint presentation. Rosneft office in Moscow has special working scheme for allocating group presentations, following the letter, a date can be set for joint visit of Finnish companies to Rosneft office in Moscow. Main participants of such joint presentations

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from Rosneft are department of supply, and correspondent technology department representatives. This way Finnish companies can apply to become accredited and participate in the company‘s tendering processes. OSK

Group City Company name Interviewee name Interviewee position Contact details Email Website

State Bodies St Petersburg OSK United Shipbuilding Corporation Valery Kireev Director of R&D St Petersburg, 191119, Ulitsa Marata, 90 Tel: +7 (812) 494 1752

The United Shipbuilding Corporation, OSK, was founded by the order of the President of the Russian Federation dated March 21, 2007. The corporation is fully government-owned. Its Chairman of the Board of Directors is Igor Ivanovich Sechin, a deputy Prime Minister of the Russian Federation. The corporation owns the following three regional centers of shipbuilding:   

The Western Center of Shipbuilding of the city of St. Petersburg; The Northern Center of Shipbuilding and repairs of the city of Severodvinsk; The Far Eastern Center of Shipbuilding and repairs of the city of Vladivostok.

The OSK facilities include 9 design bureaus, 32 shipbuilding and ship repair wharves. The largest assets: the Yantar Baltic Shipbuilding Plant of Kaliningrad, the Admiralty Wharves of St. Petersburg, the Sevmash production association of Severodvinsk, the Zvezda Far Eastern Wharf of Vladivostok. The largest international projects: the construction of the Zvezda-DSME wharf by the joint venture with Daewoo Shipbuilding & Marine Engineering of the Republic of Korea and the construction of the Vostok-Ruffles wharf by the joint venture with Yantai Ruffles of Singapore. The Western Center of Shipbuilding, a subsidiary sub-holding company of the United Shipbuilding Corporation was founded by the order of the President dated 21.03.2007. The Western Center of Shipbuilding Corporation, hereinafter referred to as WCS, includes the largest shipbuilding companies of the West, Northwest and Center of Russia. The Western Center of Shipbuilding Corporation owns the following shipyards:       

the Admiralty Wharves of St. Petersburg: 100% minus 1 share; the Sredne-Nevsky shipbuilding plant of St. Petersburg: 100% minus 1 share; The 33 Ship Repair Plant of the Kaliningrad Region: 100% minus 1 share; The ERA Svetly Facility of the Kaliningrad Region: 100% minus 1 share; the Yantar Pribaltiisky Shipbuilding Plant of Kaliningrad: 51% of all shares; the Krasnoye Sormovo plant of Nizhny Novgorod: 33.53% of all shares; The Northern Shipbuilding Wharf of St. Petersburg: 20.96% of all shares. The principle objectives of the WCS are:

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  

obtaining orders for the facilities owned by the sub-holding company, handling the cooperation ant technical re-equipment of shipbuilding plants, managing wharves through participation in their boards of directors and meetings of stockholders.

Strategically, OSK aims at developing highly profitable industrial niches. In civil shipbuilding, those areas are drilling rigs and extraction platforms, ocean shelf machinery, specialized ice-class vessels to be used for developing the Arctic zone and vessels to be used on domestic waterways. In military shipbuilding, they are meeting the demands of the navy and designing and building a 21st fleet. A considerable portion of military output is exported. Depending on the scales and economic importance of orders, the state is prepared to consider their joint financing. Design bureaus are greatly experienced in introducing innovations into shipbuilding and the production of marine machinery. OSK makes plans to make Russia a leader on the world‘s shipbuilding market. In 2009, OSK earned RUR 150 billion, which meant a RUR 92 million profit. Major assets of OPK (united Industrial Corporation) will most likely be transferred to OSK, i.e. Severnaya Verf, Baltiysky Zavod, Iceberg. OSK owns 58% of major shipbuilding assets, including 9 engineering companies and 22 shipbuilding plants. OSK also owns a subsidiary corporation called ―Morskie neftegazovye proekty‖ (Sea Oil and Gas Projects) whose major perpose is to operate Krasnoye Sormovo shipyard in Nizhniy Novgorod. New head of OSK, Mr. Trotsenko, is planning to rearrange the corporation structure in order to get rid of the existing ―shipbuilding centers‖ division as supervising organizations. The major purpose of such reorganization is to have a direct control from OSK to every company in the group without any intermediary administrative divisions as ―shipbuilding centers‖. At present all OSK management is placed in Moscow. The office in St Petersburg is only one department for informatization and R&D. All largest engineering and R&D institutions in shipbuilding of former USSR are located in Ukraine and Russia. Practically all of Russian R&D institutions are owned and/or controlled by OSK, one of the largest is Baltsudoproekt. Mr. Kireev is at present creating a new OSK company called OSK Engineering. The new structure is intended to unite all R&D and project design institutions. The company headquarters are expected to be located in St Petersburg. Human resources for the new OSK Engineering Company will be primarily collected from former consturction design bureau ―Vostok‖, Center for Technologies of Shipbuilding and R&D Center CNII Krylova. OSK Engineering will be a state-owned center for project design and R&D in civil shipbuilding. OSK has an aggressive position in Shockmann project. No tender applications from OSK were turned down. The state is planning to reach through OSK its target of reaching 2% of world shipbuilding volumes (by tonnage). OSK is the primary facilitator of state-run financing programs, including Federal Program ―Support of Civil Marine Shipbuilding in 2009-2016‖, which allocates EUR 2 bn for financing the ―white collars‖ in the shipbuilding industry. Largest projects which OSK is leading include Sakhalin 1 (Exxon and Rosneft act as project operators). OSK is working closely with Sovkomflot to build two new ice-breakers and is working on starting up STX Aker Arctic. OSK is operating the STX Aker Arctic shipyard in Helsinki which was acquired by OSK (50% of STX production capacities and 24% of shares of Aker Arctic Company). STX will concentrate on moving Admiralty Shipyards to Kronshtadt in order not to compete with Vyborg Shipyards. The new shipyards in Kronshtadt will be constructed starting with a plant for moving the industrial facilities from Admiralty Shipyards. The process is

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expected to take at least 5 years before new production facilities are oprerational. At present the berth is operational in Kronshtadt, the nearest plan is to construct a dock, OSK is planning to cooperate with Finnish companies in connection to this. OSK will be further supporting JV opportunities with Finnish companies like Wärtsilä to cooperate with Transmashholding (railroad diesel engines which can be re-engineered for marine industry). OSK is ready to contemplate a strategic cooperation with large companies from Finland as well as small companies who can be nd 2 tier suppliers to contractors of big projects. Such companies could liaise with shipyards that provide guarantee service works. Finnish companies can address STX Europe, who has a long general makers list with a large number of local companies. Generally, when R&D project design company is designing a new ship project, major documents are:   

ship specification blueprints of general equipment makers list (agreed by engineering company, supplier and project owner)

According to Mr. Kireev, Finnish companies should concentrate on guarantee services, ship repairs, supply of components and consumables. The ways for Finnish companies to connect is either via STX Europe or via OSK engineering. Director of OSK is selecting unilaterally all subcontractors among OSK‘s shipyards and engineering and design companies for every project. Steel producers are going to be selected via OSK structures. Smaller producers will need to cooperate with shipyards directly. Companies like Sovkomflot hold so-called black lists of companies. These lists are made almost automatically, only due to breach of contractual conditions. It works as a system, contractors should follow agreements precisely, otherwise it‘s difficult to trace what was really the reason for black-listing. OSK is ready to offer existing production facilities for JV initiatives. There are ready production sites with th existing power supply for machine building development (e.g. 35 shipbuilding plant in Archangelsk). OSK can influence decisions on purchase of vessels. One example is Novatek who placed their order with the support of OSK for two gas transporting vessels for 2015-2016. OSK Trade House can make an influence when there are several potential suppliers, OSK can fix an order and a price beforehand. OSK Engineering will be focused on coordination of producers with project designers and with oil&gas companies who place the orders. It would be very helpful to have a catalogue of production capabilities of Finnish companies. FinnishRussian workgroup can be contacted for the purpose of addressing cooperation issues (CNII Center in SadovoKudrinskaya 11 in Moscow Earlier the process of ordering new vessels looked like this: initial draft which was further turned into technical project, after all continued as a working project. The initial draft involved the design bureau‘s decision on who to include in the makers list. An agreement is made between the design company and the producer who presented valid technology and solution (as a rule, this information is obtained from open contests, expos etc.) Normally, only the suppliers from makers list get selected for actual production of the vessel at the working stage. It‘s almost impossible to lobby a supplier who is not in the makers list. In case the project owner desires to select a different supplier, it has to be checked for technological compliance and then the project owner has to bear all extra costs connected with that.

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At present the scheme works in the way that the project owner has a contract and pre-contract documentation with the general contractor and all subcontracts with suppliers are managed by shipyards. There was an idea to make a contest for vessel construction for cases when the state acts as a project owner. But this scheme doesn‘t work, because OSK has to act only as an order controller. New director of OSK Mr. Trotsenko is aimed at norming productivity through labor-output ratio, therefore OSK will be focused on enhancing productivity and therefore, needing new technology not only for project design, but also for implementation and management.


Group City Company name Interviewee name Interviewee position Contact details Email Website

Russian Maritime Register of Shipping St. Petersburg Russian Maritime Register of Shipping Reshetov Nikolay Alekseevich Managing director 8, Dvorcovaya naberezhnaya, St. Petersburg, 191186, Russian federation Phone +7 (812) 314 07 43

The Central Agency, Russia‘s Maritime Register is a governmental agency for technical supervision and the classification of sea vessels, subordinate to the Ministry of Transportation of the Russian Federation. The classification society Russia‘s Maritime Register was founded on December 31, 1913. Since 1969, it has been a member of the International Association of Classification Societies (IACS). The principal activities of Russia‘s Maritime Register (MR) are as follows:         

The classification and examination of sea vessels and floating installations; The technical supervision of the fulfillment of international conventions; Examinations as to conformance to the ISM and ISPS codes; The technical supervision of the designs, production and use of containers, including tank containers; The certification of industrial products and production; Expert assessments of the safety of hazardous industrial installations and vehicles, including floating and stationary offshore rigs; Surveyor services; expert assessments and registrations of declarations of hazardous cargoes, in crates and other packaging; The certification of quality management, environmental protection and safety systems; Cost assessments.

MR structure includes the Central Agency in St. Petersburg and 109 representative offices and branch offices in Russia and abroad. The MR class includes 6,677 vessels registered under the flags of over 40 states. The Baltic office of the Maritime Register has 15 branch offices allowing to provide fast high quality services to clients. MR‘s activities cover the Bryansk, Kaluga, Kursk, Leningrad, Moscow, Lipetsk, Novgorod, Oryol, Pskov, Ryazan, Smolensk, Tambov, Tver and Tula Regions, the Republic of Karelia (to the south of the 62nd parallel circle), the port of Belomorsk and the cities of Moscow and St. Petersburg.

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New products subject to technical supervision on the part of MR may be used at installations subject to MR‘s supervision only when accompanied by documents (certificates) confirming their conformance to MR‘s requirements. The steps of registering new materials are as follows:       

filing an application; presenting technical documentation for examination; testing the manufacturer‘s ability to make products conforming to MR‘s requirements; subjecting manufacture to inspection, including MR‘s participation in production testing; installing the product at vessels, stationary offshore rigs, etc., under MR‘s supervision; the supervision of the product in use; the supervision of the product being repaired or modernized.

In respect of requirement variations undergoing classification by the Russian and foreign registers, MR‘s requirements are no different than those of other classification societies, the provisions of international conventions, national administrative requirements and the unified IACS requirements being the same for all. At the same time, there are certain differences between MR‘s requirements and those of other classification societies. Such are certain MR‘s rules based on the unique experience of many years that resulted from scientific research and the practical use of vessels in arctic conditions. More stringent requirements are made to the following:   

supervised units and items intended for use in low temperatures and under hard ice conditions that result in stronger vibrations, higher hull loads, etc.; ice-class vessels; icebreakers and freight vessels under atomic power.

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Group City Company name Interviewee name Interviewee position Contact details Email Website

Shipbuilding St Petersburg Admiralteiskye verfi Leonid Promyslov Advisor to managing director St Petersburg, Nab. Fonanki 203, tel: 922 0007

The shipyards history dates back to 1704 when it was primarily used for sailing ships, including battle ships. In 1856 the shipyards switched to production of vessels for civil and military fleet. Now main output of the shipyards is tankers and research vessels for oceans and also submarines for third world countries. Before 2009 the shipyards was a part of Ministry for Shipbuilding Industry, later it was a part of the department of shipbuilding of the Ministry of Industry and Trade. In 2009 it was formed into an open joint-stock company and merged into OSK structure with 100% shares belonging to the state. Major modernization steps include using 40mm 3.5x5m steel (instead of 25mm 2.5x3m) for vessel hulls, which made serious impact on welding needs (because the length of joint welds became much shorter) Present-day orders are tankers with deadweight of 20, 40 and 70 thousand tons, research vessels (from the Institute of geology), and diesel submarines from foreign countries. The plan is to transport the shipyards‘ production facilities to Kronshtadt by end of 2012. Konshtadt shipyards are planned to host the Admiralty Shipyards shipbuilding facilitites. Major decision maker of the shipyards is the managing director – he signs all the documents and selects all major contractors. Commercial director is in charge for supply of auxiliary equipment for every ship and is directly involved in selection of contractors and producers of such equipment. This is coordinated via the marketing department. All working issues connected with ship construction, planning and commissioning are discussed weekly with managing director. All questions connected with auxiliary equipment are delegated to the chief engineer of the shipyards. Such meetings involve all heads of profile departments. Major suppliers for the shipyards are: Deck machinery: 1. Proletarsky Zavod 2. Obukhovskoye 3. Baltiisky Zavod

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4. Zvyozdochka (screw propeller works) 5. Admiralty Shipyards‘ own machine building 6. Armalit (fittings) Radio equipment: 1. 2. 3. 4.

Aurora concern Granit-electron concern CNII Elektropribor (navigation) Agat concern

Admiralty Shipyards has experience of working with Finnish company Ice Technology. The company designed the primary project for 70 thousand tons tanker, and Admiralty Shipyards implemented this project with Engineering Center. This implied re-engineering of shipyards capacities from 40 to 70 thousand tons of deadweight and eventually increased the costs. Major requirements for foreign suppliers include:      

Necessity for local service centers Certification Customs brokerage Technical documentation and personnel training Equipment used for production is mainly made by own workforce and capacities, therefore a foreign supplier has to make allowances to place production capacities locally Supply of components and consumables on account of order contracts

According to Mr. Promyslov, Admiralty shipyards are constantly seeking new technologies for shipbuilding. The plant organizes regular delegation trips to Finland, Japan, China, South Korea, Portugal, USA, England, Germany, Sweden, the Netherlands. Demand for new technologies has formed, but it awaits the state-level decision to actively support of import of these technologies. The shipyards are receiving only relatively shortterm credit money from local banks at 30% interest rate, which is not feasible. OSK is regarded as a solution for centralized financing of the industry in general and support of the shipyards in particular.


