2008-02-21
The Norwegian shipping major Odfjell has cancelled its contract with the Sevmash shipyard in Severodvinsk, Arkhangelsk Oblast, over the construction of a series of chemical tankers. The reason is serious delays and cost overruns with the construction of the vessels.
The cancelled contract could seriously harm the Russian shipyard’s reputation both domestically and abroad.
The agreement, which included up to 12 tankers, was signed in 2004 and promoted as an historic deal in Norwegian-Russian industrial relations. The contract was worth 500 million USD.
-We are very disappointed, company leader Terje Storeng says to newspaper Dagens Næringsliv. He adds that the Russian shipyard has acted with disrespect as well as a lack of will to meet the contract conditions.
The cancelled contract is another blow to the reputation of the Russian shipyard, world famous for its construction of nuclear-powered submarines. From before, the shipyard is struggling to overcome a crisis in its relations with the Indian Navy, following delays and cost overruns with an aircraft carrier, as well as a diesel-powered submarine.
–They have shown no will to try to understand that this is a commercial project. They have deliberately sabotaged and delayed the project, Mr. Storeng maintains to DN.no
“Following serious delays in the construction process, combined with demands for further price increases from the Yard, continuous cooperation problems as well as protracted negotiations, Odfjell decided today to serve formal notice of cancellation to Sevmash”, today’s press release from Odfjell reads.
It remains an open question how much compensation Odfjell will demand from Sevmash. The case could end up in court should the Russian shipyard not agree to Odfjell demands.
The Sevmash shipyard has long promoted its capacities in connection with the development of oil and gas projects in the Barents Sea, including the Shtokman project. The relations with Odfjell, as well as the Indian Navy, is likely to seriously hamper the company’s chances for new commercial contracts in the sector.