COLLABORATIVE
PROJECT OF
THE TERRITORY
OF PROSPECTS
A special project about the key region for the Russian shipping industry, marine oils and other oil products
&
COLLABORATIVE
PROJECT OF
COLLABORATIVE

PROJECT
THE TERRITORY
OF PROSPECTS
A special project about the key region for the Russian shipping industry, marine oils and other oil products
&
COLLABORATIVE PROJECT OF
For lots of people, the Far East means red caviar, crabs, right-hand drive cars, volcanoes and geysers. At the same time, the Far East is much more than just a stunning landscape, exotic fauna or the Asian goods dominance. Thanks to the great economic, resource, and geopolitical potentials of the region, a number of industries, including shipbuilding and shipping, are receiving a powerful impulse for their growth.
Growth Potential
Потенциал
для роста
The Far Eastern ports are significant for the economy both of the region and the whole country, first of all, due to the geographical position and their transport and logistical capabilities. The Pacific ports are close to the rapidly developing countries of the Asia-Pacific region (China, Japan, South Korea) which Russia seeks to strengthen its trade, economic and political ties with. Oil, coal, aluminum, timber, fish, and seafood are exported and transported for domestic needs of Russia through the ports of the Far East. Cargoes from Russia go to more than 25 countries of the world through the ports of the region.

There has been a steady increase in traffic along the Northern Sea Route (NSR) in the last several years. 10.5 million tons of cargo excluding transit vessels were carried along the route in 2017. According to the forecasts, the cargo traffic on the NSR will grow almost 10 times and will reach 80 million tons per year excluding international through traffic by 2029.
Cargoes from Russia go to more than 25 countries of the world through the ports of the region
Cargoes from Russia go to more than 25 countries of the world through the ports of the region
The President of Russia called the development of the Far East as "a national priority for the entire 21stcentury" and his words have already materialized into a special state program. Trillions of rubles have already been invested in the region's economy.
The creation of special business incubating areas such as two dozen TADs (Territories of Advanced Development) and the Free Port of Vladivostok in the Far East was the most powerful incentive for investment inflows, both from the federal budget and from abroad. The attractiveness of the region for investors has grown several times due to a number of benefits granted by the Russian government to those who develop these areas. Such benefits include reduced taxation, simplified customs procedures and a number of other preferences for the residents. The Far East attracts immigrants from other regions of Russia owing to the federal program "Far Eastern Hectare." According to the initiative, any citizen has the right to get one hectare of land for building a house or starting a business.
Law and the New Order
Закон
и новый порядок
Cabotage — is the transport of goods or passengers between two places in the same country by a transport operator from another country.
Flag of convenience — is a business practice whereby a ship's owners register a merchant ship in a ship register of a country other than that of the ship's owners, and the ship flies the civil ensign of that country, called the flag state.
On December 29, 2017, the President of Russia signed an Act broadening the concept of 'cabotage' in the Merchant Shipping Code to strengthen country's position in the Arctic and to put Russian shipping in a more advantageous position as compared to foreign companies. The Act assigns an exclusive right to transport sources of energy through the Northern Sea Route (NSR) to the Russian fleet, and expands the list of activities for which vessels under the Russian flag have an advantage offshore in the Russian Federation.

These include pilotage, storage of oil and oil products, natural gas (including LNG), gas condensate and coal, if such storage is carried out on a vessel offshore in the NSR. Now, a significant share of the world tanker fleet goes under 'convenient' flags of Liberia, Cyprus, Marshall Islands, etc.
However, the law allows exceptions. The Government of Russia has the right to make decisions about transportation of oil and oil products engaging foreign-flagged ships, if this does not go in contradiction with the general principles and norms of the international law or treaties of the Russian Federation.
The shipbuilding complex "Zvezda" has made contracts for 24 vessels in the Far East. They load the shipyard 100% until 2028
The shipbuilding complex "Zvezda" has made contracts for 24 vessels in the Far East. They load the shipyard 100% until 2028
Following the aforementioned Act, the Ministry of Industry and Trade prepared another significant package of amendments. Its main idea is to grant the implementation of coastal, icebreaker, pilot and a number of other works to the ships not only under the Russian flag, but also built exclusively at the Russian shipyards. The authors of the document are concerned with the fact that there are too many ships built abroad going under the Russian flag. It is estimated that over the past five years, the right to go under the flag of the Russian Federation was granted to more than 1,100 vessels, while domestic shipyards have not been loaded even in a half.

The second package of amendments has not been adopted yet, but many of the Russian shipyards have already been provided with orders for many years to come. For example, the total portfolio of the United Shipbuilding Corporation includes orders for 15 years in advance for more than 1 trillion rubles. The shipbuilding complex "Zvezda" has made contracts for 24 vessels, works on conclusion of 15 contracts are in progress which will load the shipyard 100% until 2028.

