ANNUAL REPORT2013 In 1988 Sovcomfl ot became one of modern Russia’s fi rst joint-stock companies and its fi rst domestic shipping enterprise, established in accordance with international standards and practice. Since then the company’s fl eet has grown almost eightfold and today Sovcomfl ot enjoys leadership positions in new and highly demanding market segments. The average fl eet age at the end of 2013 was eight years. JUNE 1988 JUNE 2013 122 158 diversified specialised vessels vessels 1.6 12.6 mln tonnes dwt mln tonnes dwt OAO SOVCOMFLOT from ship-owning to commercial and Russia’s largest and one of the world’s technical management, with offices and leading shipping companies specialising subsidiaries in St. Petersburg, Moscow, in crude oil, petroleum products and Novorossiysk, Murmansk, Vladivostok, liquefied gas transportation and the Yuzhno-Sakhalinsk, London, Madrid, servicing of offshore upstream oil and Singapore, Limassol and Dubai. gas projects. Provides a full range of services – from traditional seaborne Sovcomflot services some of the largest energy transportation to complex energy projects in Russia and beyond: engineering solutions for offshore oil and Sakhalin-1; Sakhalin-2; Varandey; gas transportation in harsh ice conditions, Prirazlomnoye; Tangguh (Indonesia); the servicing of oil platforms, geological Peregrino (Brazil); Escobar (Argentina). offshore exploration and towage. In 2013 OAO Sovcomflot (“SCF Group”) A reliable team of experienced celebrated its silver jubilee – 25 years professionals counts over 9,300 people since its foundation as an independent at sea and ashore. The company has joint-stock company. a fully integrated corporate structure: ANNUAL REPORT 2013 Annual report 2013 Contents COMPANY 06 PROFILE Today Sovcomflot is Russia's largest shipping company and one of the world leaders in energy transportation by sea. AREAS 08 OF OPERATION The SCF fleet operates across the globe. At the end of 2013 the fleet included 158 vessels with a total deadweight of 12,6 million tonnes. CHAIRMAN’S 12 STATEMENT PRESIDENT & CEO’S 14 STATEMENT SOVCOMFLOT 17 HISTORY For a shipping company vessels represent its historical milestones. This section examines the past, present and future of Sovcomflot through its ships. CALENDAR 25 OF EVENTS The anniversary year for the company was marked with a series of notable delivery ceremonies. 4 SCF DEVELOPMENT 26 STRATEGY Sovcomflot is actively developing new market segments within the shipping industry, focusing on high-margin business. OPERATIONAL 30 RESULTS SCF retained its operating margin and achieved significant results in key areas of activity. FINANCIAL RESULTS 50 In 2013 the company demonstrated growth in its financial resources. SAFETY 62 AND QUALITY The safety culture developed at SCF is founded upon the retention and consolidation of Russia's maritime traditions. TEAM 70 SOVCOMFLOT SCF Group of companies is first of all a team of professionals. SOCIAL 76 RESPONSIBILITY Supporting charities is an integral part of the work for SCF Group. 5 Annual report 2013 Company profi le Today, CRUDE OIL OIL PRODUCT OAO Sovcomfl ot DIVISION DIVISION is Russia’s This is the company’s largest sub-division, This division provides hydrocarbon serving the maritime transportation needs transportation services for light and dark largest shipping of Russian and international clients for oil oil products as well as bulk cargo. These company and and dark oil products. As of 31 December include: petroleum, diesel fuel, fuel oils, 2013, the division's fleet had 63 tankers iron ore and coal. At the end of 2013 the one of the world with a total deadweight of over 7.5 million division had 58 vessels with a combined tonnes. Revenue from crude tanker deadweight of 2.96 million tonnes. Revenue leaders in energy operations was USD 603.7 million. During from operations totalled USD 347.5 million. the year, the fleet expanded further with The fleet gained three new vessels over transportation the arrival of the largest vessel in the history the past year. The vessels played an active of the Russian merchant marine – role in the implementation of the program by sea. the VLCC tanker Svet. of exploration of the high-latitude Arctic routes, and also worked in joint enterprises with the world's leading oil-traders. 63 58 tankers of over vessels of nearly 7.5 million tonnes 3 million tonnes dwt dwt in total. in total. VLCC tankers Aframax tankers LRII tankers Suezmax tankers LR tankers MR tankers Towage operations for platform substructures 6 GAS OFFSHORE SEISMIC DIVISION DIVISION DIVISION Sovcomflot’s gas division provides shipping This fleet division supports offshore oil & The division was established in 2013 and services for liquefied natural gas and gas production, providing a wide range of represents a developing business unit. SCF liquefied petroleum gas (LNG and LPG). services, including: platform supply and Group’s state-of-the-art seismic exploration At the end of 2013 the divisional fleet servicing; terminal management and safe vessel Vyacheslav Tikhonov became the consisted of 10 gas carriers, with a further