Japan Ready to Build Submarines in Australia

By Reuters 2015-09-29 18:37:20

Japan is ready to match European rivals and build a fleet of submarines for Canberra entirely at Australian shipyards, a senior Japanese official said on Tuesday, after stumbling in its effort to win the A$50 billion ($34.76 billion) contract.

Tokyo was willing to train hundreds of Australian engineers in Japan’s submarine-manufacturing hub of Kobe as well as in Australia as part of its offer for one of the world’s biggest defense contracts, Masaaki Ishikawa, director general for Acquisition Reform at the Ministry of Defense, said.

His comments are the first from an official directly involved in the bid that Japan is willing to build the stealth submarines entirely in Australia, where jobs are a hot button political issue. Canberra is expected to order between eight to 12 vessels.

“Whatever option Australia chooses we are ready to provide the necessary technology transfers and skills,” Ishikawa said in an interview. “We will optimize the role of Australian industry.”

Japan had been the frontrunner to replace Australia’s ageing Collins-class submarines with a modified off-the-shelf version of its 4,000-tonne Soryu-class vessel until then Prime Minister Tony Abbott opened up the bidding in February under pressure from opposition and ruling party lawmakers.

While Japan sought to stress the capabilities of its submarines, Germany’s ThyssenKrupp Marine Systems (TKMS) and France’s state-controlled naval contractor DCNS both said they would make a full build in Australia part of their offers.

The European firms have also courted the Australian defense industry and politicians for months, while Japan’s efforts to do likewise have fallen flat.

Abbott’s ouster earlier this month was a further blow to Tokyo given his close relationship with Japanese Prime Minister Shinzo Abe, sources have said.

Ishikawa said Japan would submit three options requested by Canberra: a full build in Australia, a hybrid option that would see the first vessels built in Japan and then the rest in Australia, as well as a complete overseas build.

It was up to Canberra to assess the risk and cost of each option, he added.

An expert advisory panel is expected to deliver its recommendation on the bids to the Australian government in November. The contract also includes a decades-long maintenance program for the submarines.

BID DEAL FOR ABE

Japan is offering a variant of its 4,000-tonne diesel-electric Soryu submarine built by Mitsubishi Heavy Industries and Kawasaki Heavy Industries.

“We already have an ocean-going submarine of the right size that is operating today at sea,” Ishikawa said.

TKMS, which is proposing to scale up its 2,000-tonne Type 214 class vessel, has said it would turn a naval shipyard in South Australia into a submarine construction and maintenance hub for Asia.

DCNS has said it would share for the first time its stealth technology with the Australian government and is also planning a package of economic incentives.

Abe has a lot riding on the tender after lifting a decades-old ban on weapons exports in April last year as part of his more muscular security agenda.

Japan has yet to secure a major overseas arms deal since then, with its inexperience in the rough and tumble of global defense markets showing.

Ishikawa and other Japanese government and industry officials who travelled to the South Australian capital Adelaide last month to promote the Soryu submarines were stung by criticism over their unwillingness to commit to building all the boats in Australia.

That team, Ishikawa said, would deliver a clearer message next month in Sydney in a bid to regain lost ground.

There they plan a second presentation for potential suppliers and partners at the Pacific 2015 International Maritime Exposition, a biennial expo and conference that begins on October 6. A third presentation will be held in Melbourne on October 9.

In addition to highlighting the technical merits of Tokyo’s bid, Ishikawa said the team would note Japan’s investment in Australia, point to past industrial collaboration and talk up the benefit of building security ties with a fellow U.S. ally in Asia rather than buying vessels from distant Europe. ($1 = 1.4384 Australian dollars)

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Gazprom Weighs Fourth Train for Sakhalin-2

By Reuters 2015-09-29 18:26:37

Russian energy giant Gazprom is considering building a fourth production train for its Sakhalin-2 LNG plant, a joint venture with Royal Dutch Shell, Alexander Medvedev, the company’s deputy CEO, said in an interview on Tuesday.

Gazprom and Shell signed a memorandum of strategic partnership earlier this year, agreeing to commission a third production train for the Sakhalin plant aimed at expanding its capacity to 15 million tons from 10 million tons.

A fourth train would mean that the plant in Russia’s far east, the country’s only LNG-producing unit, would double its current capacity.

