Narrative
Full Description
Project narrative
In October 2018, China Development Bank (CDB) and Vnesheconombank (VEB) — a Russian state-owned development corporation — signed an RMB 4 billion loan agreement for the Icebreaking LNG Tankers Acquisition Project. VEB then on-lent the proceeds of the loan to LLC SSK Zvezda (a special purpose vehicle owned by PJSC NK Rosneft). The borrowing terms of the loan are unknown. The purpose of the project is to facilitate the construction and acquisition of a fleet of 15 icebreaking liquefied natural gas (LNG) tankers for LLC SSK Zvezda. The Arc7 ice-class LNG tanker fleet will form the core of the Arctic fleet for transportation of LNG from Novatek’s Arctic LNG 2 project (in Gydan Peninsula within northern Siberia) and ensure year-round navigation along the Northern Sea Route including its Eastern part throughout the year. The vessels, which are designed to navigate the complicated ice conditions of the Northern Sea Route, will supply LNG to the Asian Pacific region and boost the development of the Russian shipbuilding industry. These tankers will have increased icebreaking and maneuvering characteristics than the existing fleet used by Novatek’s Yamal LNG project. The carriers will be registered under the Russian Federation and operated by the Russian crew. The new fleet of 15 Arc7 ice-class tankers will be owned and operated by SMART LNG LLC (a joint venture between Novatek and Sovcomflot) and Arctic LNG 2 LLC (a subsidiary of Novatek). The tankers will be used for long-term time charter (lease) contracts between Sovcomflot Group, SMART LNG LLC, and Arctic LNG 2 LLC. On December 17, 2019, VEB disbursed the first, $66 million loan tranche to LLC SSK Zvezda. A steel cutting ceremony for the lead (pilot) Arc7 ice-class LNG vessel was held in November 2020. A steel cutting ceremony for the second vessel in the fleet took place two months later (January 2021). Then, on April 13, 2021, construction of the third vessel commenced. A metal cutting ceremony for the fifth vessel (Star SSC) took place in September 2021. VEB also disbursed funding a year earlier (September 2020) for the construction of the last ten vessels.
Staff comments
1. The Russian project title is строительства нефтяных и газовых танкеров на верфи «Звезда» or «Поставка 15 ледокольных танкеров-газовозов в рамках реализации проекта «Арктик СПГ 2». 2. LLC SSK Zvezda is also known as “Zvezda” Shipbuilding ComplexLimited Liability Company, Zvezda Shipbuilding Complex, and PAO Zvezda. It was established on December 17, 2015. In March 2019, the U.S. Treasury imposed sanctions on LLC SSK Zvezda for Russia’s aggression toward Ukraine. 3. PJSC NK Rosneft, which is also known as Rosneft, is a Russian state-owned oil company. 4. On November 1, 2017, China Development Bank (CDB) signed a Memorandum of Understanding with Novatek regarding the Arctic LNG 2 project. The purpose of this project is to create a liquefied natural gas (LNG) facility consisting of three trains, each using concrete gravity-based structures. The LNG facility will be located in the Gydan Peninsula in Siberia. Upon completion, its expected annual LNG production capacity is 19.8 million metric tons per year. A special purpose vehicle (SPV) and project company — called Arctic LNG 2 LLC — has been established to finance, design, implement, and operate this project. In September 2020, a group of lenders — including France’s Bpifrance, Germany’s Euler Hermes, Italy’s SACE, Russia’s Sberbank, China Development Bank (CDB), and the Japan Bank for International Cooperation (JBIC) — expressed interest in financing the Arctic LNG 2 project. CDB is expected to offer a $5 billion loan in support of the $21 billion project (as captured via Record ID#67091). The project's equity partners include France's Total, China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC), and the Japan Arctic LNG consortium made up of Mitsui & Co and state-owned JOGMEC, formally known as Japan Oil, Gas and Metals National Corporation. 5. This RMB 4 billion CDB loan is not included in the China’s Overseas Development Finance Dataset that Boston University's Global Development Policy Center published in December 2020.