oil transportation via shuttle tankers from first vessel of its kind in the Russian fleet. four vessels under construction and due offshore fields located within challenging During the year, the vessel successfully to join the fleet in 2014-2015. Gas shipping climatic conditions. The offshore division completed a range of seismic exploration represents one of the key segments in works on long-term contracts, providing projects for the giant oil & gas companies Sovcomflot’s development strategy. The the transportation component for projects Rosneft and Gazprom. division is committed to working under long- such as Sakhalin-I, Sakhalin-II and Varandey. term agreements with the world’s leading The divisional fleet consists of 16 vessels, charterers. Over the past year, the fleet has including 12 ice class shuttle tankers and gained two new LPG carriers. Revenue from four icebreaking platform supply vessels. gas carrier operations totalled USD 48.7 The division’s revenue in 2013 totalled USD million during 2013. 207.7 million, and the fleet expanded with the addition of the multi-purpose supply vessel Aleksey Chirikov. 10 16 3D gas carriers with vessels of over million seismic exploration. a combined 800,000 tonnes dwt in total. cubic metres of cargo capacity. Ultra-modern Atlanticmax LNG carriers IBSV’s Seismic vessel Vyacheslav Tichonov Conventional LNG carriers Shuttle tankers for off shore shipping LPG carriers 7 Annual report 2013 158 VESSELS 12.6 MILLION TONNES DWT Areas of operation Mongstad Brofjorden SOVCOMFLOT UK LTD. Wilhelmshaven London Foley Rotterdam Le Havre Trieste SCF MARPETROL S.A. Fos-sur-Mer New York San Francisco Madrid Gibraltar Baja Pascagoula Houston Freeport Corpus Christi Cayo Arcas Punta Cardon Puerto la Cruz Lagos Port Arica Rio de Janeiro Cape Tow Branch office Puerto Montt 8 Pevek Tiksi Varandey Murmansk OAO SOVCOMFLOT, OOO SCF ARCTIC Primorsk ZAO ROSNEFTEFLOT St. Petersburg De-Kastri Ust-Luga OOO UNICOM MANAGEMENT SERVICES; ZAO ROSNEFTEFLOT Ванино Yuzhno-Sakhalinsk Moscow UNICOM LTD (CREWING OFFICE) Prigorodnoe OAO NOVOSHIP Kerch Vladivostok Novorossiysk Pro solum SOVCOMFLOT (CYPRUS) LTD.; UNICOM MANAGEMENT COMPANY LTD. Busan Yeosu Osaka Limassol Shanghai Sidi Kerir SCF OVERSEAS MANAGEMENT COMPANY, LTD. Fujairah Yanbu Dubai Bombay SCF UNICOM SINGAPORE PTE. LTD, SCF SWIRE OFFSHORE PTE. LTD. Singapore Tangguh Mombasa Beira wn Sydney 9 Annual report 2013 OAO Sovcomfl ot (SCF Group) Board of Directors Elected at the shareholders’ meeting of 13 August 2013. Marlen Manasov Mikhail Poluboyarinov Independent Director, Management Board Member, Member of the Board of Directors First Deputy Chairman of State of OAO “Aeroflot” Corporation “Vnesheconombank” Alexey Klyavin Sergey Frank Ilya Klebanov President of the National Chairman of SCF Executive Chairman of the Board Chamber of Shipping Board, President & CEO of Directors of Sovcomflot 10 David Moorhouse Charles Ryan Independent Director Independent Director, Chairman and Managing Director of UFG Asset Management Nikolay Tokarev Viktor Olerskiy President Deputy Minister of AK "Transneft" OAO of Transport of the Russian Federation 11 Annual report 2013 Address from Chairman of Sovcomfl ot Board of Directors Ilya Klebanov 12 In market segments associated with the servicing and support of large-scale off shore oil & gas projects in challenging climatic conditions, Sovcomfl ot holds absolute leadership. DEAR FRIENDS! and challenges that have been affecting SCF Board of Directors, I would like to The year 2013 marked the 25th the global tanker industry for the past five congratulate the recipients once again, anniversary of Sovcomflot as a joint years. as well as all current serving personnel stock company – one of the first JSCs and veterans of OAO Sovcomflot Group. in the history of modern Russia. Over Sovcomflot holds leading positions in We would also like to express our sincere what has been a challenging quarter of global energy shipping segments and gratitude to our clients and partners for a century for our country, Sovcomflot is committed to expanding the share their constant support. has evolved from a mid-sized shipping of Russian projects in its business line to become Russia’s largest shipping portfolio – primarily focusing on offshore Chairman company. Today, Sovcomflot is among project support. The company is one of of Sovcomflot Board of Directors the world’s top five energy transporters the largest clients for Russia’s domestic Ilya Klebanov and provides first class shipping services shipbuilding industry and in recent years for over five per cent of all global oil has placed orders for the construction and petrochemical consignments. In of 14 vessels at a total cost of over USD market segments associated mostly 700 million. These vessels include with the servicing and support of large- unique state-of-the-art ships designed scale offshore oil & gas projects in the for operations in the Russian Arctic. challenging conditions of the Arctic Sovcomflot is systematically increasing and Subarctic seas, Sovcomflot holds the number of Russian-registered absolute leadership.