COLUMN | Timing is everything: Finarge, Sevnor, Gazprom and Nord Stream 2 [Offshore Accounts]
It is often hard to untangle luck from business genius, and coincidence from strategy.
In 2013, Italian owner Rimorchiatori Riuniti’s offshore unit Finarge ordered a ship of beauty, a Moss 919 design anchor handler from a Korean shipyard called SPP Shipbuilding for US$60 million.
Built with 21,760 brake horsepower from four main engines, an expected 250 tons of bollard pull, full Special Purpose Ships Code compliance, and all the bells and whistles, the AHTS was to be named AH Genova. The vessel was contracted for delivery in the third quarter of 2014.
AH Genova seemed ideal for Finarge’s core Brazilian and North Sea markets, exactly when rates were sizzling and the company had just taken delivery of the AH Varazzi, a smaller UT712 design 19,000bhp AHTS with 220 tons bollard pull.
Korean misfortune saves Italians
Unfortunately for SPP, the yard had never built an anchor handler before, and the shipbuilding team proved unable to meet the contracted delivery date.
In late 2014, as SPP was fumbling over how to finish the ship on time, the oil price collapsed and North Sea spot market earnings slumped – the great offshore boom was over.
Suddenly, the Korean yard’s problem was the Italians’ opportunity. Rimorchiatori Riuniti exercised its right to cancel the contract due to late delivery in mid-2015, demanded its deposit back and walked away, a move which saved the company a massive writedown on the ship, and four years of losses on the unit.
In late 2019, the creditors of Emas Offshore reportedly sold a similar anchor handler Lewek Teal (built 2012) to POSH for less than $6 million at auction in Walvis Bay, so Finarge had dodged 90 per cent value destruction. Bellissimo!
Russians, Cypriots and/or Norwegians pick up a bargain?
Someone saw opportunity in SPP’s distress however. In 2016, the partially built hull and forty containers of equipment were sold by SPP to the Russian-connected owner Sevnor, headquartered, predictably, in Cyprus, but also with a management company in Norway. Not much is known about the ownership of Sevnor, although VesselTracker.com states (see here) that one of the owners is Gunnar Nordsletten, a Norwegian living in Russia.
Nordletten’s father was Norwegian ambassador to Russia from 2000 to 2008 (according to investigative journalists at OCCRP here) and Nordletten himself was involved with former Moldovan Prime Minister Ion Sturza in an offshore company exposed in the Panama Papers investigation in 2015 (here). Ion Sturza has denied any wrongdoing.
Sevnor towed the unit and the equipment to Tersan Shipyard in Turkey for completion, announcing that the former AH Genova would be finished a year later. It wasn’t. 2019 was the best year for anchor handlers in the North Sea since 2014, with spot rates averaging over $30,000 a day, but still the hull remained in Turkey, incomplete.
Imagine our surprise then, when we read (here) that Sevnor was finally going to deliver its largest and newest vessel in summer 2020, now renamed Sayan Prince and repainted in Sevnor’s navy blue livery and branded with the company’s narwhal logo. The Sayan Mountains are in southern Siberia.
What prospects for Sayan Prince?
From a timing point of view, spending more money on Sayan Prince seemed to be a pretty wretched decision. March saw anchor handling rates and utilisation in the North Sea enter a sustained slump, with Maersk chartering its 23,000bhp Maersk Lancer and Maersk Lifter at under $8,000 each to prelay anchors for the rig Ocean Patriot in early May.
With rigs being re-delivered from contracts to be stacked, the oil price languishing under $30, and Diamond Offshore joining McDermott and Hornbeck in Chapter Eleven bankruptcy protection (see here) one can’t imagine Sevnor has many prospects for the vessel.
Sevnor’s secret sauce
Sevnor has a long history of co-operation with Tersan and a recent history of buying distressed assets and then selling or chartering then. The company’s first large PSV Sayan Princess was delivered from the Turkish yard in 2013 (video here) and in 2017, Sevnor bought the partially finished ice class 1A MPSV Troms Polaris.
This has also been ordered at the yard by Tidewater, in the aftermath of the American company’s disastrous acquisition of Troms’ fleet of six PSVs for the incredible price of $395 million in 2013 (here). The ship was delivered by Tersan in 2018 and initially traded on the North Sea spot market as Sayan Polaris, alongside Sayan Princess.
To Russia with love – success with Gazprom
Then, in November 2019, a subsidiary of the Russian state gas company Gazprom announced it had chartered Sayan Polaris for operations on the Prirazlomnoye project in the Barents Sea working out of Murmansk (see here).
The charterers reported that, “the vessel has been modernised by specialists at Marine Arctic Geological Exploration (MAGE) to operate under the challenging environmental and climatic conditions of the Prirazlomnoye project, [its] icebreaking capacity having been enhanced, passenger capacity increased, and a special crane and emergency oil-spill-response equipment installed.”
This was not the first co-operation between Russian entities and Sevnor. When the purchase of the hull of AH Genova/Sayan Prince was first announced in 2016, it was reported that the company already owned two ice-class cargo ships that were sailing between Murmansk and Yamal, the site of a major Russian LNG project.
Earlier, one of the first charters for Sayan Princess had been a three month fixture to Gazprom in Russian waters in 2014 (reported here). Around the same time, Simon Møkster Shipping announced it had also chartered four of its offshore vessels to Sevnor for operations with Gazprom in Russia (here). This was just when Washington announced the first American sanctions on the Russian oil sector.
Bottom feeders for old UT722s or strategic assets?
