Daewoo Shipbuilding & Marine Engineering (DSME) has notified the cancellation of the contracts on all three LNG carriers awarded by a Russian client two years ago. The Russian client failed to make payments for the ships on time, amid sanctions by the international community against Russia for the prolonged invasion of Ukraine.

DSME announced on Nov. 25 that it had notified a Russian client of the termination of the contract for one LNG carrier, which was signed in October 2020. The value of the canceled contract was 337.9 billion won. The shipbuilder said that due to export control on Russia, supply of major equipment and materials has been delayed or suspended, making it impossible to build the ship.

Industry insiders assume that the owner of the ship is Novatek, a Russian gas company. The company has oil and gas fields in the Arctic Circle, and placed orders for large icebreaking LNG carriers with Korean shipbuilders.

On Oct. 9, 2020, DSME signed a contract to build three LNG carriers with the client for 1,013.7 billion won. But as the Russia-Ukraine war broke out earlier this year, DSME could not receive payments from the client within the deadline.

After the invasion of Ukraine, Russia was expelled from the SWIFT system, and the Russian client has virtually been blocked from paying the bills. DSME notified the cancellation of the contract for each vessel in May, June and November following the passing of the deadlines.

“Currently, we notified the client of the termination of the contracts but whether the contract are actually terminated or not will be determined by the client,” an DSME official said. “Apart from the contract cancellation notification, we will build the ships as scheduled and look for ways to handle them.”

Source: BusinessKorea