“From a technical point of view everything (that is needed for the fourth production train) is there,” said Medvedev, who was speaking during an interview conducted as part of the Reuters Russia Investment Summit.

“The key point to discuss is the gas sourcing issue”, he said, explaining that Gazprom was in the process of choosing whether to buy gas from Rosneft-ExxonMobile’s nearby joint offshore field, Sakhalin-1, or to get it from Gazprom’s own Yuzhno-Kirinskoye undersea deposit, which is on a U.S. sanctions list.

Relations between Russia and the West slumped to a new post-Cold War low last year after Moscow seized control of Crimea and the United States accused the Kremlin of backing pro-Russian separatists in eastern Ukraine.

That prompted Washington and the European Union to impose sanctions on Russian firms and individuals, a move which continues to hurt the Russian economy at a time when it is reeling from low oil prices.

But Medvedev said the economic pain would not deter investment and that Gazprom was ready to invest in new LNG projects, including in Sakhalin-2 and Baltic LNG, even though oil prices were languishing at $45-$50 per barrel.

“Even if this period will last for several years it won’t affect our readiness to invest,” said Medvedev. He singled out Latin America, the Middle East and South East Asia as potentially interesting markets. “One of the potential markets is the Philippines”, he said.

He also cited China, saying he was confident of its prospects even though its economy was faltering.

“Of course, (Chinese) domestic demand will probably not reach the kind of figures that have been mentioned such as 500 bcm per year or more,” said Medvedev. “But 400 bcm per year and then some is definitely realistic even if economic growth is low.”

Russia announced this month it would construct its third gas pipeline to China from Sakhalin. It has another pipeline under construction and another at the design stage.

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Japanese Dry Bulk Shipping Company Files for Bankruptcy

By Reuters 2015-09-29 16:12:22

Japanese bulk carrier company Daiichi Chuo Kisen Kaisha said on Tuesday it had filed for protection from creditors – the second shipper to do so this month – with analysts predicting more failures if the market for dry freight continues to slump.

The shipping industry has been hit hard by the global commodities meltdown with the dry freight market near six-year lows and rates for large ships carrying iron ore and coal barely covering operating costs this year.

Daiichi Chuo said it had been unable to make ends meet on ships it had chartered or finance ships it had ordered, leaving it and a wholly owned subsidiary with a combined 176.9 billion yen ($1.5 billion) in liabilities – a figure it said could rise.

The shipping company, which has suffered four straight years of losses, is set to be delisted on Oct. 30. That would be a rare case of listed corporate failure since Prime Minister Shinzo Abe returned to power in 2012 with aggressive policies to boost the economy.

The move follows private equity-backed Global Maritime Investments Cyprus Ltd’s filing for Chapter 11 bankruptcy protection in the United States on Sept. 15.

“If such a market is sustained we can expect a few more companies to be in line,” said Jayendu Krishna, director at Drewry Maritime Advisors.

Shares in other Japanese shippers tumbled on the news with Mitsui OSK Lines Ltd, Daiichi Chuo’s biggest shareholder, sliding 7.7 percent. Traders said, however, that the filing would be a relief for Mitsui OSK as it had had to prop up Daiichi Chuo in the past with capital injections.

Mitsui OSK, which owns 16.6 percent of Daiichi Chuo, said it would book an extraordinary loss of about 25 billion yen in the July-September quarter.

Despite the filings, some market experts said a rebound in dry bulk could be swift.

“I agree dry bulk looks gloomy but we feel we’re much closer to the end of this part of a downcycle than we are to the beginning,” said Martin Rowe, managing director of Clarksons Platou Asia, a shipping services firm, in Hong Kong.

The news came as Asian commodity stocks were battered after shares in Glencore Plc fell almost 30 percent and closed at a record low on Monday over concerns it was not doing enough to cut its debt to withstand a prolonged fall in global metals prices.

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GLDD wins LNG terminal contract

LNG exporter Cheniere Energy has tapped US dredging contractor Great Lakes Dredge & Dock (GLDD) to dredge two ship berths at its marine terminal being built in Corpus Christi, Texas.
The project, which involves dredging approximately 3.3 million m3 (4.3 million yd3) of material, also includes
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