Вектор
развития
Vector of Development
Over the next 10–12 years, the Far East is expected to become a key region for the Russian shipping industry. One of the reasons is the active development of its economic ties with the countries of the Asia-Pacific region, and as a result, the displacement of Russian traffic flows to the East. Temporary trade restrictions of the Western countries are the second reason to look in the Asian direction. The implementation of the package of measures for development of the Russian Arctic and its main traffic artery – Northern Sea Route – as an international transport corridor is another important factor.
Russia may become one of the full participants of the international transit market in Asia
Russia may become one of the full participants of the international transit market in Asia
 The projects of the International Transport Corridors Primorye-1 and Primorye-2 have already been developed to strengthen transit capacities of the Far East. The corridor Primorye-1 connects Chinese Harbin, the capital of Heilongjiang Province, with Russian ports in Vladivostok, Nakhodka and Vostochny in Primorsky Krai. Primorye-2 is a route from the Chinese border city of Hunchun to the nearby Russian ports Posyet and Zarubino. Thanks to these projects, Russia may become one of the full participants of the international transit market in Asia.

There are 22 Russian seaports in the Far Eastern basin. Bulk liquids such as crude oil and liquefied gas form the greatest share of the goods transshipped in the region. The largest fleet in terms of numbers is the fishing one (551 units). Vessels of this type exceed half of all other sea transport registered in the ports of the Far East. The tanker fleet is the second in numbers (165), then goes dry cargo (90) and refrigerators (68).
The experience of communication with the representatives of foreign shipping companies shows that not all of them are well informed about the port infrastructure in the Far East, and underestimate it by mistake. Meanwhile, Vladivostok, Nakhodka, Vostochnyand other ports of the Far East are modern hubs with a well-developed supply market, where high-quality marine oils, fuels and supply services are available all year round at a high international level.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
The experience of communication with the representatives of foreign shipping companies shows that not all of them are well informed about the port infrastructure in the Far East, and underestimate it by mistake. Meanwhile, Vladivostok, Nakhodka, Vostochnyand other ports of the Far East are modern hubs with a well-developed supply market, where high-quality marine oils, fuels and supply services are available all year round at a high international level.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
The economic development of the Far East and the 8-day visa-free entry granted to those visiting the Free Port of Vladivostok from 2016 shall provide conditions for tourist traffic to the Far East region from abroad. This will affect the work of both the air gateway and the seaports, where no excitement has been observed so far. In 2017, cruise ships entered the port of Vladivostok only 14 times, bringing 13 thousand tourists. In comparison, tourist vessels moored 250 times and brought more than 560 thousand passengers in the port of St. Petersburg during the summer navigation of the same year.

Far Eastern ports host fishing vessels, tankers and dry cargo ships more often than tourist ones, demonstrating a stable and significant increase in ship calls. In 2017, traffic in the ports of the Far East grew by 25%. There also was a significant increase in goods transshipment in most of them. According to the "Strategy for the development of the sea port infrastructure of Russia until 2030", developed by FSUE 'Rosmorport' and commissioned by the Ministry of Transport of the Russian Federation, in the period from 2015 to 2025 the capacity of the Far Eastern ports will grow to almost 40% and will be up to more than 340 million tons.

With the increase in port capacity, an increase in traffic should be expected, and at the same time, an increase in market demand for ship supply products and services. The management of Gazpromneft-Lubricants, one of the largest players in the national marine oils market, commended the potential of the region, having made the development of the marine oils business in the region one of its priorities.
In 2012, when Gazpromneft-Lubricants started developing its marine oils business, the company delivered its first batch of products manufactured in Russia to the city of Petropavlovsk-Kamchatsky in the Far East. Now Gazpromneft-Lubricants is closely monitoring the regional marine supply trends and highly assesses the importance of the Far East for the Russian shipping.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
In 2012, when Gazpromneft-Lubricants started developing its marine oils business, the company delivered its first batch of products manufactured in Russia to the city of Petropavlovsk-Kamchatsky in the Far East. Now Gazpromneft-Lubricants is closely monitoring the regional marine supply trends and highly assesses the importance of the Far East for the Russian shipping.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
Reliability and Quality
Any shipowner or charterer may suffer losses from half to tens of millions rubles per day due to a commercial vessel's one day downtime. Such large amounts are explained by the fact that in addition to the costs of maintaining the vessel and the crew, the owner or charterer also incurs losses connected with the lost profit from non-delivered services. There may be many reasons for downtime, and one of them is a failure of ship mechanisms due to the poor quality or a mismatch of the oil.
Marine oils of high quality ensure reliable and durable equipment operation. Particular attention is paid to the quality of products manufactured at the plants of Gazpromneft-Lubricants. All the production sites of the Company have been certified according to international standards, and the produced oils have been approved by the leading manufacturers of marine engines.
Today, Gazpromneft-Lubricants' customers can
receive marine oils in 800 ports around the world
Today, Gazpromneft-Lubricants' customers can
receive marine oils in 800 ports around the world
Today, customers of Gazpromneft-Lubricants can receive marine oils in 800 ports around the world, thanks to the company's integration into the Chevron international supply chain, one of the five leaders in the world marine oils market. In 2017, the company also put into production its own marine oils brand, Gazpromneft Ocean. The range of modern engine oils includes 15 types of products for all types of vessels. In the same year, Gazpromneft-Lubricants began to deliver the new product to the customer vessels and announced its intention to introduce Gazpromneft Ocean brand to the international arena.
Бизнес судовых масел компании «Газпромнефть-смазочные материалы»
Gazpromneft-Lubricants' priority is uniform
quality standards of its services and products
both in Russia and abroad
Gazpromneft-Lubricants' priority is uniform
quality standards of its services and products
both in Russia and abroad
Simultaneously with the supply geography growth, the company is developing domestic business. Gazpromneft-Lubricants' priority is uniform quality standards of its services and products both in Russia and abroad.

