Vadim Malov , MNP Group
Release Date: 2010-08-09
Vadim Malov, Director General of MNP Group, has been interviewed by Russiaenergy.com for Oil and Gas Financial Journal to discuss the business of MNP Group, the importance of modernization and the development of MNP Group’s international activities.Mr. Malov, MNP Group was separated from OMZ in 2004. Why was the decision taken to separate MNP Group’s activities from OMZ, and who has the group evolved independently since that time?
The company was spun off in order to specialize in marine construction. This has been MNP Group’s core business ever since.
MNP Group comprises three business units: Krasnoye Sormovo shipyard, Sormovskoye machine building plant and Volga Caspian design bureau. The group has a vertically integrated structure that enables a clients to simply bring an idea to MNP Group and lets our company deal with the rest. This is possible because the design bureau cooperates tightly with the group’s production plants. It enables us to know the technological potential of the plant and design ships that are easier to produce, but also that coincide with the wishes of the client.
In 2007, MNP Group completed the implementation of an automatic hull structure production line at the Krasnoye Sormovo shipyard. How important is it for your company today to stay at the highest levels of technology?
During the past five years, MNP Group has been constantly modernising its production sites because the company understands that it is impossible to construct modern ships and to be competitive if modernization is not a priority. Over the last five years, MNP Group has spent around $20 million USD on modernization of its facilities and on the purchase of new production lines. This is the first time in Russia that an automated production line has been implemented. The system allows sections to be welded and cut automatically. There is no analogue in Russia, or even in Europe; only the largest wharves in Asia possess such high levels of technology. When MNP Group’s competitors saw how effective our new production line was, they also committed to purchasing this equipment in order to compete with the company. However, MNP Group is five years ahead, and hopefully the company will remain in its advanced position, modernising even further as our competitors try to catch up.
This process was 100% self-financed by the Group, with no external sources of capital. In 2005, the company completed a very important contract for a submarine, and, rather than paying dividends to the shareholders, that year we committed the money to start the modernization.
The Russian government has highlighted the shipbuilding industry as being of key strategic importance for the country. Now, after a few difficult years, how do you think this new priority from the government will affect your business?
MNP Group’s management has been participating in the state commissions on changing the current legislation. The company’s major message to the government is that help is required not only for the shipbuilding industry but also for ship owners and need to be encouraged to invest in new fleets and sailing them under the Russian flag. MNP Group is capable of building any ships but more incentives are required for the shipping industry to modernize.
A lot of the Russian shipping companies are increasingly looking to Asia for supply of their fleets. What kind of responsibility do you think these companies have to the Russian shipbuilding industry?
Today, they have no responsibility towards the Russian industry. Big shipping companies such as Sovcomflot are looking for Chinese and Korean vessels because Russia does not have enough production capacity to build 200,000 tonne vessels. Shipping companies who work in MNP Group’s niche have so far not been stimulated to start renovating their fleets. Many of the ships that are in operation today are over 30 years old. Now, once strict regulations, ecological and others will be put on those companies, we can expect a higher demand for our ships, in particular in the Caspian Sea, since this is a closed basin. International companies who operate transportation vessels there are very strict about following environmental regulations on the ships that are in operation, so now in the region there is an active renovation of fleets.
Location is obviously the key for any shipbuilding company, and where you can supply your vessels to, so how do you think MNP Group’s location with prime access to the Caspian Sea has affected where you look for business and how you have developed your capabilities technologically, and the partners you are looking for?
The fact that we have direct access to the Caspian Sea does not mean that we are close to it. Nizhny Novgorod is located in the centre of Russia: it’s over 2000km down the river to the Caspian, but the Astrakhan wharf also stands on the Volga, rather than the Caspian, so the limitations for the ships that are produced in Astrakhan are the same as for Krasnoye Sormovo, located in Novgorod. By comparison, the company is equally close to the Baltic Sea, though there are more limitations on ship size when building ships to be delivered to the North. But we work both for the North Seas and the Caspian Sea.
In terms of strategic regions, both are quite important for the oil and gas industry. Everyone is looking at the Caspian, and also at the Baltic region in terms of shipping. How are you finding that the business today is splitting? Where is the biggest demand for new ships?
MNP Group is currently constructing vessels that can be divided into two parts: 70% of the vessels are for the Caspian Sea, and 30% are for the Black Sea. The Caspian is experiencing an explosion of demand for ships, because until now one company has dominated the region, the Caspian Shipping Company (CASPAR). This is the region’s oldest transportation company. The company has been in cooperation with CASPAR for more than 100 years: the first tanker in the Caspian Sea was built at the Krasnoye Sormovo plant for CASPAR in 1887. But in the past years, Kazakhstan and Turkmenistan have also started to grow their own fleet, run by state-owned companies.
For quite a number of years now, there has been talk of replacing Caspian shipping routes with subsea pipelines. How do you see that as a challenge in the future in terms of finding business?
Despite the discussion of subsea pipelines, there will always be a need in the Caspian to transport oil by tanker. MNP Group is currently in negotiations with Kazakhstan over the construction of tankers that are too large to leave the Caspian. Three years ago MNP Group designed a project for Total, the operator of the Khashagan oil field, for a range of vessels of varying sizes up to 58,000 tonnes. The smaller vessels would be completely constructed in Nizhny Novgorod, but the larger ones were to be constructed in parts and be assembled in the Caspian Sea.
Final construction in the Caspian is something that MNP Group has experience of already. In 2006 the company built a construction platform for Saipem at the Khashagan oil field which was about 150m by 42 m – too large to transport in one piece due to the dimensional restrictions of Volga-Caspian waterways. The platform was constructed at two different plants, transported from the plant to the Caspian, and the welding and assembly was done in situ.
As oil and gas exploration and production increases in the Caspian Sea, how will this affect the business of MNP Group?
Oil and gas will be a very important part of MNP Group’s future business. Platform building will still be important for the company, but today, the influence of the oil and gas business is based in tankers. MNP Group has had many successful projects in the oil and gas industry. In 2008, the British Royal Society of Shipping Engineers awarded MNP Group the ‘Ship of the Year’ award for a tanker designed specifically to be able to enter and exit the Caspian Sea. This allows companies to work during the north in the summertime, but can come back to the Caspian when other areas are less hospitable.
How important is developing MNP Group’s international activity?
This is a priority for the group, and developing international business in countries such as Italy and Sweden helps to build the image of the company. Working in these companies gives international credibility to the MNP Group brand. Italians are the most famous shipbuilders in the world, and they understand this business. Working with Italian companies creates a good image for MNP Group.
In terms of future international projects, the Caspian has the most potential for the company. Due to the geographical situation there, the shipping companies in the Caspian are linked to the wharves that are placed in the region. Ordering ships from shipyards that do not service the region is possible, but very expensive.
What would you say to an international company that might be considering MNP Group? What are the reasons that they should choose your company as their shipbuilding partner?
I would highlight the fact that MNP Group is the most reliable! We deliver any customized solutions. The clients simply need to come up with an idea. Within a month, we will provide a design for a ship that will meet their requirements. Often, a client comes would come with a ship design that has been created at another design bureau. In many of these cases, MNP Group’s design bureau has to adapt these projects to reality. MNP Group’s design bureau is becoming famous across the world. The company has invested a lot of money in specialised software for 3D modelling. Now we’re seeing the return on those investments, as MNP Group’s reputation grows and the company establishes itself as the partner of choice in Russia.
| Company: | MNP Group |
| Position: | Chief Executive Officer |
| Country: | Russian Federation |