Sevmash learns hard lesson from Odfjell case

When Sevmash concluded the agreement with Odfjell, several miscalculations were made regarding the costs and complicity of the project. Chemical tankers had never been built in Russia before and Sevmash therefore lacked the necessary experience in this type of project according to website Ahrperspektiva.ru.

In 2005, at the same time as construction of the first tanker started, Sevmash was also involved in several other large projects; modernization of the aircraft carrier Admiral Gorshkov for the Indian Navy, construction of the first Borey-class nuclear submarine and construction of the drilling platform Prirazlomnaya.

All these orders meant the shipyard had to prioritize its work and, taking into account all the complications with the Odfjell order, the shipyard most probably chose to concentrate on domestic contracts first.

In spite of the $90 million prepayment and bank credits Sevmash has to pay back, and the $43 million fine, some good has come out of this case. Sevmash has decided to continue construction of the tankers, and will therefore be the first Russian yard to have such experience while Russia will get its own fleet of modern chemical tankers which will be needed when development of the Shtokman gas field starts.

In a press release from Odfjell, the shipping company said it was seriously disappointed about the damages awarded. It claimed the figure of $43.76 million was but a fraction of the value of its lost bargain and of its trading losses. This is despite winning the main point, that of Sevmash being guilty of wilful misconduct.