High quality level of marine oils supply depends on several parameters. The quality of oils is approved by the leading manufacturers of marine engines. Not only engine oils are presented in the assortment at the warehouse, but also auxiliary ones for the entire range of equipment on a ship: from the main engines to process oils for hatch covers The time interval from the receipt of the procurement inquiry till shipment of the product to the vessel should be minimal, and the list of ports where oils could be supplied to, on the contrary, must be as large as possible.
Particular geographical position of the Far East dictates a key requirement for those who supply marine oils: the customer service should work in the same time zone as the client in order to be in touch and coordinate all the parties 24/7. Only this way the supply will take place on time and without any problems.

There is an impressive 7 to 9 hours difference in time between the Gazpromneft-Lubricants branch in St. Petersburg, managing the supply of marine oils, and the company's clients in the Far East. Opening of a representative office in Vladivostok made it possible to solve this task and increase the efficiency of the company's interaction with the regional partners.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
Particular geographical position of the Far East dictates a key requirement for those who supply marine oils: the customer service should work in the same time zone as the client in order to be in touch and coordinate all the parties 24/7. Only this way the supply will take place on time and without any problems.

There is an impressive 7 to 9 hours difference in time between the Gazpromneft-Lubricants branch in St. Petersburg, managing the supply of marine oils, and the company's clients in the Far East. Opening of a representative office in Vladivostok made it possible to solve this task and increase the efficiency of the company's interaction with the regional partners.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
Расстояние.
Скорость.
Время
Distance. Speed. Time
Расстояние.
Скорость. Время
Gazpromneft-Lubricants produces marine oils at two Russian plants: in Omsk and Fryazino (the Moscow region). The oils are delivered to the Far East from Omsk, logistics expenses in this case are much lower than from the Moscow region. Nevertheless, the transportation of oil products across half of the country requires significant costs and maximum operation efficiency.
Considering the distance from Omsk, the delivery to the Far East is very expensive and takes from three to four weeks. The main mode of transport is rail, then we deliver products to Kamchatka and Sakhalin by sea. Such a complex and long route imposes additional requirements on the quality of planning of production and sale. Of course, we may reduce the delivery time using motor transport, but this will increase the transportation cost.

The main risk, particularly when supplying directly to consumers, is not to deliver on time. In addition, there is a risk of importing a non-demanded product to the market of the region, which will inevitably lead to economic losses. To reduce the impact of a long shipment period on the work efficiency, our logistics specialists carefully study the market and plan the delivery of products to customers and regional warehouses up to the finest detail.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
Considering the distance from Omsk, the delivery to the Far East is very expensive and takes from three to four weeks. The main mode of transport is rail, then we deliver products to Kamchatka and Sakhalin by sea. Such a complex and long route imposes additional requirements on the quality of planning of production and sale. Of course, we may reduce the delivery time using motor transport, but this will increase the transportation cost.