Group City Company name Interviewee name Interviewee position Contact details

Engineering St Petersburg Malakhit Vladimir Antonov Chief constructor 196135, St Petersburg, Ulitsa Frunze, 18 Tel/fax: (812) 388-35-90, (812) 378-69-21

Email Website

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Malakhit is a part of OSK, along with Rubin and Almaz. Malakhit is a design and engineering center and shipbuilding plant. Malakhit received financing through CNII Krylova, which is managing the state programs (e.g. Development of Civil Marine Shipbuilding). Malakhit‘s civil shipbuilding actions are primarily focused on Kara Sea region, its production includes: 

 

Drilling and service rigs (primarily ice-class), e.g. Obsky-1 which is managed together with Korall. During 2003-2007 Malakhit acted as a general expert for Gazprom‘s Prirazlomnaya, later it was transferred to Sevmash. Security systems, firefighting systems, special fittings and reinforcements Deep water works

The company is experienced with Lukoil and Rosneft projects. One of the major orders at present comes from the Federal program for Civil Shipbuilding. Malakhit is developing technology for ecological safety (mainly technology connected with gathering of oil). The company made a project of the terminal for Prirazlomnoye field, including series of mobile and stationary equipment. Malakhit developed a project for deep sea transportation of products, i.e. underwater tankers with 100 thousand tons deadweight. Also the company developed an underwater technology for hydrate collection. Deep sea LNG transport is regarded as more reliable and safe way to transport products. The underwater tankers can connect to distant terminals and make delivery under water (approx. 5km from the shore). These tankers are powered by atomic energy. One of the projects for this kind of underwater terminal delivery was developed for Varandey terminal. According to Mr. Antonov, 15 tankers would be enough to suppy the transporting needs for Prirazlomnoye. Shtockmann is going to have a pipe – this technology suggests that a FPSO will prepare gas which will be transferred via the gas pipe to Murmansk terminal. Foreign suppliers work directly with Malakhit. Main direction of foreign supply is regarded as electronic equipment. Finnish companies are most likely to be strong in metal works, but it is necessary to work out technical and economical feasibility studies for each case. Malakhit developed a terminal design for Prirazlomnoye in 1997. Malakhit‘s solution was used for Varandey terminal project in 2007 (it is implemented by another company). At present Malakhit provides technical expertise to these projects, including reconstruction projects for cable planning, accommodation hulks, helicopter pads, etc. Malakhit has historic horizontal connections with companies like Lazurit and Rubin. The underwater tanker technology is more attractive economically: e.g. estimated cost for deep sea gas pipe construction is approx. $3 mn per 1 km, while one tanker costs approx. $500 mn. Two main reasons to use underwater technology is ecological safety and meteo-independence. Plus it‘s more efficient in terms of speed and doesn‘t demand ice-breaker fleet. Gasprom is not interested in underwater tanker technology, so this technology can be offered to Sovkomflot and used further for North Sea way concept. Sevmash could integrate this technology, because they have over 60 years experience of creating nuclear-powered engines for submarine tankers with over 70 thousand tons deadweight. Malakhit is researching technologies for liquefying gas under water and is also contemplating possibility to use this for hydrate extraction.

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For new technologies, the best expo, according to Mr. Antonov, is RAO Offshore ( which will take place 13-16 October 2011. Good source for offshore oil & gas technologies information is


Group City Company name Interviewee name Interviewee position Contact details

Shipbuilding St Petersburg SNSZ Sredne-Nevsky Shipyard Larionova, Catherine Head of marketing department Ulitsa Zavodskaya 10, Pontonnyi, St Petersburg, Telephone: +7 (812) 462-59-01


Catherine Larionova, head of marketing department. Sredne-Nevsky Shipyard (SNSZ) is a part of OSK. Headcount employment at present is about 1000 employees. Main specialization of the company if building of trawlers (the company built the first trawler in Russia). Over its history the shipyard built over 500 vessels for 43 projects (in over 200 years). The company is producing vessels with deadweight below 1000 tons. Major production materials are aluminium and low-magnet steel. The company is liaising closely with Rosatom. SNSZ makes design, planning, building and servicing (guarantee and post-guarantee) for vessels, and also runs programs for personnel training. Historically, the company is closely cooperating with Almaz, Agat, Petrobalt, MTD, Ricochette Design Group. At present the company is searching to outsource the building of two pilot boats for a large customer. It would like to find a medium-size Finnish company who could take this order. Projects run by the shipyard include: Auxiliary vessels with under 1000 tons deadweight (supply vessels, pilot boats) Rare orders from oil and gas (the shipyard is rather small for large orders) Project design (3D modeling proejcts) The company is seeking potential new technology solutions. Main information exchange is done at Neva exhibitions (, SMM, NorShipping, Maritime Indistry of Russia Expo ( The company has an ability to influence makers lists. At present 80% of equipment for the shipyard is imported from Sweden, Slovakia, Holland. According to Ms. Larionova, SNSZ is basing its contracting on OSK infrastructure. The company is interested in seeking engine suppliers for smaller trawlers, it is taking part in

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Euronaval exhibition where it would be best to address the company or its allied design and engineering partners (over 15 in total), such as Severnaya Verf, Zvyozdochka, Amur shipbuilding plant. Ms. Larionova referred to Mr. Alexandr Gritzan who is OSK‘s expert in St Petersburg for issues related to shipbuilding market and pricing for equipment. OSK‘s Sudoeksport is a new commercial department for centralized management of foreign contracting, which is worth addressing.


Group City Company name Interviewee name Interviewee position Contact details Email

Shipbuilding Murmansk Nerpa Shipbuilding (part of Zvezdochka OAO) Erin, Oleg Fadinovich Deputy director for commerce Snezhnogorsk-2, Murmanskaya Oblast, 184682 Tel: +7(81530)6-0220

Nerpa‘s history is over 45 years. Total headcount employment is 1500 people. Nerpa Shipyard is located 70km from Murmansk. It is active in the following types of projects:  Ship repair works  Shipbuilding projects  Recycling of large drilling rigs  Metal works (40x35 up to 13 tons) Nerpa‘s main customers are Russian Navy (50% of orders), Rosatom (30%) and commercial orders. Commercial orders are usually vessel conversion projects, ship repairs and manufacturing of construction materials. Largest commercial customers are MSCO and Atomflot. Nerpa is participating in Shtockmann project in the following directions: Metal constructions for underwater complexes Onshore structures construction Construction of fragments for oil extraction systems (own waterside and warehouses) Nerpa is a civil shipbuilding plant, but it‘s located in a restricted military zone, therefore it has certain preferences and special legislation regulations. Nerpa is a part of Zvyozdochka, the main affiliate for Northern Center of Shipbuilding of OSK. Shipbuilding plants no. 82 and no. 10 will be included in the OSK structure. External contractors and partners for Nerpa are companies from UK, Germany, Sweden, Finland and Norway. Nerps is very much oriented at attracting foreign contractors. Mainly Norwegian companies are regarded as primary partners for underwater production because of technical potential, existing production capacities and

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handy logistics. For a Russian customer companies from Norway are well-equipped. Stendal Group is one example of successful cooperation in the field of importing technologies. Nerpa is developing its existing network and seeking cooperation in the field of machine works, metal constructions. The company is interested in cooperation for manufacturing of basic metal construction and their transfer to offshore. Nerpa can offer to locate a foreign production at its site with the use of local workforce. Existing cooperation with Finnish companies is e.g. with Onninen. Nerpa is running several modernization projects, funded from Federal State Programs. Upgrades and modernization projects are concerned with reequipment of existing production facilities and supply of modern equipment. Nerpa is outsourcing electric works. Inhouse laboratory is cerified with ISO certificate. Nerpa is interested in continued cooperation with foreign companies in the field of machine works and metal constructions, personnel training and certification. At present the company has 35 active contracting partners, 25 out of which were sourced through Murmanshelf.


Group City Company name Interviewee name Interviewee position Contact details

Shipbuilding St Petersburg Shipbuilding & Ship Repair Technology Center Gorbov, Leonid Grigorievich Deputy managing director 7, Promyshlennaya Street, St. Petersburg, 198095 Telephone: +7 (812) 786 05 22


Shipbuilding & Shiprepair Technology Center (SSTC) JSC is one of the major research institutions in Saint Petersburg and a leading center of shipbuilding technologies in Russia. SSTC has status of State Scientific Center of Russian Federation and carries out fundamental and exploratory research in the field of creation of modern technologies for shipbuilding and engineering sectors, including those with use of highly effective power sources and new physical phenomena. SSTC takes part in development and implementation of large-scale investment project. SSTC is a multi-functional research and production complex. It incorporates research laboratories, design and construction divisions, dealing with creation and modernization of shipbuilding yards water-development facilities and engineering enterprises, creation of on-shore bases for marine objects, design and manufacturing of ship fittings, design of fishing and fish-processing vessels, special-purpose vessels, as well as production facilities for manufacturing of designed equipment. SSTC has experience of working with Wartsila and Baltiysky Zavod for building 2 shallow depth ice-breakers. Presently SSTC is involved in project works for LNG plant in Teriberka (planned for 2016). According to SSTC‘s

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chief advisor to CEO, gas transport is not defined yet. One case that it would be gas tankers built with MOS technology, which Finnish shipyards in Turku are capable of bulding. SSTC is closely working in the intergovernmental commission between Russia and Finland. SSTC is ready to make a joint project with Tekes and bring this MOS project to the commission for review. Earlier plans involved Gasflot acting as operator for Gazprom. Recent decisions showed that Sovkomflot is going to play that role. Membrane technology based LNG tanker is easier to build with the help of Finnish companies who have significant experience in MOS technology. SPB technology used for LNG tankers is most likely to be outsourced to Daewoo. 90% will be most likely outsourced to Koreans in this case by OSK. Main areas for development is the building of 3 nuclear power ice-breakers until 2020 (60MW power) and building of LNG tankers. There are three types of potential projects for LNG tankers:  MOS tankers (outdated system, but is currently used)  SPB tankers  Membrane tankers (this system prevails, South Korea is a key supplier) SSTC was participating in all shipyards planning and design in former USSR. SSTC has experience with such companies as Remomet, Rauta Ruke, McGregor, ABB. Rema (Pekka Hekkanen) is a key supplier of technological equipment. SSTC is directly liaising with Ministry of Industry and Trade. Federal Program for development of marine shipbuilding has a special division (no.4) which is solely devoted to SSTC. According to SSTC‘s chief advisor to CEO, cost efficiency in Russia is very low. At present Baltiisky Zavod is not developing fast enough (as well as Primorsk). Most prospective shipyards in Russia are Vyborgsky Zavod, Admiralty Shipyards (seen as prospective after transfer to Kotlin Island) and Daewoo-OSK cooperation in the Far East of Russia. Finnish companies are all well known to SSTC as well as Finnish technologies which are offered at present. Some of contracts are managed via the intergovernmental group, some are direct contracts. At present all liaisons with foreign technology providers are managed by VEF (Company for Foreign Economic Cooperation), a SSTC company who‘s CEO is deputy managing director of SSTC Aleskandr Komok is in charge.



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Ports Murmansk Murmansk Commercial Seaport Morozov, Viktor Vasilievich Managing director 19 Portoviy Proezd, Murmansk, 183024 Tel: +7(8152) 480-644

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The port area is owned by Rosmorport, FGUP. Murmsnak Commercial Seaport (MSC) OJSC owns the port area via leasehold rights. Stevedor on the port‘s territory is Agrosfera ZAO, daughter company of MSC. Murmansk Commercial Seaport was established in 1994 on base of the public enterprise and nowadays it‘s the biggest company in Murmansk. Murmansk Commercial Seaport has 16 berths with total length 3‘000 m (depth at the berths 14.2 m, on the roads – up to 60 m) and is equipped with the modern handling facilities: 52 gantry cranes with the capacity up to 40 tn, 1 shiploader for handling of apatite concentrate with the capacity more than 1‘000 th tn/hour, 113 units of fork trucks with the capacity from 1,5 to 32 tn. To provide auxiliary operations the Port has roll-trailers, tractors, haulers, bulldozers. Warehouse premises include: covered warehouses 21‘000 m2, ground storage 130‘000 m2 (capacity for bulk cargo 750‘000 tons).The main range of cargo handled by MSC    

coal (over 80% of cargo turnover) apatite concentrate (over 10%) non-ferrous, rolled ferrous metals and alloys in packages (3%) other materials (chemical products, construction materials, containers ISO-20 and ISO-40).

Handling of coal ranks the special place. Murmansk Commercial seaport is the greatest and the only big transshipment point of coal in the North of country. Now Port of Murmansk handles more coal than ports of SaintPetersburg, Kandalaksha, Vyborg and Vysotsk all together. The main export receivers - countries of West Europe, in particular: Spain, Netherlands, Belgium, France, Great Britain. MCS does not at handle LNG or oil. Technical capacities of the port:  Maximum achieved turnover – 15.2 mn tons p.a.  Handled vessels – 550 to 600 p.a. (15-20 tons per day)  Railcar turnover – 220‘000 p.a. (over 750 per day)  Maximum deadweight of vessels handled at berths – up to 140‘000 tons  Maximum weight of cargo units as handled by: o cranes – up to 80 tons o fork-trucks – up to 45 tons o tractors – up to 60 tons The company‘s cargo turn-over, according to 2009 results, amounted to 15,2 mln. tons, making a 10% growth. In 2007 the port‘s cargo turn-over accounted for 14 443,213 thousand tons, 567 vessels were handled, including 336 bulk cargoes vessels. Wagons handling amounted to 211 528 cars, including 161 721 coal wagons, 33 360 apatite wagons, 3 385 iron-ore concentrate wagons, 2 065 non-ferrous metals wagons. The share of export cargoes amounted to 95,86% of the total cargo turn-over of the company; import – 0,57%, coastal cargoes – 3,54%. Construction of a specialized coal handling complex and a container terminal is planned. Phased reconstruction of the complex is planned in order to increase capacities of the complex and provide transshipment of apatite concentrate and mineral fertilizers.