In 2017, Sevnor bought two large 15,000bhp anchor handlers of UT722 design, both built in the late 1990s in Norway, and both laid up. These were Olympic Poseidon, purchased from Nordea Bank in February, as part of the restructuring of Olympic Shipping, which Sevnor renamed Sayan Cloudberry; and Stril Power, bought from Simon Møkster, which it renamed Sayan Power.
Miraculously, no sooner had Sevnor purchased Olympic Poseidon/Sayan Cloudberry in February 2017, saying that the ship would be managed by Høyland Offshore, the managers of Sayan Princess, upgraded to UK Standby Class, and offered on term contracts in the North Sea, than the company announced it had flipped the anchor handler and doubled its money, according to industry press. The buyers? Unnamed Russian interests, which renamed the ship Umka. Umka is now operating out of Murmansk, like Sayan Polaris.
In May 2018, Sayan Power followed Sayan Cloudberry/Umka to Russia, when the ship was bareboated to…Russian company MAGE on a five-year deal, and renamed Almaz under the Russian flag.
Even bigger Bourbon duo
Gambling on the completion of Sayan Prince wasn’t enough. In February, almost at the same time as announcing the exciting new delivery of the former Finarge ship from Tersan, Sevnor embarked upon two more purchases.
Sevnor had tripled its bet on the deepwater anchor handing segment just when when oil prices were wobbling ahead of the crash in March. It snapped up two very large AHTSs from the former Bourbon fleet, built in 2003 in Norway to the UT722LX design, but laid up in the fjords since 2016: 20,000bhp Bourbon Borgstein and Bourbon Surf. The ships will be renamed Sayan Lord and Sayan Duke. Broker’s reports state that the units were owned by the banks, and that Sevnor paid about $5 million en bloc.
On the face of it, this seems like commercial madness. There were thirty large anchor handlers laid up in and around the North Sea, excluding Bourbon Borgstein and Bourbon Surf, when Sevnor announced the deal in February. At least one more unit has since been cold stacked since then. With the collapse in oil prices in March the business case to complete Sayan Prince and spend millions docking and renewing class on Sayan Lord and Sayan Duke seemed insane. Unless, maybe there was a project which Sevnor could access with a friendly client?
Is there a Nordstream opportunity?
So what projects might require the use of large anchor handlers? And what offshore projects are there which might involve the Russian state entities with which Sevnor has enjoyed so much success in the past six years? Hmm. Let’s think about that.
We can observe that Gazprom’s 55 billion cubic metre per year capacity Nord Stream 2 pipeline between Russia and Germany remains unfinished. Contractor Allseas suspended work just before Christmas last year when the USA issued sanctions targeting its pipe-laying vessels. This resulted in the Swiss-Dutch offshore giant halting its work on the final section of the pipeline with its huge installation vessel Pioneering Spirit, and withdrawing its equipment and all its chartered support vessels from the Baltic under heavy legal and political pressure.
As a result, everything stopped on the main pipeline, cutting off a major source of export revenue for Gazprom. Nord Stream’s management has maintained that all other work, including completing landfalls and offshore works for stabilising the pipeline, are continuing as planned, but it is not clear how it can complete the job. More than 2,300 kilometres of the pipeline had been laid when the suspension kicked in, leaving just 160 kilometres to go.
After Allseas, who does the work?
The main hurdle to completing Nord Stream 2 is finding a construction vessel and a support spread able to complete the pipe-laying operations in line with the terms of permits issued by Danish and German authorities.
Russian state-owned vessel Akademik Cherskiy could be suitable to complete the work, and the vessel sailed from Nahodka on the Russian Pacific coast in January and approached Danish waters on May 2, a move widely watched by American strategists (see here and here).
Additionally, the moored Russian pipelayer Fortuna was also in Denmark, and Platts speculated that this vessel could be used, which would, of course, require a contingent of anchor handlers to assist in its pipelay activities as well (here).
Nord Stream 2 refused to confirm whether Akademik Cherskiy and/or Fortuna would be involved in completing the project, and said it would make public its plans “in due time”. Of course, both Akademik Cherskiy and especially Fortuna need a spread of high specification ships to support their operations.
That’s where Sevnor could come in (hypothetically) as a very useful strategic partner at exactly the time the company has bought new vessels in what seemed a massive speculative punt. This is pure speculation, of course, and the company’s past work for Gazprom is not a guide to future participation in Nord Stream 2, obviously.
However, timing is everything, as Finarge showed in its deft exit from the new building in 2015. Whilst Sevnor may appear to have mistimed the North Sea spot market badly by acting in February, its timing would be a happy accident for Gazprom, if the Russian company fortuitously needed anchor handlers for Nordstream operations.
Good luck or business genius, pure coincidence or planned strategy? Time will tell.
More corporate information on Sevnor is here: http://cy-check.com/sevnor-limited/353399.html
The Sevnor fleet list is here: https://sevnor.com/en/fleet-2
MAGE website is here: http://mage.ru/en/about/
The pre-sanctions project plan for Nordstream 2 can be viewed here: https://www.nord-stream2.com/media/documents/pdf/en/2018/10/leaflet-construction-pipeline-en-201809.pdf
Marine Traffic location for Fortuna is here: https://www.marinetraffic.com/en/ais/details/ships/shipid:4677206/mmsi:273395690/imo:8674156/vessel:FORTUNA
Location for Akademik Cherskiy is here: https://www.vesselfinder.com/vessels/AKADEMIK-CHERSKIY-IMO-8770261-MMSI-273399760
This anonymous commentator is our insider in the world of offshore oil and gas operations. With decades in the business and a raft of contacts, this is the go-to column for the behind-the-scenes wheelings and dealings of the volatile offshore market.