The main risk, particularly when supplying directly to consumers, is not to deliver on time. In addition, there is a risk of importing a non-demanded product to the market of the region, which will inevitably lead to economic losses. To reduce the impact of a long shipment period on the work efficiency, our logistics specialists carefully study the market and plan the delivery of products to customers and regional warehouses up to the finest detail.
Roman Miroshnichenko
Gazpromneft-Lubricants
Branch Director in St. Petersburg
Until recently, there was an increased demand for low performance marine oils (GOST-approved) in the Far East conforming to the Soviet standards of the second half of the 20thcentury. Marine oils of that class have not been approved by any of the world motor industry leaders, and therefore cannot be used in most of the modern vessels. In recent years, the situation has begun to change: the share of GOST-approved oils is steadily reducing, and the demand for high-quality products, on the contrary, has increased. There are several reasons for change in proportion of the high and low quality marine oils. Firstly, the gradual renovation of the fleet with new warranted vessels obliges shipowners to use only those products that have been approved by the manufacturers of ship engines and other devices. The second, but not less significant factor is the wide presence of high-quality marine oils on the market, as well as the variety of ship supply methods with packaged and bulk products.
The representatives of the Far Eastern shipping companies note
the economic effect of using marine oils produced in Russia
The representatives of the Far Eastern shipping companies note
the economic effect of using marine oils produced in Russia
Moreover, the representatives of the Far Eastern shipping companies note the economic effect of using marine oils produced in Russia:
"We receive packaged marine oils from the Gazpromneft-Lubricants warehouse in Vladivostok, and then deliver them to the reference port in Slavyanka or Nakhodka by ourselves," notes Nikolai Maltsev, the Far East Branch of the RFC (Russian Fishery Company) representative. " It is much more cost-effective for us to buy oils in Russia and provide our fleet with them."

Shipowners and charterers of the Far Eastern Federal District highly appreciate the development of infrastructure in the region, but they also see the areas requiring growth.

In particular, marine oils are represented broadly in the major ports of the region but not near those with less traffic.
Cylinder and circulating oils — marine engine oils for 2-stroke engines.
The only factor arousing buyers' dissatisfaction with the regional market of oils is the geographical location of both the main suppliers and their storage facilities.

Basically, these are the ports of Vladivostok, Nakhodka, and Vanino. As for Sakhalin, Kamchatka, and Magadan, the oil supply system is poorly developed, which is due to high transportation costs and underdeveloped bulk storage infrastructure.

In most cases, there are interruptions in delivery of special types of oils most often being synthetic or semi-synthetic ones, or those which are used in specific ship equipment (for example, in refrigeration units). For
circulating and cylinder oils, the deficit factor is largely absent; these oils are available in sufficient quantity.
Konstantin Loginov
General Director of FESCO Fuel Company LLC
(part of the FESCO Transport Group)
The only factor arousing buyers' dissatisfaction with the regional market of oils is the geographical location of both the main suppliers and their storage facilities.

Basically, these are the ports of Vladivostok, Nakhodka, and Vanino. As for Sakhalin, Kamchatka, and Magadan, the oil supply system is poorly developed, which is due to high transportation costs and underdeveloped bulk storage infrastructure.

In most cases, there are interruptions in delivery of special types of oils most often being synthetic or semi-synthetic ones, or those which are used in specific ship equipment (for example, in refrigeration units). For
circulating and cylinder oils, the deficit factor is largely absent; these oils are available in sufficient quantity.
Konstantin Loginov
General Director of FESCO Fuel Company LLC
(part of the FESCO Transport Group)
Gazpromneft-Lubricants has raised efficiency
of marine oils supply and optimized logistics
Gazpromneft-Lubricants
has raised efficiency
of marine oils supply
and optimized logistics
In 2017, Gazpromneft-Lubricants managed to solve not only tactical, but also strategic tasks in the Far East. We have significantly enhanced the efficiency of marine oils supply, optimized the logistics and got the opportunity to cooperate with our Far Eastern partners, having eliminated the time zone aspect. Having strengthened its positions in the region, Gazpromneft-Lubricants has got the opportunity to develop together with the Far East and to aim higher in business development not only in the East of Russia, but also beyond its borders.
Alexander Trukhan
General Director
of Gazpromneft-Lubricants
In 2017, Gazpromneft-Lubricants managed to solve not only tactical, but also strategic tasks in the Far East. We have significantly enhanced the efficiency of marine oils supply, optimized the logistics and got the opportunity to cooperate with our Far Eastern partners, having eliminated the time zone aspect. Having strengthened its positions in the region, Gazpromneft-Lubricants has got the opportunity to develop together with the Far East and to aim higher in business development not only in the East of Russia, but also beyond its borders.
Alexander Trukhan
General Director
of Gazpromneft-Lubricants
Ports of the Far East
The Project Team
E D I T O R S
Olga Bakhtina,
Anastasiya Nikitina,
Anna Pavlikhina,
Alexander Korobchenko,
Elena Alifirova
(special correspondent)
E D I T O R - I N - C H I E F
Olga Tsyganova
D E S I G N
Ruslan Mashkov
M A N A G E M E N T
Dmitriy Aver'yanov
Collaborative project of Neftegaz.RU
Gazpromneft-Lubricants

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