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MSC is taking part in projects of Murmansk Transport Node (formed as closed joint stock company, CEO Andrei Shapovalets), Prirazlomnoye offshore field development project (construction of Prirazlomnaya Platform). Container terminal reconstruction is in phase I. It includes hydro-complexes, which will be constructed with state financing. Also, warehouse construction, loading zone and railroad connection will be reconstructed by companies who will eventually be utilizing these facilities. At present the focus is at stevedore companies for construction of specialized warehouses with total capacity of 20 mn tons. At present MSC employs approx. 4000 people. Annually MSC allocates RUR 600 mn for technical upgrades, RUR 100 mn for operating expenses and RUR 180 mn for repairs. The company uses mostly equipment supplied by foreign companies. Volvo used to be a major supplier before, now the company is importing auto loaders from Japan. It takes up to 8 months to supply them, mainly MSC is aimed at component import. Cranes are supplied by Sevmurmontazh. MSC is taking part if exhibitions such as Transrussia, Transtek, Neva, Coltrans. MSC is a part of Association of Sea Ports. It is important for MSC to constantly update information about new technologies from foreign specialists. MSC is regularly organizing fact-finding trips for its employees. Perspectives for Finnish companies mostly lie in the range of subcontracting for Norwegian rigs. Mr. Morozov mentioned that Finnish shipyards could supply parts for drilling rigs to be further used at complex platforms. MURM ANSK SHIPPING CO MPANY

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Shipping Murmansk Murmansk Shipping Company Medvedev, Alexandr Mikhailovich Managing director 15, Ulitsa Kominterna, Murmansk, 183038 Telephone: +7 (815 2) 48-10-49


Alexandr Medvedev, CEO mentioned that closest cooperation with Finnish shipyards was reached in the 1980s. Since then European shipyards have been in tough competition with China, South Korea and India. Europe is highly competitive in building platforms, on-shore service stations, special vessels and civil ships. MSCO is actively considering opportunities connected with offshore field development. Most potential areas in Shtockmann project are: 1. 2. 3. 4. 5.

On-shore territories development Sites for repairs Derrick lay vessels for underwater pipes Shuttles for pipe delivery Service ships and supply vessels for servicing offshore platforms

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Prirazlomnoye project is seen also as prospective in the following directions: 1. Cargo delivery for oil and gas sector 2. Development of necessary facilities at drilling and technological rigs and platforms 3. Delivery of pipes and equipment to the development sites MSCO is also considering potential in Yamal projects in regards to the condensate transporting and delivery. At present MSCO has two tenders from Shtockmann Development AG for auxiliary supply vessels and complex services for ILW – Integrated Logistic Ways. MSCO is participating in development of onshore land plots, acts as project manager and hires foreign subcontractors. SDAG will act as a tenant for land sites suited to hold pipes of large diameter. One of the main advantages of MSCO is the ability to ship into the sea with significant draught. MSCO‘s fleet is able to make delivery and unload cargo directly to the onshore plots, practically anywhere, without any equipped berths. Therefore MSCO enjoys advance payments for 50% of their orders. MSCO is servicing its fleet in the North and North West of Russia as well as outside of Russia (at Estonian and Latvian shipyards). MSCO is cooperating with companies from Finland and Germany mostly on the basis of equipment and component supply. Welding works and metal works are mostly ordered from China. Key issue for Finnish companies is the ability to guarantee terms and deliver post-guarantee servicing of vessels. For this purpose as Mr. Medvedev mentioned, OSK, Wartsila, ABB and a number of smaller Finnish companies are working together to create a ship repair center to process following types of works:    

Hull repairs Drives repair and maintenance Engines repair and maintenance Quality replacement for electronic components of the ship

MSCO is primarily occupied with such cargo types as coal, oil and chemicals. BALTTELEKOMPORT

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Port Equipment Suppliers St. Petersburg Balttelekomport Safonov Vasiliy Vladimirovich Manager director Address: 42 Shpalernaya str, S-Petersburg 191123, Russian Federation Phone +7(812)318 35 48

Email Website

The Balttelekomport corporation: a communications operator for the Ust-Luga merchant seaport General information The Balttelekomport corporation, a subsidiary of the port of Ust-Luga was founded in 1997.

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The purpose of its creation was meeting the demand of the port and all its facilities under construction for communication services. The source of its financing is the activities of the company. Its annual trade turnover amounts to RUR 50 to 60 million. The corporation has up to 20 employees. Its suppliers are all large telecommunications systems, such as Peterstar, Delta Telecom, Northwestern GSM, etc. Key clients: Rosmorport, Rosneft Activities: -

designing and building communications systems, providing telephone, radio and Internet services, leasing communications channels, servicing communications systems and networks.

1. The basic areas of today’s service application - software for monitoring the flow of cargoes further loaded onto railcars and trucks; the transshipping of automobiles; - logistics; - security - border guard services 2. The basic areas of development: the provision of telecommunications services - the port, - the city, - comprehensive grounds development The corporation is interested in Finnish technologies, which are mostly stevedoring-related technologies.


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Ports Kalingrad Port of Kaliningrad Vladimir Lavrenhuk Vice managing director 24, Portovaya str., Kaliningrad, Russian Federation, 236003 Phone +7 (4012) 692 467

1.Age of the company, who was the initiator of creation. Public Transport Enterprise "Kaliningrad Sea Commercial Port" was established June 20, 1945 based on the Decree of the State Defence Committee of the USSR. In 1992, as a result of market reforms in Russia, the port has been transformed into a corporation. June 20, 2010 "Kaliningrad Sea Commercial Port" JSC ("KSCP" turned 65) 2.Founders of the company Today "KSCP - a company with a 100 - percent private capital, whose founders are both physical and legal persons.

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3.Whats the company's role in the Marine chain of command who is the governing body OAO KSCP "- one of the largest operators of the seaport of Kaliningrad and a transport organization, which is functionally closed on Federal Agency for Maritime and River Transport (Rosmorrechflot) under the Ministry of Transport of the Russian Federation. 4. Trade. According to the Charter of the main activity of JSC "KSCP" is the fulfillment of cargo handling (stevedoring activities). The company has the ability to overload in their berths to 6 million tons of cargo a year. In the years before the global financial crisis turnover of JSC KSCP "is 4,7 - 4,8 million tons in 2009 - 2,2 million tons. 5. Number of staff To date, the number of employees of JSC KSCP "is 740 attendees. 6. The main objectives of the company The main purpose of "KSCP, as well as any joint stock company, a profit of statutory activities. 7. Stages of production processes Specificity of stevedoring activities, which deals with OAO KSCP "includes mainly the implementation of works on cargo handling: -Overload of cargo from one mode to another; -The movement of goods within the port; Warehousing, storage and batching of goods in anticipation of filing of vehicles. 8. Subcontractor This is a different company, contributing to ensure the smooth operation of JSC "KSCP and service providers: towing vessels, construction of port facilities, installation of specialized equipment, etc. 9. Suppliers and key customers of the company. Users of the services of "KSCP" are the shippers and consignees. The main ones: -Russian metallurgical plants (export of ferrous metals); -Russian chemical industry (fertilizer exports); And industrial enterprises of Kaliningrad region. (Export-import of various products). Our biggest customers: From Russian smelters (exports of ferrous metals):-Novolipetsk and Oskol. Of the chemical industry (fertilizer exports): "Kuibyshevazot and Uralkali. Of the industrial enterprises of the Kaliningrad region: Avtotor, Telebalt, "" Food " GC Soyuz-Fregat. 10. Suppliers of equipment and software OAO KSCP "fitted handling equipment manufacture well-known manufacturers: On-tap: "Gantz", "Falcon", "Albatross," Condor "; On-floor transport vehicles: "Squid", "Fantutstsi", "Toyota", "Linda", etc. SOFTWARE: "Dialogue of IT" (St. Petersburg). 11. Potential of the company - Reliability for clients: the guarantee of the stability of the relationship between the customer and the company. - Highly qualified staff of managers and workers who can perform work of any of high quality.

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12. Plans for development. Continue to invest: - A modernization of machinery and equipment; - The further implementation of modern IT-technology; - The development of port facilities, where the main task is to create high-tech container terminal. OAO KSCP is also interested in placement of various industries and enterprises on the territory of the company and is ready for a constructive and mutually beneficial cooperation in this sphere with all who are interested in it. OAO KSCP "always ready to learn and introduce new foreign technology, as cargo handling, and the organization of other processes associated with the company and is ready to consider any offers. CONTACT.:. OAO "Kaliningrad Sea Commercial Port 236003. Kaliningrad, ul.Portovaya, 24 Tel. +7 (4012) 69-24-67 +7 (4012) 69-24-67 Fax: +7 (4012) 69-22-10 E-mail:


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Ports Primorsk Port of Primorsk Yudin Vladimir Managing director Office 13A, 54 Shpalernaya str., St. Peterburg, Russian Federation Phone +7 (812) 333 22 32

The port of Primorsk The port of Primorsk is situated at the ends of the Baltic Pipeline System (BPS-1) and the Port of Kstovo– Yaroslavl–Kirishi–Primorsk (Project North) trunk pipelines transporting petroleum products owned by the JSC Transnefteprodukt. Thirty percent of all Russia‘s export oil and 37% of all oil exported through Russia‘s ports is transshipped via Primorsk.

General information The port of Primorsk is situated 4 miles to the southeast of the city of Primorsk in the deep-water portion of the Strait of Bjerkesund. The port is accessible to ships up to 307 meters long whose draught does not exceed 15 meters. The port may load tankers whose deadweight capacities are between 4,000 and 150,000 tons.

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The port has two 368 meters long piers, each with 5 oil loading outlets each capable of handling between 8,000 and 12,000 tons of crude oil per hour, depending on the load capacities of tankers. There are 7 tugboats assuring the safety of mooring tankers, a fleet of special-purpose vessels for evacuating polluted water and garbage from tankers and 7 icebreakers. There is also special-purpose equipment for handling possible oil spills and capacities for spilled oil removed from water and land The port is divided into two parts: The first part consists of an oil storage depot for storing crude delivered by the pipeline and, further, dispensing it into tankers. The second part includes port installations, water treatment facilities, two loading piers and an auxiliary pier. The vessels turnover came to 1,869: 935 in and 934 out. The oil companies cooperating with the port of Primorsk are as follows: Russia‘s largest such as the LUKOIL corporation, Gazprom Oil corporation, Rosneft corporation, Tyumen Oil– British Petroleum holding corporation and Surgutneftegaz corporation. Also such foreign companies as JSC KazTransOil and TOTAL.

Subcontracting organizations: Petrotrans–Primorsk, Ltd. engaged in designing and building an oil transshipping terminal. The Trans-Flot private corporation: pier builders. The Morskoi Portovyi Service private corporation: rescue, salvage and environmental protection. The Sovfrakht-Primorsk private corporation: provides tugboats. The advantages of the transportation/technology multifunctional port complex: - favorable natural conditions, the round-the-year use of the port and navigation with just a short-time need for icebreakers; - the convenient geographical location; - the 25 to 30 meters deep water area and guaranteed 10 to 15 meters deep mooring at the piers; - safe vessel piloting and convenient moorings for ships displacing up to 100 thousand tons; - the development of a specialized transportation and engineering infrastructure needed to accept crude oil and petroleum products; - decreased ship processing times due to the efficient organization of loading and the high intensity of the processing of vehicles. Volumes of crude oil and petroleum products 2002 - 11.2 million tons 2003 - 16.0 million tons 2004 - 44.6 million tons 2005 - 57.4 million tons 2006-66.1 million tons 2007 - 74.2 million tons 2008 - 75.6 million tons 2009 - 79.2 million tons 1 st half of 2010 - 38.2 million tons Total for 2002 - 2010 - 462.4 million tons

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Ports St Petersburg Administration of the seaport Big Port of St. Petersburg Timofeeva Elena Sergeevna Director for external relations 10, Gapsalskaya str. S-Petersburg, Russian Federation 198035 Phone +7 (812) 327 40 20

1. Age of the company, who was the initiator of creation. Outdoor company "Sea Port of St. Petersburg was incorporated on the basis of the Leningrad commercial seaport on Dec. 8, 1992. Thus, the Company operates in the market of stevedoring services about 18 years. 2. The founders of the company In February 2008, shares of JSC Sea Port of Saint-Petersburg, JSC "First Stevedore Company, Inc." Second Stevedoring Company, Inc. Third Stevedoring Company ", JSC" Fourth Stevedoring Company "in the Greater Port of St. Petersburg, as LLC Universal Transshipment Complex at the port of Ust-Luga purchased from Jysk Stalindustry ApS and Chupit Limited Transport Group Universal Cargo Logistics Holding (UCL Holding). 3. What is the company's role in the marine chain of command who is the governing body which companies, in turn, obey your company Today, the group of companies "Sea Port of St. Petersburg is the largest group of stevedoring companies in the North-West Russia. Share of group turnover in the Big Port of St. Petersburg is 20%. From July 2009 as a sole executive body of the stevedoring company performs "TA Management» / «Driving assets, is the managing company of UCL Holding. 4. Trade turnover In 2009, the stevedoring companies of the group processed more than 11.5 million tons of cargo. 5. Number of staff To date, the group of companies "Sea Port St. Petersburg employs over 3,500 people. For information: The group of companies "Sea Port St. Petersburg", which is part of the international transport holding Universal Cargo Logistics Holding, includes "First Stevedore Company, Second Stevedoring Company", "Third Stevedoring Company", "Fourth Stevedoring Company", " Universal Handling Complex in Ust-Luga, as well as service companies. Universal Cargo Logistics Holding (UCL Holding) - international transportation holding company that unites and Tuapse, Taganrog ports in the South, Volga, North West and Western Shipping Company, a number of shipbuilding, shipping and logistics assets. "Managing transportation assets» (TAManagement) - the managing company of UCL Holding, established to optimize the management of Russian assets, as well as conducting a coordinated investment policy in transport companies of the group.

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Shipping Company St.Petersburg North Western Shipping Company Ovechkina Galina Chief of department of advertizing Address: 37, Bolshaya morskaya str., St. Petersburg, 190000 Russian Federation Phone +7 (812) 3 23 98

1. Age of the company, who was the initiator of creation. North-West Shipping Company is the successor of the North-Western Shipping Company, formed by the Decree of the Council of Labor and Defense on January 30, 1923. In December 1992 Shipping Joint Stock Company. In 1993, the North-Western Shipping Company changed the name of the company in the North-Western Shipping Company as a corresponding status of the company. 2. The founders of the company Russian Federation through the Federal Agency for Management of Federal property (the owner of 25,5% of shares). HAVENSIGHT SHIPPING CYPRUS LIMITED (the owner of 62.423% of shares). 3. The organizational structure of the company Production and transport of "Holding" type, which includes the parent company of "FFP" and 6 subsidiaries. These include: shipping company - the North-Western Fleet, "" Passenger Port, 2 shipbuilding and ship repair companies - Nevsky Shipyard "and" Ascension maintenance base of the fleet, as well as "Snabservis" and the company charter management "of the Volga-Baltic Logistics." 4. Main activities cargo transportation by ships, river-sea vessels, shipbuilding, ship repair, transportation of passengers. 5. Location of subsidiaries St. Petersburg and Leningrad region 6. Regions activity inland water of European Russia , Baltic, North, Mediterranean, Black and Caspian seas. 7. What are Shipping Fleet In management, the company is about 145 trucks 550 thousand deadweight tons, including 120 ships of "riversea", 4 barges, 12 tugboats and six auxiliary vessels. Fleet shipping supplies bulk and general cargo in the Baltic States, Scandinavia, Western and Southern Europe, England and the ports of North Africa, equipment and building materials for construction of objects of oil and gas

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in the Barents Sea coast, for the construction of oil in the Caspian Sea. Over 45 years the company carrying out transit cargo carriages through the Volga-Baltic waterway and more than 35 years - Saimaa Canal. 8. What goods are transported Company transports general, mass, bulk, bulk cargo, special cargo ship batches from 1000 to 5000 tons.Transportation is carried out by the courts of projects Rusich, Valdai, "Baltic", "Sormovsky", "Siberian, Volga, Volga-Balt", "Cupid", "ETS". On service rigs in the Caspian Sea working tankers "Roskam", "Roskam-1", "Roscoe 2. Company is transporting annually about 6 million tons of cargo, making 2500 arrivals of 300 river and sea ports from foreign countries. 9. Main cargo (marine) delivery of general cargo from European ports to ports in the Volga and Kama; - Delivery of timber and lumber from the river port on the Volga-Baltic Waterway and Karelia, as well as sea ports of St. Petersburg, Ust-Luga, Vyborg, in Scandinavia and Western Europe; - Transportation from the Baltic ports: timber from Riga and Liepaja metal from the ports of England and Europe; - Transport of ferrous metals and scrap of Cherepovets in the Baltic, from the ports of St. Petersburg and Kaliningrad in the European ports; - Transportation of non-ferrous metals from the sea ports of St. Petersburg, Ust-Luga and Kaliningrad, the ports of Europe. - Delivery of fertilizers from the seaport of St. Petersburg in the Baltic ports and Europe, from the port Solikamsk - Poland; - Transportation of Belarusian potash from Klaipeda to Poland. - Delivery of equipment and building materials for construction of objects of oil and gas on the coast of the Barents and Kara Seas; - Delivery of equipment for the construction of oil in the Caspian Sea. - Transportation of grain from the ports of the Lower Don and Azov Sea ports in southern Europe. 10. Key Customers key customers services company on the Transport of goods are the largest Russian metallurgical plants, fuel and energy enterprises complex of Russia, Kazakhstan, Turkmenistana, the biggest concerns for processing timber in Finland, Sweden, Norway, the largest Russian and European concerns for grain processing. 11. Major subcontractors Fleet Repairs Shipping manufactured in the following companies: Northwest: enterprise of the Kaliningrad region - LLC SRH "Pregolya" and "Ship Repair-West. South: Kerch Shipyard, DESSAN-Ltd (Istanbul), Azov Shipyard, Izmail Ship Repair is a-d, the plants in Rostov - on - Don - "Midel, ship repair and "Sailor." 12. Suppliers of equipment and software suppliers of marine equipment: Waertsila Jotun

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Bartels-Lueders Mann Katerpiller Russian company MT Naval Mechanics software provider - the company MIKROSOFT 13. What is the potential of the company potential of the company - in its strong position in the market for transport services long-term stable relationships with major customers, qualified staff, developing key business areas.

14. Due to what is planned to develop the company: • Development of new freight • Fleet replenishment

15. Where the company receives information about new technologies and materials In specialized international exhibitions and forums on shipbuilding and ship equipment, the Internet portal, through personal contacts management and specialists with their colleagues. 16. Is there a need of foreign technology there 17. How can a foreign company can come up with a proposal Contact by email. mail / fax with the offer of cooperation in the structural Shipping unit or subsidiary, in which information technology can be used. Visiting exhibitions, forums, in which regularly participates North-Western Shipping Company: Neva in St. Petersburg, TransRussia in Moscow «SMM» in Hamburg.


Group City

Port Equipment Suppliers St. Petersburg

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Company name Interviewee name Interviewee position Contact details Email Website

Technoros Radov Anton Vladimirivich Chief of department of new product Address: Lit A, 70|2, pr. Obuhovskoy oboronu, St Petersburg, 192029 Russian Federatoin Phone (812)718 82 28

The Technoros cranes producing plant The plant is the basic successor of the S. M. Kirov plant of lifting and transporting equipment The plant designs, makes and supplies modern high quality lifting and transporting equipment, such as metallurgic and special-purpose bridge cranes, special-purpose gantry cranes, portal, mounting and transloading cranes, container loaders and floating cranes. The group of companies also includes: - a technological design bureau, - own production lines, - mounting, servicing and nondestructive inspection organizations. Achievements: - the availability of all the licenses and certificates required for manufacturing lifting and transporting equipment; - while designing every crane, the thorough research of the areas of use of the equipment to be produced; - the fitting of all Technoros cranes with accessories manufactured by leading domestic and foreign producers; - guaranteed high quality at reasonable prices. 1. The company is 20 years old. 2. It employs 100 persons in production and 50 in design. The total number of employees is about 200. 3. The principal competitive advantage is the price. 4. The company‘s suppliers are German manufacturers making parts and accessories for SWF Krantechnik GmbH and Zollern cranes. 5. Key clients are ports. If a park of cranes is to be renewed, 40 cranes must be ordered annually. In reality, only 15 cranes are ordered annually. 6. Technoros supplies to 5 cranes annually. 7. The company‘s potential is in its strong team of designers. 8. Its working principle is the adaptation of foreign technologies to the realities of Russia‘s ports and their needs. 9. Technoros‘ actual needs are as follows: - Electric equipment, - Software, - Cable winches, - Pneumatic chassis, - Cables 10. Information about new technologies and materials is obtained from exhibitions and magazines. 11. To offer cooperation, please get in touch with Mr. Radov Anton Vladimirivich e-mail


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Ports St. Petersburg Port Ust-Luga Pavlovskiy Igor Anatolevich Director for external relations Address: 2,Shpalernaya str.,S-Petersburg, Russian Federation Phone (812)334 16 77

Email Website

1. Age of the company, who was the initiator of creation. The company was founded in 1992 for the construction of a new seaport in the Luga Bay of the Gulf of Finland. 2. The founders of the company - applied the principle of public-private partnership. Quadripartite Agreement between the Ministry of Transport of the Russian Federation, OAO Russian Railways, Government of Leningrad region and JSC "Ust-Luga. 3. Company Structure: On the basis of Ust-Luga Company established subsidiaries that provide all the needs and development of the port. OJSC "Commercial Sea Port of Ust-Luga" was created for the project development of a complex of services related to operational activities of Commercial Sea Port of Ust-Luga. Ust-Luga design-engineering company that was established for implementation of integrated socio-economic development of the area adjacent to the commercial seaport of Ust-Luga. OAO PortZhilStroy "was created for the implementation of housing programs in the area adjacent to the commercial seaport of Ust-Luga, including the construction of a new settlement at the mouth area of the Luga river. OAO Balttelekompor "-the design and construction of communication networks, telecommunication services, telecommunication, services of Internet access, services, rental of communication channels, service systems and networks. JSC "Ust-Luga port transport company was established to provide transportation services to spur railroad tracks commercial seaport of Ust-Luga. 4. Trade turnover Just 10 months of 2010 in Ust-Luga port handled 9766 thousand cargo and 48,114 vehicles. In 2009 the turnover of the port of Ust-Luga totaled 10.3 million tons and 17 000 vehicles. It is planned that by 2018, turnover increased to 180 million tons of cargo a year. 5. Plans for development 1. Planned construction of terminals: • The complex handling of stable gas condensate • Complex for handling of liquefied petroleum gas and light oil • Neftebaza "Ust-Luga • Terminal Fertilizer • Steel terminal 2. Port Ust-Luga decided to build a new town, designed by 34,5 thousand people for the employees serving the port. 3. To date, multi-handling system "Yug-2" takes the car brands Hyundai and Kia, the line runs Malmo-Hanko-

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Ust-Luga on the transport of cars, "Toyota". In the near future should see a line connecting the Ust-Luga, not only to the Scandinavian, but also with other European ports. Negotiations with ocean lines. The opportunity to work with export cargoes. 4.Planned build a warehouse logistics center. This will be a rear warehouse for the car terminal, and an area for storage, stuffing and unloading containers. Since it is supposed to provide services for pre-sales of cars, then this area will be constructed corresponding centers.

6. Where the company receives information about new technologies and materials Foreign delegations are constantly coming to port: only for the autumn months of 2010, the port visited: Lithuanian businessmen, the president of Flanders, the consuls of 19 countries, representatives of the Consulate General of the United States. 7. Is there a need of foreign technology Representatives of the companies are willing to travel to foreign ports to exchange experiences. 8. How can a foreign company can come up with a proposal of its technology. Send the proposal to name Igor Pavlovsky Director of External Relations Tel.: +7 (812) 438 18 46 , +7 (812) 438 18 46

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PROSPECTS FOR FINNISH COMPANIES SUMMARY OF MAJOR FINDINGS In the course of the study it was identified that shipbuilding cluster development issues are widely addressed on the strategic level by a special workgroup within Russian-Finnish Intergovernmental Commission on Economic Cooperation since 1992. Interviewees indicated that most companies in Russian shipbuilding cluster (engineering & design as well as shipyards) have long history of cooperation with Finnish partners dating back to Soviet period, hence most of production potential is well recognized by the industry specialists. Therefore existing facilities for information exchange in regards to partner search, technological updates dissemination, conferences and theme events must be further improved. Cross-border efforts for information exchange are highly valued by local experts, i.e. potential further development of information channels is possible and recommended. State-run oil and gas companies have their own infrastructure for handling liaisons with foreign producers and suppliers and are not interested in practical participation in a particular special intergovernmental workgroups and newcomers in the market or companies who would like to suggest new technology or solutions must liaise directly with the oil and gas departments. However, it is wise to unite efforts and address oil and gas companies jointly through an organized meeting or roadshow. OSK as consolidated state management is planning to establish Trade Center for tendering and subcontracting purposes based on Federal-owned FGUP Sudoeksport, i.e. OSK indicated no particular necessity for extensive joint cooperation with Finnish companies proposing technical solutions for the industry. Potential improvement of research and development cooperation between Finland and Russia is possible via establishment of new joint facilities (e.g. companies, institutions and organizations) for education and scientific research. Labor force training possibilities can be beneficial in terms of competitiveness of Finland due to its immediate proximity (e.g. as compared to Korea).

PARTICULAR POTENTIAL FOR FINNISH SUPPLIERS Opportunities for Finnish companies were studies in the course of this project. It was summarized into an opportunity chart (below) to visually represent which fields can be interesting for Finnish offering and which of them can be competitive. The vertical axis represents the need of Russian companies for foreign technologies and products. The potential for Finnish companies is marked along the horizontal axis. This chart is based purely on expert assessments. In the attempt to visually show the relative size of potential market in each field, they are represented as balloons. Blue balloons denote the needs in the field of shipbuilding (namely, vessel production). Green balloons represent the potential volumes for equipment and technology from the point of view of shipyards, ports and domestic equipment manufacturers. Orange balloons mark the potential need from the point of view of engineering companies and design bureaus.

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In order to avoid contradictions, a point has to be made that e.g. machinery and machine tools for the needs of shipyards and ports objectively has a high potential demand for foreign technologies. However, the position of this field along the axis of opportunities for Finnish companies does not mean that Finnish manufacturers are unable to provide good quality and modern solutions, but only suggests that the competitive price offer in this case is not in favor of Finland. Again, these estimations are based purely on the expert opinions of the interviewed specialists in respective fields. Among the most potential areas for Finnish companies are steel structures, construction of industrial buildings, residential units, storage tanks for finished products. As a separate direction of potential offering shown in the chart is paint and painting works, the volumes of which can be quite significant in development projects of terminals and ports. Many experts identified the offering of Finnish companies with a field of expertise in production technologies, process automation, energy efficiency as highly competitive. Design and engineering solutions, environmentally-friendly technologies and solutions for the safety also may be a potential area for Finnish companies that are specialized in these areas. With specific regard to the construction of ships, the Russian strategy involves the maximum load of domestic shipyards. However, it is obvious that the construction of large-tonnage ships will be done overseas, at least in the coming years.

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Chart below represents areas of potential offering for Finnish suppliers (marked orange) which were identified in the course of the study. This chart relates to the areas of potential of Finnish offering, but indicates possible direct customers for Finnish companies. More information can be found in the interview materials of this report.

Potential direct customer groups

Potential area of offering

Oil&gas companies


Shipping companies


Engineering & Design

Vessels for drilling and extraction, transportation and pipeline construction, service vessels Metal constructions, warehouses and storages Machinebuilding and equipment manufacturing

Paint and painting services

Technologies, know-how, automation solutions Engineering, design and planning for parts of platforms, rigs and vessels Energy efficiency solutions for production

Ecological solutions

Safe work environment solutions

In order to enlist highlighted potential prospects for Finnish suppliers, below is a brief summary. More information can be found in the interview material of this report.   

Novatek Ust-Luga 5-year project for LNG terminal construction is active in tendering: at present seeking suppliers of paint and contractor for paining works on the berth Sredne-Nevsky Shipyards have a large pre-paid order to construct 2 pilot boats (below 1000 tons) and are seeking to outsource this to a Finnish medium-sized shipyards Rosneft has internal procedure for assessment of potential suppliers and contractors. It can consider a group visit of Finnish companies to meet with heads of specialized departments and tendering departments

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     

  

Murmansk Commercial Sea Port indicated potential participation for Finnish engineering and design companies as subcontractors to Norwegian producers of drilling wigs Murmansk Shipping Company mentioned Finnish companies as potential suppliers of equipment and spare parts for the fleet Nerpa Shipyards acknowledged Finnish potential in metal constructions for fragments of the berth and storage complexes Ust-Luga In 2011 plans to purchase two manipulators and two trucks with carrying capacity of 2 and 10 tons. For the purchase of the technological equipment over EUR 1 mn is allocated RosMorPort‘s CEO Igor Rusu announced in Nov 2010 interest in foreign designers with experience in the design of ports and hydralic facilities and invited them to create foreign project offices in Russia Primorsk Port is interested in a visit to the port of Vuosaari in Helsinki to study history of relationships between the management company of the harbor and government and private entities that maintain the port Technoros manufacturer of cranes is interested in electric equipment, software for cranes, wire rope winches, pneumatic chassis, cables; Technoros produces 3-4 cranes per year BaltTelecom a telecom operator is interested in IT solutions for stevedoring processes North-Western Shipping Company is interested in buying ship engines Wärtsilä for 10 ships

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APPENDICES APPENDIX I – LIST OF KEY PLAYERS OIL AND GAS SECTOR COMPANIES GAZPROM Gazprom is one of the world‘s largest energy companies. Its major business lines are geological exploration, production, transportation, storage, processing and marketing of gas and other hydrocarbons as well as electric power and heat energy production and distribution. The state owns a 50.002 per cent controlling stake in Gazprom. Gazprom Group possesses the world‘s largest natural gas reserves. As of December 31, 2008 the Group‘s A+B+C1 resources were estimated at 33.1 trillion cubic meters. According to the international PRMS standards the Group‘s proven and probable hydrocarbon reserves are estimated at 27.3 billion tons of fuel equivalent and valued at USD 230.1 billion. With 17 per cent of the global gas production, Gazprom Group is the leader among the world‘s oil and gas companies. In 2008 Gazprom Group produced 549.7 billion cubic meters of gas, and plans to boost gas production to 650-670 billion m3 by 2020. The share of Gazprom in the total Russian and global gas production accounts for 83% and 17%, respectively. Gazprom owns the world‘s largest gas transmission system capable of uninterrupted and long-distance gas delivery to Russian consumers and abroad. Gazprom gas trunklines stretch 159.5 thousand km. The Company‘s 165 gas distribution companies maintain 445.3 thousand km of gas distribution pipelines and secure transportation of 164.3 billion cubic meters of natural gas. Gazprom exports gas to the countries within and beyond the FSU, and continues reinforcing its positions on conventional international markets. In 2008 the Company sold 184.4 billion cubic meters of gas to European countries along with 96.5 billion cubic meters to the CIS and Baltic states. A business priority of Gazprom is the development of the Yamal Peninsula, Arctic continental shelf, Eastern Siberia and the Far East. According to the assignment of the Russian Federation Government, Gazprom coordinates the implementation of the Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Program). Russia‘s East is planned to see the development of a gas processing and gas chemicals industry that will enable to rationally use substantial reserves of helium and other valuable components of Eastern Siberia‘s gas. Contact information: Address: 16 Nametkina St., Moscow, Russian Federation Phone: +7 (495) 719-30-01 (for references) Fax: +7 (495) 719-83-33 Deputy Chairman of Gazprom's Board of Directors, Chairman of Gazprom's Management Committee: Alexey Borisovich Miller Web-site:


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―Gasprom dobycha shelf‖ Ltd. was established in 2008 as a company specializing in offshore fields development. ―Gasporm dobycha shelf‖ is 100% owned by ―Gasprom‖ OAO. The first project of the company was Shtokman gas and condensate field, located in the central part of the shelf of the Russian sector in the Barents Sea, 650km north-eastward from the port of Murmansk and 290 km westward from the Novaya Zemlya archipelago. Contact information: 65, Novocheremushkinskaya str Moscow, Russian Federation, 117418, Phone: +7(495) 719-85-12, +7(499) 550-30-02 Fax: +7(499) 550-30-03 General director: Aleksander Yakovlevich Mandel

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LUKOIL Lukoil is one of the world‘s leading vertically integrated oil & gas companies. Main activities of the Company are exploration and production of oil & gas, production of petroleum products and petrochemicals, and marketing of these outputs. Most of the Company's exploration and production activity is located in Russia, and its main resource base is in Western Siberia. LUKOIL owns modern refineries, gas processing and petrochemical plants located in Russia, Eastern and Western Europe, near-abroad countries. The Company's products are marketed in Russia, Eastern and Western Europe, in near-abroad countries and USA. Lukoil is the second largest private oil Company worldwide by proven hydrocarbon reserves. The Company has around 1% of global oil reserves and 2.4% of global oil production. LUKOIL dominates the Russian energy sector, with 18.6% of total Russian oil production and 18.9% of total Russian oil refining. Lukoil proven reserves at the beginning of 2010 were 13,696 mln barrels of crude oil and 22,850 bcf of natural gas, totaling 17,504 mln boe. Company has an outstanding portfolio of production assets. The main production region for LUKOIL Group is Western Siberia. LUKOIL is carrying out international exploration and production projects in Kazakhstan, Egypt, Azerbaijan, Uzbekistan, Saudi Arabia, Colombia, Venezuela, Cote d‘Ivoire, Ghana and Iraq. Lukoil owns significant oil refining capacity both in Russia and abroad. In Russia the company owns four large refineries at Perm, Volgograd, Ukhta and Nizhny Novgorod. Total capacity of Lukoil facilities in Russia is 45.1 mln tons of oil per year. Lukoil also has refineries in Ukraine, Bulgaria, Romania, and a 49% stake in ISAB refining complex (island of Sicily, Italy) and a 45% stake in TRN refinery in the Netherlands with total capacity of 26.4 mln tons per year. In 2009 Lukoil refined 62.70 mln tons of oil at its own refineries, ISAB complex and TRN refinery, including 44.46 mln tons at its Russian refineries. Today's LUKOIL: •

1.1% of global oil reserves and 2.3% of global oil production

19% of Russian oil production and 19% of Russian oil refining

The chief objective of LUKOIL‘s geological exploration work is to replace production with new commercial reserves of hydrocarbons, and to prepare reserves for rapid launch and expansion of production in promising regions (Timan-Pechora, the Northern Caspian and the Bolshekhetskaya Depression). The Company maximizes efficiency of its geological exploration work by use of the latest technologies. Contact information: Postal address: 11, Sretensky Boulevard, Moscow, Russia, 101000 Tel./fax: (+7 495) 627 4444; (+7 495) 625 7016 President of LUKOIL, Member of the LUKOIL Board of Directors, Chairman of the LUKOIL Management Committee: Vagit Alekperov

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ROSNEFT Rosneft is the leader of Russia‘s petroleum industry, and ranks among the world‘s top publicly traded oil and gas companies. The Company is primarily engaged in exploration and production of hydrocarbons, production of petroleum products and petrochemicals, and marketing of outputs. Rosneft has been included in the Russian Government‘s List of Strategic Enterprises and Organizations. The state holds 75% in the Company (through OJSC ROSNEFTEGAZ). Rosneft is widely engaged in exploration and production across all key hydrocarbon regions of Russia: Western Siberia, Southern and Central Russia, Timan-Pechora, Eastern Siberia and the Far East. In addition, the Company participates in several exploration projects in Kazakhstan and Algeria. Rosneft‘s seven major refineries have convenient locations throughout the country, from the Black Sea coast to the Far East, and the Company‘s retail network covers 39 regions of the Russian Federation. Rosneft has a vast and high-quality reserve base, with total proved hydrocarbon reserves of 22.9 bln barrels of oil equivalent – among the best indicators for a global publicly traded oil and gas company. Moreover, Rosneft is second-to-none on an international scale in terms of total proved liquid hydrocarbon reserves. The Company‘s proved reserve-toproduction ratio is 26 years. Rosneft operates mainly conventional reserves, so the Company is well-placed for efficient increase in hydrocarbon production. In addition, Rosneft has access to 14.1 bln barrels of oil equivalent of probable reserves and to 11.1 bln barrels of oil equivalent of possible reserves, which will become the main source of proved reserve extension in the future. Rosneft is focused on expanding its resource base through intensive exploration and new acquisitions in order to secure sustainable production growth in the long term. In recent years, the Company has demonstrated consistently strong reserve replacement performance: in 2009, Rosneft‘s proved reserve replacement ratio was 163%. Rosneft‘s major exploration projects are located in the most promising hydrocarbon regions of Russia, such as Eastern Siberia, the Far East, and shelves of Russia‘s southern seas. As a result, the Company has access to over 47 bln barrels of oil equivalent of prospective recoverable resources. Rosneft has over 800 bln cubic meters of proved gas reserves by international classification, of which only 21% are currently being developed. Therefore, development in the gas sector and commercialization of reserves are among priority tasks for the Company. In the Far East, Rosneft is taking part in the promising Sakhalin-3 and Sakhalin-5 geological exploration projects on the shelf of the Sea of Okhotsk. These projects are being implemented with the Company‘s foreign partners on a joint-financing basis, which minimizes risks for Rosneft. The Sakhalin projects offer unique experience in development of challenging shelf fields, which Rosneft will be able to put to good use in future projects for development of (as yet unallocated) resources beneath the Arctic shelf. Contact information: Mailing address: 26/1, Sofiyskaya Embankment, 117997, Moscow, Russia Tel: +7 (495) 777-44-22 Fax: +7 (495) 777-44-44 Executive director, President: Sergey Bogdanchikov Web-site:

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SHTOKMAN DEVELOPMENT AG Shtokman Development AG is a joint venture established on 15th of February 2008 for financing, design, construction and operation of the first phase Shtokman gas condensate field development. Shares of participation in the project were distributed as follows: OAO "Gazprom" - 51 %, Total S.A. (France) - 25 % and Statoil ASA (Norway) - 24 %. The Company Headquarters is located in Zug, Switzerland. Company branches are opened in Moscow, Murmansk and Teriberka village, Murmansk region. ÂŤShtokman Development AGÂť will be the owner and the operator of the first phase infrastructure of the Shtokman gas condensate field for 25 years after its commissioning. Phase 1 of the development will provide production of 23.7 billion cubic meters of natural gas per annum. Part of the natural gas produced within Shtokman project will be transported across the Baltic sea through Nord Stream main gas pipeline which will connect Russia and the European Union. Partnership of OAO "Gazprom", Total S.A. and Statoil ASA within the Shtokman project unites long-term experience, enormous resources and advanced technologies necessary for the success of this unique project. Contact information: 3 Malaya Pirogovskaya, 119435 Moscow Tel: +7 (495) 777 06 80; +7 (499) 576 65 34 Fax: +7 (499) 576 65 35 Executive director: Aleksey Zagorovskiy

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TNK-BP TNK-BP is a leading Russian oil company and is among the top ten privately-owned oil companies in the world in terms of crude oil production. The company was formed in 2003 as a result of the merger of BP‘s Russian oil and gas assets and the oil and gas assets of Alfa, Access/Renova group (AAR). TNK-BP is a vertically integrated oil company with a diversified upstream and downstream portfolio in Russia and Ukraine. The company‘s upstream operations are located primarily in West Siberia (KhantyMansiysk and Yamalo-Nenets Autonomous Districts, Tyumen Region), East Siberia (Irkutsk Region), and Volga-Urals (Orenburg Region). In 2009 the company produced on average 1.69 mboed (thousand barrels of oil equivalent per day). The independent audit confirmed that as of 31 December 2009 TNK-BP‘s Total Proved Reserves amounted to 11.667 billion barrels of oil equivalent, applying PRMS (formerly SPE) criteria. Proved Reserves constitute a Total Proved PRMS reserve replacement ratio of 329%. TNK-BP controls 675 thousand bbl/day in installed refining capacity, with principal refining assets located in Ryazan (near Moscow), Saratov (Volga-Urals), Nizhnevartovsk (West Siberia) and Lisichansk in Ukraine. TNK-BP operates a retail network of approximately 1,400 filling stations in Russia and Ukraine working under the BP and TNK brands. The company is one of the key suppliers to the Moscow retail market and is a market leader in Ukraine. The main activities are:   

exploration and production of oil and gas production of petroleum products and petrochemicals sales of manufactured products

In 2009 TNK-BP Holding joined the top 15 ranking of Annual Ranking of 250 Top Performing Global Energy Companies according to Platts. The company improved its position 10 points at once in comparison with 2008 – it moved from the 23 to 13 place. Address: 1, Arbat Street, Moscow, Russia, 119019 Phone: +7 495 777 77 07, +7 495 745 89 58 Fax: +7 495 787 96 68 Executive director: Victor Vekselberg

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NOVATEK Novatek is Russia‘s largest independent gas producer and the second-largest natural gas producer in Russia. Founded in 1994, the Company is engaged in the exploration, production and processing of natural gas and liquid hydrocarbons and had 4.96 billion oil equivalent barrels of proved reserves at the end of 2008. The Company‘s upstream activities are concentrated in the Yamal-Nenets Region, which is the world's largest natural gas producing area and accounts for over 90% of Russia's natural gas production and 20% of the world‘s gas production. In October 2009, the Company launched the second stage of Phase Two development at the Yurkharovskoye field, providing the Company with the potential to increase annual productive capacity at the field by seven billion cubic meters (bcm) of natural gas and approximately 600 thousand tons of unstable gas condensate. As part of the second stage development, the Company launched two additional processing trains for separating natural gas, enabling the field to reach annual natural gas and gas condensate production volumes of 23 bcm and two million tons, respectively. With the launch of the second stage, NOVATEK has the productive capacity to produce up to 44 bcm of natural gas per annum. In 2009, gross production for NOVATEK totaled 32.78 billion cubic meters of natural gas and 3,049 thousand tons of liquids. Natural gas production increased by 1.89 billion cubic meters, or by 6.2%, whereas gross liquids production increased by 463 thousand tons, or by 17.9%, as compared with the corresponding gross production in 2008. Contact information: Address: 12a, Nametkina street, Moscow, 117420, Russia Tel: +7 (495) 730-60-00 General Office Fax: +7 (495) 730-60-07 General Fax Chairman of the Management Committee, Member of the Board of Directors: Leonid V. Mikhelson

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ITERA Itera International Group of companies is one of the largest independent producers and traders of natural gas operating in the CIS and the Baltic states.Itera is a success in energy, gas processing, and construction works projects in Europe, Asia, and the USA. The Company also deals with real estate and the insurance business. Company was established in 1992. It has been involved in marketing natural gas since 1994. Itera is a private natural gas company in the CIS and the Baltic States that is experienced in exports of natural gas. It has nearly 150 representative offices, branches, and affiliated companies in Russia, the CIS, the Baltic States, Europe, and the USA. Itera has been developing the production of gas in the Yamalo-Nenets Autonomous Region of Western Siberia (Russia) since 1998.The Company has invested over $1 billion in the gas industry. Itera is the first private company to put gas fields into operation in the Far North of Russia: Gubkinskoye gas field (reserves of 399 BCM) in 1999, gas deposit (reserves are 407 BCM) of Vostochno-Tarkosalinskoye field in 2001), and Beregovoye (reserves are 325 BCM) in 2003. The total of over 100 BCM of natural gas has been produced by ITERA in its fields in Yamalo-Nentskiy autonomous region. Contact information: Address: 117209, ĐœĐžscow, Sevastopolsky Prospekt, 28, Bldg. 1. Tel.: +7(495) 411-8500, +7 (495) 788-8500 Fax: +7(495) 788-8502 Chairman of Board of Directors: Igor Viktorovich Makarov

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SURGUTNEFTEGAS Surgutneftegas is one of the Russian oil majors involved in oil and gas production and exploration, gas processing, power generation, output and marketing of petroleum products, petrochemicals and gas products. It accounts for almost 13% of the country‘s crude output and 25% of gas produced by domestic oil companies. Over many years, the company has been leading the industry in terms of exploratory and development drilling, as well as the number of production wells brought on stream. The company was the first in Russia to develop the complete cycle of gas production and processing, gas-based power generation, and output of finished products and petrochemical feedstock. Fifty-nine divisions of the company are involved in the whole range of prospecting and reservoir management operations, construction of facilities and pipelines, environmental safety, and process automation. Surgutneftegas‘ crucial competitive advantage lies in advanced petroleum production technology successfully applied by its own service subdivisions. Oil is supplied to Russian refineries and exported to CIS and Western Europe. The company‘s refinery Kirishinefteorgsintez, one of the largest in Russia, accounts for almost 9% of the country‘s refining throughput. The refinery produces 58 types of petroleum products with high-quality performance and environmental characteristics, including all types of motor fuels, aromatics, liquid paraffin, roofing and insulation materials, etc. Diesel fuel, jet fuel, roofing materials and bitumens produced by the refinery meet international quality standards. The Company carries out and supports the following activities in its gas sector:     

intra-field gathering, gas mains transport, consumer supplies via five gas distribution stations, and field and main gas pipelines totally covering 2,880 km; gas compression performed by eight transmission compressor stations and a gas injection compressor station; for the purpose of energy all stations are fitted with gas turbine drives; low-pressure gas utilization run by ten compressor stations of final separation stages; gas processing maintained by three processing units with total output of 7.2 bcm/year; power generation driven by 17 gas turbine power plants (GTPP) – in 2009 their total gas consumption exceeded 1 bcm – and 7 gas piston power plants (GPPP), which processed 38.5 mn cubic meters of gas last year.

In 2009, Surgutneftegas produced 14.03 bcm of associated petroleum gas (APG). In 2010, the Company plans to produce 13.8 bcm including 13.5 bcm in Khanty-Mansiysky Autonomous Okrug, 300 mn cubic meters in the Republic of Sakha (Yakutia), and 3 mn cubic meters in Yamalo-Nenetsky Autonomous Okrug. Contact information: Address: ul.Grigoriya Kukuyevitskogo, 1, bld. 1, the city of Surgut, Tyumenskaya Oblast, KhantyMansiysky Autonomous Okrug – Yugra, Russian Federation, 628415 Moscow Office of OJSC ―Surgutneftegas‖: ul. Myasnitskaya, 34, Moscow, Russian Federation Phone: +7 (3462) 42 70 09 (Integrated inquiry service), +7 (3462) 42 61 33 (Director General‘s Office) General Director: Vladimir Bogdanov

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TATNEFT Tatneft is one of the largest Russian oil companies, operating as a vertically integrated Group. The Group includes: — oil and gas production entities; — oil and gas refining entities OAO TANECO, Neftegaspererabotka Administration; — petrochemical production facilities; — enterprises for selling crude oil and gas, as well as oil, gas, and petrochemical products; — intracorporate stream of service structures. The main territory of the Company activity is the Russian Federation. The Company provides for the stable replenishment of its reserves. According to Miller & Lents, international consulting company, the volume of proved developed, undeveloped and undrilled oil reserves of OAO TATNEFT amounted to 861.9 million tons (6,139 million barrels) as of January 01, 2009. At the same time, the Company implements the strategy of an efficient reserves increase and expansion of the territory of its activities both outside the Republic of Tatarstan, as well as out of the Russian Federation. Annually, the Company increases the volume of oil production. TATNEFT owns most licenses for oil exploration and production in the territory of Tatarstan, and expands its resource base through deposits development in the other territories. The Company performs pilot operations for the development of extra viscous oil deposits. Along with strengthening of the resource base and increase of production volumes, the Company priority tasks include the following:   

development of oil and gas refining facilities expansion of sales markets for oil, gas and petrochemical products, expansion of the filling stations network under the corporate brand.

Contact information: Address: Lenin St. 75, Almetyevsk, Republic of Tatarstan, 423400, Russia Phone: +7 (8553) 307-001, 371-111 (directory inquiries) Fax: +7 (8553) 376-151, 256-865 General Director: Takhautdinov Shafagat Fakhrazovich Moscow Office Head: Yagafarov Azat Ferdinandovich Address: Tverskoy Boulevard 17, building 1, Moscow, 103104, Russia Phone: +7 (495) 937-55-78

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RUSSNEFT Today RussNeft is among top ten oil companies of the country. It comprises 21 producing enterprises, 2 oil refineries and its own distribution system of gasoline filling stations, located in 14 regions of Russia and CIS. The geography of "RussNeft" covers KhMAO, YNAO,the Tomsk Region, the Ulyanovsk Region, the Penza Region, the Volgograd Region, the Bryansk Region, the Saratov Region, the Kirov Region, the Orenburg Region, the Krasnodar Territory, the Republic of Udmurtia and the Republic of Belarus. The headquarters of the Company is situated in Moscow. More than 170 oil-gas fields are being under development. "RussNeft" NEP exceeds 600 mln.tons. Total amount of oilfields belonging to ―RussNeft‖ is 178. The production enterprises of OAO Oil and Gas Company ―RussNeft‖ are incorporated in four territorial-production groups: 1. West Siberian group 2. Ural group 3. Volga Region group 4. Central Siberian group Today the Company produces 14,2 mln. tons. The bulk of refining comprises 7,4 mln.tons. The Company has an up-to-date crude oil terminal with the volume of output up to 7 mln tons per year. The terminal is located in the Bryansk Region. The staff of the Company counts 20 thousands people. Contact information: Address: 69, Pyatnitskaya st., Moscow, Russia,115054, Теl.: (495) 411-6309 Fаx: (495) 411-6325 President of the Company: Mikhail Safarbekovich Gutseriev

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BASHNEFT Bashneft is the oldest oil producing facility in Russia; it makes up the basis of the industry in the Republic of Bashkortostan (Bashkiria), and provides one-fifth of the republican budget. Bashneft performs a complete cycle of prospecting for and production of oil and gas and marketing the products of their refining. It is among the top ten oil producing companies in Russia and develops 140 oil and gas fields in 27 regions of Bashkortostan and also in Tatarstan and Udmurtia. Its annual oil output exceeds 16 million tons. Its offices, branches and subsidiary enterprises function in big industrial centers of Russia and in the CIS countries. It also cooperates on a long-term basis with major companies of France, Britain, the U.S., Italy, Finland, Canada, Belgium and other countries. The main stockholder and owner is the Bashkir Open Joint Stock Fuel Company (63.72%) Organizationally, the Bashneft oil company is part of the Bashkir Fuel Company together with other oil refining, petrochemical and power-engineering facilities in the republic. The company has 46 departments, including the Ufaneftekhim, Novoil (Novo-Ufimsky) and Ufimsky oil refineries and also the Ufaorgsintex petrochemical facility. The total output of its refineries reaches 40 million tons of oil annually. Contact information: President of the company: Victor Gennadievich Khoroshavtsev Address: 30, Karla Marksa str, Ufa, Russia, 450008 Phone: +7 (347) 279-77-54, +7 (347) 279-75-58 Fax: +7 (347) 279-72-28, 279-73-87 In Moscow: phone +7 (495) 228-15-96, fax:: +7 (495) 228-15-97

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OIL AND GAS INDUSTRY SUPPLIERS ASSOCIATIONS MURMANSHELF Founders of Murmanshelf Association: Industry and Transport and Energy Ministry, Union of Industrialists and Entrepreneurs (Employers) of the Murmansk region, Northern Chamber of Commerce and Industry. Murmanshelf Association currently brings together the largest building, transportation, ship repair and engineering companies in the North-West of Russia: head branch "Ship repairing plant "Nerpa", JCS "Center of repair "Zvezdochka" - (GF "FSA "Nerpa" JSC "CA "Zvezdochka") JSC "Murmansk shipping company", JSC "Stroytransgaz", "Podvodrechstroy" FGU, "Stroygazkonsalting" Ltd.", etc. The Association also includes educational, scientific and research institutions of the region: Murmansk State Technical University, The Mountain Institute and the Institute of Economic Problems of Kola Science Center RAS, Khibinskiy Technical College. Some foreign members of Murmanshelf: D&F Group (Norway) , PEAB (Sweden) Reinertsen (Norway), Acergy Services (UK), Ramboll Storvik (Norway),Van Oord (Holland), Jotun Paints (Norway),VINCI (France), DnB Nor Monchebank (Norway), Technip (France) ,OIL INFORMATION AS (Norway) , Baker Huges (USA) , Bedriftskompetanse AS (Norway), Finstaship (Finland), TSCHUDI SHIPPING (Norway), ENTREPOSE (France), Maritime Logistica H.Grimm (Norway), REINERTSEN(Norway), Olen Betong (Norway) , Total (France), VB Sikring (Norway), INOKS (Slovenia), Salzgitter Mannensmann (Sweden) etc. Murmanshelf Association currently includes 230 members. The association gives a wide spectrum of services for the members:     

Development of manufacturing potential of local enterprises; Contribution to increasing the competence level of small and medium-size enterprises; Complex support and promotion of business projects of the Association members; Facilitation of contacts and development of cooperation between Association members and operators; Protection of rights, common interests and private of estate of Association members in public bodies and organizations incl. international ones.

Contact information: Address: 14, Vorovsky street, Murmansk Russia, 183038 Phone: +7(8152) 55-41-53, 55-41-54 Phone/Fax: +7(8152) 45-61-12, 45-03-93 Director General: Grigory Ivanovich Stratiy

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SOZVEZDYE Association of oil and gas suppliers Sozvezdye was founded in 2006 on the initiative of the Arkhangelsk regional Administration to unite the industrial potential of the region and participate in the oil and gas projects on the Arctic shelf, in particular Shtokman gas-condensate field development project. There is JSC PO Sevmash, JSC CS Zvyozdochka, Northern (Arctic) federal university in the Board of the Association. Ministry of industry, transport and communication of the Arkhangelsk region, Ministry of economic development, and also some other relevant ministries and departments in the Government of the Arkhangelsk region are actively involved in the activities of the Association as associated members. At present the database of the Association contains information about more than 180 companies, mostly from the Arkhangelsk region and the Nenets Autonomous Area, working in the spheres of shipbuilding and mechanical engineering, transportation and logistics, construction and other industrial sectors. The main objective of the Association is to maximize involvement of its member-companies in the Shtokman project, to attract of Russian and international companies to the Arkhangelsk region for establishment of production facilities, transfer of technologies and joint participation in oil and gas projects. Association Sozvezdye has developed strong business contacts with oil and gas operators JSC Gazprom, JSC Gazprom dobycha shelf, and Shtokman Development AG in terms of delivering information about potential contractors, selection of sites for the integrated logistic base, establishment of production facilities of service companies for the Shtokman project. Contact information: Address: 4, Lenin sq., office 1807, Arkhangelsk, 163000 Tel. +7 (8182) 28-69-30 Tel./fax +7 (8182) 28-69-10 Director: Sergey Smirnov

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SHIPBUILDING COMPANIES ADMIRALTY SHIPYARDS The principal direction of work of ―Admiralty Shipyards‖ is design, production and modernization of civil and naval vessels of various types. The company‘s business activities include:      

Shipbuilding, ship repair of vessels mostly of its own construction – tankers, submarines Production on outside orders of machine-building products: frames, springs, sections, compartments Production of metal and upholstered marine furniture Electroplating work Production of consumer goods: boxes for fishing tackle, spinning rods Handling on its own railway station of carriages and warehousing of goods of outside organizations, provision of tug services

Production capacities and equipment of the shipyard allow to build vessels that meet international requirements. Now surface shipbuilding of the shipyard is aimed first of all at construction of a tanker fleet. In 1994 the enterprise delivered to the Customer the first tanker ―Pulkovo‖ with deadweight of 28,4 thousand tons out of series of 7 ships. It is a modern ship with a cruising range of 10.000 miles, speed of about 15 knots, high level of control automation of ship's systems and machinery. In 1997 the shipyard started construction of tankers of ice class of 20 000 DWT, designed for simultaneous transportation of up to 4 different cargo grades. These tankers have been equipped with the latest automated ship's systems of world class. The tanker has double hull and is able to run in solid-ice of 0.5 m thickness at a speed of 1,5 to 2 knots. During recent years the shipyard constructed for oil company ―Lukoil‖ 5 ships of this project – ―Astrakhan‖, ―Magas‖, ―Kaliningrad‖, ―Saratov‖, ―Usinsk‖, which are working on the Northern Sea Route. In arduous ice conditions the tankers have confirmed high professional level of the company employees and workers. ―Admiralty Shipyards‖ successively keep specialization in the area of submarine shipbuilding. 298 submarines have been built here to date (including 41 nuclear submarines) as well as 68 deep-diving and underwater vehicles. A unique deep-sea research vehicle ―Consul‖ is the first Russian deep-diving vehicle of the third generation. The vehicle is capable of diving as deep as 6000 meters and working for 10 hours using a manipulator as well as lifting to the surface a load of up to 200 kg. The enterprise has obtained an international certificate of quality allowing to give customers firm guarantees of high quality of production and enhance competitiveness of the products in the world market. Having entered the third millennium, ―Admiralty Shipyards‖ are planning with confidence to take an active part in development of the Russian shipbuilding, rebirth of the naval glory of Russia. Contact information: Address: 203, Fontanka Emb., St. Petersburg, Russia, 190121 Phone: +7 (812) 714-8863, +7 (812) 494-79-43, 714-88-33 Fax: +7 (812) 571-1371 General Director: Aleksandrov Vladimir Leonidovich

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ALMAZ SHIPBUILDING COMPANY Almaz Shipyard is a modern enterprise of many years standing traditions in manufacturing the latest models of military technology. Almaz Shipbuilding Company is situated in the central part of Saint-Petersburg on Petrovsky island in the immediate vicinity of Finish gulf. It occupies the territory of about 165 000 sq.m including 50 000 sq.m occupied with workshops fitted with modern equipment. Production facilities allow to process up to 3000 tons of steel and up to 650 tons of aluminum a year. Personnel include more than 1000 people. Modern covered shipways allow the company to carry out the complete shipbuilding cycle. All hullconstruction works, mounting of equipment and armament are conducted under workshop conditions. Technical base of the enterprise enables to conduct all sorts of ship repair and modernisation simultaneously with shipbuilding. Ship are launched and hosted with the help of two floating docks of 3000 and 2500 tons payload capacity. Docks are used to hoist and roll ships to horizontal building berths which have more than ten building places. The shipyard is equipped well with machinery manufacture enabling production of all ship components including propeller shafts and other mechanical articles. Shipbuilding specialization of the company does not exclude accomplishment of complex machinebuilding orders: components of nuclear electric power stations, drill rig blocks and high-precision metal structures. Contact information: Address: 26, Petrovsky pr., 197110, St. Petersburg, Russia Phone: +7 812 235 5148 Fax: +7 812 235 7069 General Director: Grabovets Leonid Gennadievich

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BALTIISKY ZAVOD Baltiysky Zavod, JSC is one of the leading enterprises in the Russian shipbuilding industry. In 2006, the shipyard is celebrating its 150th anniversary. During this century-and-a-half period, the shipyard has delivered over 500 naval ships, submarines, and commercial vessels. Since the day of its foundation, the shipyard has been among the first to undertake new shipbuilding projects subsequently taken up by other yards. The shipyard built the first metal ship in Russia – armored gunboat the Opyt (1862), the first Russian submarine designed by Ivan Alexandrovsky (1866), the first armorclad Admiral Lazarev (1871), and the first naval submarine Delfin (1904). In 1920s Baltiysky Zavod was among the pioneers in the Soviet Union to begin building diesel-electric icebreakers, and in 1980s – heavy nuclear-powered missile cruisers of Project 1144 (the Orlan). Today, the shipyard's production facilities and equipment are capable of producing modern ships that meet all necessary international requirements. Baltiysky Zavod production capacities and the most modern equipment allow the shipyard to build and deliver turn-key ships and vessels. The shipyard‘s in-house steel manufacturing and engineering capacities make it possible to produce parts and components for the vessels built at the shipyard, which significantly reduces construction costs. Currently the Baltiysky Zavod shipyard specializes in construction of icebreakers and ice-classed vessels (with nuclear-powered propulsion, as well as conventionally powered), large commercial vessels for carrying various types of cargo, and naval ships. The company also manufactures a wide range of marine propulsion equipment and machinery for equipping ships built at the shipyard, as well as for supplying other yards. Baltiysky Zavod also manufactures heat exchanges for nuclear power plants and is a major producer of non-ferrous and core-mould castings. One of the most promising fields of the shipyard's activity is the construction of floating nuclear power plants. Over the recent years Baltiysky Zavod has delivered ships to customers from Russia, Germany, Holland, Portugal, Norway, Sweden, and other countries. Contact information: Address: 16, Kosaya Linia, St.Petersburg, Russia, 199106 Tel. +7 (812) 324-93-70 Fax +7 (812) 327-71-90 General Director: Fomichev Andrey Borisovich

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“KRASNOYE SORMOVO” ―Krasnoye Sormovo‖ Plant‖ JSC was founded in 1849 as a diversified enterprise for important state orders. For one and a half century of its operation the plant has built hundreds of shops and vessels of various purposes, from river barges to modern submarines. In various times the plant was building bridges, locomotives and railway cars, during the war – tanks and submarines, in peacetime – producing shipbuilding and machine building and metallurgy products, high quality electrodes. At present the company holds a good position on the domestic and international shipbuilding market. ―Krasnoye Sormovo‖ plant is an enterprise with well developed own production facilities, auxiliary shops and an own engineering centre. The main workshops: hull production workshop, erecting, mechanical, metallurgical workshops. Auxiliary workshops: repair-mechanical, repair-construction, electrical repair shops, gas supply facilities, transport shop. Hull production and erecting workshops ensure output of the main shipbuilding products. Mechanical and metallurgical workshops of the company produce the following types of products: •products for own shipbuilding; •products for retooling of production facilities, upgrade of the existing equipment and accessories; •goods for the agricultural industry (grinders, thickeners, groats mills); •spare parts for large machine building and power engineering plants. The engineering centre tackles all types of tasks in development and production maintenance of shipbuilding objects. The centre hires highly knowledgeable specialists and is equipped with modern design tools. At present the following projects of vessels are under development: - ―river-sea‖ navigation tanker with 5500 tons capacity with thrusters; - dry cargo motorship of unlimited navigation zone, with 6000 tons capacity; - ―river-sea‖ navigation dry cargo motorship with 5500 tons capacity; - started has been preparation for serial production of offshore platforms for exploratory and production shelf drilling and supply vessels for them. Contact information: Address: 1, Barrikad str, Nighniy Novgorod, Russia, 603950 Phone/fax: +7(831) 273-06-49 General Director: Nikolay Sergeevich Gharkov

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“NEVSKY SHIPBUILDING- SHIPREPAIR PLANT” ―Nevsky Shipbuilding- Shiprepair Plant‖ - one of the oldest enterprises of water transport in the northwest of Russia, is situated 40 km away from Saint Petersburg, in the place where the river Neva flows from Ladoga Lake. The activity Shipyard includes shipbuilding, ship repair and maintenance works. Nevsky Shipyard production capacities and equipment allow constructing vessels in accordance with all international standards. Advantageous location on the great navigation channel ―Volga-Baltic Waterway‖ allows to repair vessels quickly and effectively as well as to carry out maintenance works of the passing-by vessels. Nevsky Shipyard is acting under the class society survey: Russian Maritime Register, Russian River Register of Shipping (divisions of both registers are located directly at the plant), Lloyd Register of Shipping, Bureau Veritas, Germanisher Lloyd, Det Norske Veritas. The total number of people working at the Shipyard is 500 people. Being qualified and experienced specialists in shipbuilding and ship-repair, they can solve production problems effectively, and fulfill the projects in due time with the best characteristics. ―Nevsky Shipbuilding- Shiprepair Plant‖ is opened for cooperation with the Russian and foreign shipowners, the Navigation Companies, Designing and Subcontractural Organizations, the Suppliers of materials and equipment for shipbuilding and ship-repair. Contact information: Address: 2, Fabrichny Ostrov, Schliesselburg, 187320, Leningrad Region, Russia Phone: (812) 494-83-38 Director General: Vladimir Bazhenov

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PELLA SHIPYARD More than 10 years Pella Shipyard is the leading company in Russian tug building market. Tugs of PELLA's new generation are successfully operating in all main Russian harbours. High quality and modern techniques of PELLA's tugs were appreciated by customers from Norway, Italy and many other countries. Pella Shipyard is also famous for the shortest terms of delivery. Construction period from signing a contract to signing of a built acceptance protocol not exceed 12 months. Production: •

Serially build harbour tugs with 1 000 - 5 000 h.p.

• Pusher tugs intended for towing and pushing of non-self-propelled vessels (barges), including oil barges with cargo capacity up to 5000 tonnes at inland waterways and offshore sea areas • Multitask escort tug capable of performing a wide range of duties such as rescue, fire fighting and pollution control operations •

Different boat modifications: workboat, pilot boat, patrol boat, crew boat and others

• Closed type life boats of cable launching, free falling with launching-hoisting facilities for life boats and guard boats as well as release type life rafts Advantages of Pella‘s tugs o o o o o o

High manoeuvrable, economical and easy in piloting due to use of azimuth thrusters; High level of automation and centralized controls ensures safety and comfort of sail; From bridge to engine room, Pella tugs offer low noise, low vibration levels and conveniently located equipment; Equipment only from original world leading manufacturers; Comfortable places for work and rest of a crew; Operation in icy weather and brutal conditions. Pella tugs are built tough and ready for hard work.

Vessels built by PELLA harmonize modern unique technologies. Tugs and pilot boats are equipped by the world leading manufacturers, such as: Caterpillar, Cummins, Rolls-Royce, Desmi, Furuno, Heinen&Hopman and others. PELLA's vessels are capable to execute a lot of additional functions and tasks in different areas and under different weather conditions. Contact information: Address: 4, Tsentralnaya str., Otradnoye, Kirovsky district, Leningrad region, 187330 Russia Tel.: +7 (812) 315 3642, +7(812) 336 4066 Tel/fax +7 (81362) 442 91 First Deputy general director, technical director: Eugeny A. Shuvalov

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SEVERNAYA VERF JSC Shipbuilding plant «Severnaya verf» is one of the leading enterprises of the defense industry of Russia. «Severnaya verf» has been included into ZAO «United Industrial Corporation», which rules over the industrial assets (Moscow) since 2004. Navy ships and commercial vessels of different purpose are the main production of the yard. The yard has great experience in building such Navy ships as: corvettes, destroyers, trawlers, antisubmarine and patrol ships. Scientific research vessels and passenger vessels, timber vessels, trawlers, container ships and RO-RO vessels have been launched at the yard. «Severnaya Verf» is the only company in Russia that is experienced in building ships and vessels using three-dimensional mathematic model that has been developed in a special shipbuilding system. The yard has established good contacts with enterprises in Russia and in the CIS countries, with regard to the delivery of materials, equipment for building, repair and modernization of ships and vessels. The orders for delivery of components and equipment are placed almost onto 2 thousand enterprises of Russia. The land-to-building ratio of «Severnaya Verf» is rather low, allowing working on improvement of shipbuilding technologies by creating specialized workshops. The convenient location of the yard immediately by the outlet of the Sea Channel into the Gulf of Finland determines potential opportunities for further modernization and expansion of the yard. At present "Severnaya verf" possesses qualified human resources and technical capabilities, which allow building ships and vessels with maximum displacement up to 12 thousands tons and launching mass up to 7 thousand tons, carry out their repair and modernization. Nowadays the company possesses the total area of about 90 ha, among them the working area amounts to 60 ha. Contact information: Address: 6, Korabelnaya str, St. Petersburg, Russia, 198096 Phone.: (812) 324-29-01 Fax: (812) 783-76-78

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SEVMASH JSCo «PO «Sevmash» is the largest ship-building complex in Russia, the only shipyard of the country, the main task of which is atomic submarines building for Navy. The basic directions of activity are:      

military engineering manufacturing for Russian and foreign customers Navy; marine engineering manufacturing for oil and gas production; civil shipbuilding; manufacturing of equipment for mechanical-engineering, metallurgy, gas-and-oil and other branches of industry; atomic submarines and surface ships warranty repair and upgrading, utilizing; design of vessels, marine structures, marine equipment, equipment for oil and gas production.

Civil production manufacturing is focused on the oil and gas fields projects on the shelf of Arctic. The building of the first Russian marine ice-resistant stationary platform «Prirazlomnaya» – a unique construction for work in the Pechora Sea – is entering into its final stage. The priority project is objects manufacturing for Shtockman gas-condensate field in the Barents Sea. Sevmash specialists also take part in construction of surface fields of Russian North – manufacturing of industrial and accommodation modules, equipment for oil production, oil-and-gas pipeline and other objects inspection. The enterprise, occupying the area of more than 300 hectares, includes in its structure more than 100 subdivisions. More than 25,000 people work on the basic enterprise of Severodvinsk. Contact information: Address: 58, Arkhangelskoye shosse, Severodvinsk, Arkhangelskaya oblast, Russian Federation, 164500 Phone: (8184) 50-47-17; fax: (8184) 58-02-19; international fax: 47-789-16122 General Director: Kalistratov Nikolay Yakovlevich

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SREDNE-NEVSKY SHIPBUILDING PLANT Ust-Izhorskaya shipyard (known today as Sredne-Nevsky Shipbuilding plant (SNSP) was founded in 1912, and due to its reasonable layout and equipment it was among the most updated shipyards designed for the construction of steel vessels. Since 1937 the plant became mainly specialized on mine-sweepers. 1960 is known as the year of commencement for construction of a large series of basic mine-sweepers from low-magnetic steel. These ships were supplied to the Soviet Navy and exported to Libya, India and other countries. Today, the SNSP is the only shipyard in Russia, that has a 40-year history and is capable of building ships of low-magnetic steel. Being one of the leading enterprises in the maritime industry of Russia, FSUE Sredne-Nevskiy Shipbuilding Plant (SNSP) is ready to offer a wide range of services concerning shipbuilding, modernization and repair. SNSP is one of the oldest shipbuilding enterprises of Russia, but nevertheless the plant is modernizing its shipbuilding equipment rapidly, which allows company to combine tradition with all the latest technologies. Nowadays SNSP specializes in constructing mine sweepers of new generation with the latest mine-detection equipment being installed. SNSP works in collaboration with world and Russian leading design bureaus, armament and equipment producers. Extending through to modernization, maintenance and repair functions, SNSP‘s full-scope service offer is designed to meet all of customer‘s requirements at every stage. SNSP has a comprehensive portfolio of vessel types and ability to adapt existing designs to meet specific customer needs. The plant is ready to offer a wide spectrum of vessels from general purpose commercial vessels to high-speed catamarans, off-shore support vessels and military vessels. The plant posses very skilled, qualified and highly-trained team of naval engineers, trade personnel and management supported by a large and trusted contractor base who have technical expertise to assist in any problem. The plant also provides logistics support to meet customer‘s demand related to training, documentation, spares requirements, manpower planning, supply support and delivery. SNSP uses latest technologies and materials sourced through Russian and international vendors. Contact information: Address: 10, Zavodskaya str, Pontonniy, St. Petersburg, Russia Phone: +7( 812) 462-59-01 , +7 (812) 462-59-03 Fax: +7(812) 462-66-05 General Director: Vladimir Alekseevich Seredokho

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VYBORG SHIPBUILDING PLANT Vyborg Shipyard JSC is one of the largest shipbuilding companies of the North-Western Region of Russia with over 60-years‘ experience in shipbuilding. Since the Shipyard was founded (1948) there have been built more than 200 different vessels with deadweight up to 12000 tons, total displacement over 1,300,000 tons. Vyborg Shipyard employs more than 1500 people. Specialists of the Shipyard are certified by the leading international classification societies: Lloyd‘s Register of Shipping, Germanischer Lloyd, Bureau Veritas, RINA. The shipyard possesses unique for Russia production complex and water area enabling to built:   

offshore oil and gas drilling rigs vessels of different type dwt up to 9,000 t big-size steel & aluminium structures.

Building of semi-submersible drilling rigs for oil and gas exploration and production on sea shelf is one of the main activities of the Shipyard. For the latest 20 years Vyborg Shipyard has been a leading builder of drilling platforms for open seas in Russia. Future prospects:   

Construction of deep sea semi-submersible floating drilling & production platforms for exploration of oil & gas offshore fields Construction of stationary production platforms Construction of deep sea jack-ups of a new generation.

Partners of Vyborg Shipyard JSC are: JSC PO Sevmash, Sevmorneftegaz CJSC, Baltiiskiy zavod JSC, JSC Shipbuilding plant Severnaya verf, Design Office for Shipbuilding (DOS) Vympel, Central Design Bureau for Marine Engineering (CDB ME) Rubin, Krylov Shipbuilding Research Institute, ERA (Electroradioautomatika), etc. Among foreign partners in Norway there are: DOF Industry, Moss Maritime, etc. And in Finland Vyborg Shipyard JSC cooperates with Kvaerner Masa-Yards, Aker - Finnyards, etc. Contact information: 2b Primorskoe Shosse 188800 Vyborg Russia Phone: + 7 (813 78) 286-86, Fax: + 7 (813 78) 289-52 General Director: Valeriy G.Levchenko

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SHIPYARD "YANTAR" Shipyard "Yantar" was established on the base of the Konigsberg branch of Schichau Werft in 1945 after World War II finishing. Several generations of Kaliningrad shipbuilders put their labour in development of new enterprise and production of hundreds of ships. For more than 50 years of its history "Yantar" has become a famous builder and repairer of the modern war ships and high-effective civil vessels. Today "Yantar" is a modern and dynamically developing enterprise having wide experience in building and repair of vessels and ships of different classes and purposes. The shipyard has developed wide range of production directions: •

Commercial Shipbuilding

Naval Shipbuilding

Metal Structures Manufacturing

Shiprepair and Conversion

Shipbuilding from Aluminium Alloys

Mechanical Engineering Production

"Yantar" is the only Russian shipyard, which is situated in the South-East part of the Baltic region in the nearness of the largest industrial centers of Europe. The city of Kaliningrad is the only Russian ice-free port on the Baltic Sea and the centre of the most western region of Russia owing status of the Special Economic Zone with the developed transport infrastructure. Contact information: Address: 10, Transportny Tupick str, Kaliningrad, 236005, Russia Phone/fax: +7 (4012) 64 75 40, +7(4012) 47 22 43 General Director: Igor A. Orlov

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ZVYOZDOCHKA Zvezdochka, shipbuilding and ship repair centre, is modern multiproduct machine building enterprise. In 1959 Soviet decree granted Zvezdochka the task of repairing nuclear submarines, which began in 1962. By a 1967 decree, Zvezdochka was assigned responsibility for repairing the nuclear icebreaker, Lenin. In 1992, the plant was renamed the Zvezdochka State Machine-Building Enterprise. Zvezdochka operates two railway slips; a floating dock; three well-equipped docks; and repair, machine-building, and auxiliary shops. Since its establishment, Zvezdochka has repaired and modernized over 100 first-, second-, and third-generation submarines. To deal with dismantlement problems Zvezdochka has built three specialized areas for cutting submarine hulls. Zvezdochka is involved in a number of conversion programs, including the development of floating offshore drilling units; the retrofitting of fishing boats and research vessels; and the manufacture of propeller screws, blades, floating landing docks, pontoons, pontoon bridges, and some consumer goods. In October 1998, construction started on the first of 20 fishing trawlers, part of the Russian-Norwegian "Rebirth of the Arkhangelsk Oblast Fishing Fleet" program. Zvezdochka also repairs foreign-owned submarines, such as the Project 877 EKM diesel submarine owned by the Indian Navy. One of the enterprise‘s subdivisions is Ship-repair plant Nerpa. Located near Polyarny on the Kola Peninsula, it is one of five naval yards where nuclear submarines are dismantled. Main activities also include maintenance of nuclear submarines and Navy ships, shipbuilding for civil fleet and maintenance services, production of fishing equipment. Nowadays one of the tasks of the yard is building up and utilization of steel structures. Contact information: Address: 12, Mashinostroiteley passway, Severodvinsk, Arhangelsk region, 164509 Phone: +7 (8184) 59 60 68 (secretary), +7 (81842) 7 02 97 General Director: Nikitin Vladimir Semenovich

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ENGINEERING COMPANIES ICEBERG CENTRAL DESIGN OFFICE JSC TsKB ―Iceberg‖ (Iceberg Central Design Office) is the leading designer of icebreakers and ice ships, including those propelled by nuclear power plants. Since its founding days, the Central Design Office‗s designs were used to build more than 100 ships and vessels, including the world‘s first Lenin atomic icebreaker, atomic icebreakers of the Arktika type, remain to be the most powerful ones up to now, a series of transport vessels of the Amguema type, Mikhail Somov and Otto Schmidt Arctic/Antarctic research vessels, a large series of various modifications of small icebreakers, depot ships to support nuclear fleet. In cooperation with Wärtsilä Marine of Finland, Taimyr and Vaigach restricteddraft icebreakers have been built. The main lines of the Iceberg CDO‘s business are as follows: •

design of high-power Arctic icebreakers and port icebreakers;

design of icebreaking transport vessels;

design of multipurpose supply icebreakers to supply offshore oildeposit facilities;

design of multipurpose offshore vessels and offshore oildeposit facility support vessels;

• plants;

design of depot ships for technical and general servicing of the ships propelled by atomic power

design of research and hydrographic vessels.

The Iceberg CDO develops working engineering and process documentation for all kinds of the design works performed and provides engineering support of construction and testing of prototypes. Contact information: Address: 36, Bolshoi pr., St. Petersburg, Russia, 199034 Phone: +7 (812) 328-12-31, +7 (812) 323-36-09 Fax: +7 (812) 321-81-75 General Director: Makeev Anatoliy Nikolaevich

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GIPROSPETSGAZ JSC «Giprospetsgaz» is the oldest design institute of gas and oil industry in Russia. Company performs the full complex of design and engineering works: -geodetic, geological, hydro-meteorological and ecological survey; -gas dynamic and hydraulic analysis for gas pipelines ; -technical and economic optimization of pipelines with a help of modern software; -development of design documentation; -supervision of construction and development of design capacity. New direction of ОАО «Giprospetsgaz» activity is designing of oil and gas production and transportation facilities on continental shelf as well as designing of facilities for production of LNG and CNG and offshore transportation by tankers to remote markets. Contact information: Address: 16/13, Suvorovsky ave., St.Petersburg, Russia, 191036 Telephone: +7 (812) 578 76 00 Fax: +7 (812) 578 76 28 General Director: Sergienko Andrey Victorovich

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KRYLOV R&D INSTITUTE The Krylov Institute is the principal scientific institution of the national shipbuilding industry and has a status of the Russian Federation State Research Centre for naval commercial ships. This status comes due to both the high qualifications of the staff researchers and experts who have established their own worldrecognised schools of learning and the unique complement of experimental facilities combined with innovative in-house research methods and tools. Actually, the Krylov Institute has all key experimental facilities relevant for the following aspects of the marine technologies: Naval ship conceptual design studies (trend prediction, future programme planning, methods for military/economic efficiency evaluations, shipbuilding industry technical/economical evaluations, etc.)      

 

Hydrodynamics (sea keeping, performance, manoeuvrability , etc.) Commercial ship and offshore engineering conceptual design studies All kinds of marine propulsors (propulsive, acoustic and strength performances) Structural mechanics (static and dynamic strengths of ship structures, marine equipment and machinery strength, structural protections and armouring, shock and vibration endurance) Marine power plants and power generation, including nuclear, as well as nuclear and radiation safety issues Equipment, machinery and ship acoustic performance (calculation, measurement and monitoring methods, noise control tools, instrumentation, platform noise affecting sonar operation) Stealth technologies for low-signature ship design (calculation, measurement and control methods for magnetic, electric, extreme-low-frequency electromagnetic, radar, infra-red, laser and hydrophysical signatures), electromagnetic compatibility, protection of personnel from harmful effects of physical fields, ecological monitoring and engineering surveys. Generation and updating of the shipbuilding industry database of technical regulations and standards, certification and licensing, microfilming of engineering documents Practical design , including construction documents, for commercial vessels, naval auxiliaries and offshore structures

Today the Krylov Institute is a multi-disciplinary scientific centre that successfully works on the most challenging tasks of naval and commercial ship hydrodynamics and strength, defines marine power plant development avenues, performs extensive research and development on the reduction of electromagnetic emissions that affect humans and the environment. Company has very close relationships with Gazprom regarding shipbuilding and off-shore projects. Contact information: Address: 44, Moskovskoye Shosse, St.Petersburg, Russia, 196158 Phone: +7 (812) 727 96 47, +7(812) 727 93 48 Fax: +7 (812) 727 96 09 Science Principal & Director: Valentin Mikhailovich Pashin

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MALAKHIT Open Joint-Stock Company ―St.Petersburg Sea Bureau of Engineering "Malakhit" was founded in 1948 (Special Design Bureau 143) for design and development of new power units for submarines, and for designing of high-speed submarines with power units of this type. Today ―Malakhit‖ sea bureau of engineering is a leading country‘s enterprise designing modern general purpose submarines and deep submergence equipment for the Ocean exploration; it is also an acknowledged pioneer in development of new types of power units and high-duty vessel materials for submarines. Since 1989 the bureau has been working on equipment for development of the Arctic shelf. The production capacities of the enterprise manufacture a number of products in terms of development works of the bureau and develop and produce their pilot models for their start-up in mass production for serial orders. Contact information: Address: 18, Frunze str., St.Petersburg, Russia, 196135 Phone/fax: (812) 388-35-90, (812) 378-69-21 General Director: Vladimir Nikolaevich Pyalov

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PROMETEY Established in 1939 Central Research Institute of Structural Materials (CRISM) has become now a multispecialized state unitary enterprise which carries out orders of Federal ministries, home and foreign companies working in different branches of industry. The institute employment numbers nearly 1500 people. Scientists and specialists in materials science, metallurgy, nonmetallic and composite materials, welding of materials are the main body of the stuff. The institute in its activities is oriented on "large" industry and contributes the development of medium and small-scale enterprises, especially in the innovations field. FSUE CRISM ―Prometey‖ is a head organization of the brunch in the field ―Structural nano-materials‖ in the National Nano-technological network (NNN). CRISM ―Prometey‖, being a National Research Centre of RF, carries out fundamental and applied research work and developments to create prospective patterns of the new millennium engineering. Main directions of the institute activities: o o o o o

Hull metallic and nonmetallic materials for use in shipbuilding Materials for use in shipbuilding and machine engineering Materials for nuclear and heat power engineering Materials for the facilities of oil and gas production, transportation and refining Materials for the facilities of oil and gas production, transportation and refining

Contact information: Addresses: 49, Shpalernaya St., Saint Petersburg, Russia, 191015 Phone: +7 (812) 274-37-96 Fax: +7 (812) 710-37-56 Director General: Aleksey Sergeevich Oryshchenko

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RUSSIAN-FRENCH ENGINEERING JOINT VENTURE SEVMASH-DORIS Sevmash-Doris is a joint enterprise of a Russian company Sevmash and a French company DORIS Engineering established in 2009. Sevmash-Doris is supposed to develop a concept of the Shtokman field exploration, but for the Severodvinsk shipyard facilities. The partners do not eliminate a possibility of further works on development of the Kara Sea fields and participation in other international projects. The French DORIS Engineering specializes in designing of oil and gas equipment. Its track record includes development of the world‘s largest platform ―Hibernia‖. Besides, DORIS Engineering is the developer of one of the Shtokman field projects. The contact information will be provided after the interview.

RUSSIAN NORWEGIAN ENGINEERING JOINT VENTURE ZVYOZDOCHKA-AKER SOLUTIONS A joint Russian-Norwegian bureau developing offshore oil platforms will be established on the base of ―Zvezdochka‖ Ship Repair Center‖ (Severodvinsk). Its base will be the 176th ship repair yard of Arkhangelsk, part of the Ship Repair Center. Its establishment is assumed to take 1-1,5 years. The contact information will be provided after the interview.

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RUBIN Public joint-stock company ―Central Design Bureau for Marine Engineering ―Rubin‖ is a diversified and dynamically developing enterprise. Remaining the largest Russian design bureau for various purpose submarine design CDB ME ―Rubin‖ at present is successfully implementing the state-of-the-art techniques into the development of different scienceintensive civil projects. High scientific and engineering prestige, exceptional reliability in partnership relations allows the enterprise to involve leading Russian institutes and enterprises of the military and industrial complex in solving complex technical tasks and actively co-operate with foreign companies. The enterprise has available a highly qualified personnel possessing wide variety of specialities and has the highest level in the shipbuilding industry of modern computing hardware that allows to provide high labour efficiency and quality of developments. Since the late 80‘s of the 20th century the design of offshore oil and gas production structures is one of the directions of CDB ME "Rubin" activities. The enterprise possesses necessary licenses for offshore oil and gas production platform design, DNV Certificate verifying that CDB МE "Rubin" meets the requirements of Quality Assurance Standard ISO in terms of objects for hydrocarbon fields on the continental shelf and design of their components at all stages of the life cycle. The enterprise has accumulated the considerable experience of participation in the realization of different projects in this field: Prirazlomnoye Project, Shtokmanovskoye Project, Sakhalin-1 Project, Sakhalin-2 Project. Contact information: Addresses: 90, ul.Marata Saint-Petersburg, Russia, 191119 Telephone: +7 (812) 7135132 Fax: +7 (812) 7643749 Director General: Andrey A. Dyachkov

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SEVERNOYE DESIGN BUREAU JOINT STOCK COMPANY The Severnoye Design Bureau, a leading company designing surface ships in Russia, was founded on 22 April 1946. Throughout the Bureau's more than 55-year life a group of highly qualified naval architects formed there, which is capable to solve the most complicated tasks in the area of designing ships and vessels. The Bureau has worked out more than a hundred designs of different purpose ships and vessels ranging from 500-ton patrol boat to 26,000-ton heavy nuclear-powered cruiser, and from bulker to whaling boat. In general, more than 550 ships and vessels with the total displacement of about 1 million tons have been built by the Bureau's designs. All of them are notable for their seaworthiness, reliability and operation economy. Some of the vessels were exported. Within the last 15 years the Severnoye Design Bureau has developed designs of refrigerator vessels, trawlers, passenger vessels (SWATH vessel inclusive), environmental vessels with systems of water and atmosphere ecological monitoring, vessels for collection and integrated processing of waste oily water and solid wastes, a hospital vessel. The Severnoye Design Bureau takes part in the Russian Navy Revival programme. More than 20 pilot projects have been worked out and offered on approval. The ships and vessels designing process in the Bureau is most up-to-date and distinguished by use of new computer aids and software. The Bureau has all licences and certificates required for development of weapons and military equipment, namely: warships, boats, ships of special purpose, supply vessels, associated hardware and propulsion plants elements. The scientific and production potential of the Severnoye Design Bureau allows it to meet all the challenges of designing war ships and commercial vessels. Contact information: Address: Letter 2, Block 2, 6 Korabelnaya street, Saint Petersburg, 198096, Russia Tel: +7 (812) 784-82-07, +7 (812) 783-9434, +7 (812) 784-76-74, +7 (812) 784-73-44 Fax: +7(812) 783-12-77; +7(812) 784-83-12 General Director: Vladimir Ilich Spiridopoulo

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SHIPBUILDING & SHIPREPAIR TECHNOLOGY CENTER Joint stock corporation "Shipbuilding & Shiprepair Technology Center" is one of the major research institutions in Saint Petersburg and a leading center of shipbuilding technologies in Russia. The Center has status of State Scientific Center of Russian Federation and carries out fundamental and exploratory research in the field of creation of modern technologies for shipbuilding and engineering sectors, including those with use of highly effective power sources and new physical phenomena. The Center takes part in development and implementation of large-scale investment project. JSC "SSTC" today is a multi-functional research and production complex. It incorporates research laboratories, design and construction divisions, dealing with creation and modernization of shipbuilding yards waterdevelopment facilities and engineering enterprises, creation of on-shore bases for marine objects, design and manufacturing of ship fittings, design of fishing and fish-processing vessels, special-purpose vessels, as well as production facilities for manufacturing of designed equipment. Contact information: Address: 7, Promyshlennaya Street, St. Petersburg, Russia, 198095 Telephone: +7 (812) 786 05 22 Fax: +7 (812) 786 04 59 General Director: Vladimir Dmitrievich Gorbatch

Sea_Cluster.Final Report. Finpro.2011  
Sea_Cluster.Final Report. Finpro.2011  

Sea_Cluster.Final Report