LNG

Gaztransport and Technigaz (GTT), the French LNG storage technology company for ships and onshore, has signed a technical assistance and licensing agreement for the construction of GTT membrane containment systems with Hong Kong-headquartered China Merchants Heavy Industries.

Hyundai Heavy Industries, the South Korean shipbuilder, was granted approval for a floating LNG power plant by French maritime classification society Bureau Veritas.

Qatar Petroleum has entered into an agreement worth more than $3 billion to reserve LNG ship construction capacity in China to be used for construction of additional ships for the Gulf nation’s LNG expansion plans.

The agreement was entered into between Qatar Petroleum and Hudong-Zhonghua Shipbuilding Group Co., a wholly owned subsidiary of China State Shipbuilding Corp. (CSSC).

“Pursuant to the agreement, a significant portion of Hudong's LNG ship construction capacity will be reserved for Qatar Petroleum through the year 2027,” said a statement.

The Qataris had been expected to centre most of their carrier building in South Korea but have surprisingly chosen China over the Koreans for the first tranche of berth reservations.

The agreement on. berths was signed by Qatari Minister of State for Energy Affairs, the President and Chief Executive of Qatar Petroleum, Saad Sherida Al-Kaabi, and the Chairman of CSSC Lei Fanpei, in a virtual ceremony.

“The value of this landmark agreement has the potential to be well in excess of 11 billion Qatari riyals ($3.02Bln), depending on our requirements and the extent of China's LNG shipbuilding capacity expansion,” stated Al-Kaabi.

This would suggest an initial booking to build at least 16 or up to 20 ships in China.

Also present at the transmitted event was Qatargas CEO Khalid Bin Khalifa Al Thani and the Chairman of the Hudong shipyard Chen Jianliang, as well as other senior executives.

“We have taken yet another concrete step to reinforce Qatars commitment to its global reputation as a safe and reliable LNG producer at all times and under all circumstances,” said QP CEO Al-Kaabi.

“By entering into this agreement to reserve a major portion of Hudong's LNG ship construction capacity through the year 2027, we are confident that we are on the right track to ensuring that our future LNG fleet requirements will be met in due time to support our increasing LNG production capacity,” he added.

The South Korean shipbuilders Samsung Heavy Industries, Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering, which has merged with Hyundai won all of the last round of Qatari newbuilds.

Between 2004 and 2007, Qatar ordered 45 LNG carriers from the Korean yards when Daewoo built 19 Qatari carriers, Samsung constructed 18 vessels and Hyundai received orders for eight ships.

Now the Qataris have first booked Chinese berths for the start of its shipbuilding programme, which could amount to at least 80 vessels, according to previous statements.

The global LNG fleet consisted of 601 vessels at the start of 2020, including medium-scale vessels of up to 50,000 cubic metres capacity,

A total of 44 newbuild vessels were delivered into the fleet in 2019 while 62 units were ordered versus 77 newbuilds in 2018, mostly from the Korean yards.

Qatar has start developing its drilling campaign for the Persian Gulf feed-gas from the North field that will underpin the feed-gas needs for the LNG expansion at Ras Laffan from 77 million tonnes per annum to 110 MTPA.

A second phase of the North Field LNG expansion, called the North Field South Project (NFS), will further increase Qatar's LNG production capacity from 110 MTPA to 126 MTPA.

The scope of the first phase of the expansion at the Ras Laffan production complex involves an additional four Trains, each with 8.0 MTPA of output.

Qatar is also expected to have partnerships with international energy majors for its expanded North Field-based projects.

Qatar has the southern portion of the North Field in Gulf waters and the other part is under the jurisdiction of neighbouring Iran.

South Korean shipyards are the builders of choice for the global liquefied natural gas carrier market with a share of over 80 percent of newbuilds, though executives regret that the nation has not gained acceptance for its LNG maritime storage technology and that shipowners prefer French-designed tanks.

Gaztransport & Technigaz (GTT) of France is the technology company that earns royalties from every LNG carrier built in South Korea and elsewhere in the world when its designs are used.

One South Korean shipbuilding executive estimated that GTT had earned 2.5 trillion won (US$2.1 billion) in royalties from South Korean shipbuilders over the last 10 years for the rights to use its membrane-type LNG tanks.

GTT’s average royalties are generally kept confidential, though are estimated to be around $10 million per vessel with carriers costing between $180M and $200M in the current market.

The South Korean national news agency Yonhap has carried a report citing financial analysts and unnamed shipyard executives regretting the fact that a South Korean-designed storage tank was not seen as acceptable in the market.

“With demand for LNG vessels soaring in particular, local shipyards are desperate to escape GTT's dominant grip,” said Choi Jin-myung, an analyst at NH Investment & Securities Co in Seoul.

“As of 2018, GTT had a 92 percent market share in the global LNG cargo containment sector,” added Choi.

“When South Korea's three major shipbuilders receive orders for LNG carriers, they all use GTT's technologies,” he explained.

“About 5 percent of the vessel's price is reportedly paid to GTT in royalties and this has been largely affecting the shipbuilders' profitability and cost management,” he stated.

South Korean shipbuilders have been trying to alter the landscape of the LNG tank system business for years. In fact, all three of South Korea's major players have designed their own LNG cargo containment systems for maritime transportation.

Samsung Heavy Industries Co. developed its KCS LNG cargo containment system in 2011, and Hyundai Heavy Industries Co. created its own LNG cargo containment system in 2013.

Daewoo Shipbuilding & Marine Engineering Co. for its part introduced its Solidus LNG tank in 2017.

However, none of them have yet been used in vessels in service. The reason why was summed up by Samsung Heavy Industries.

“The shipping industry is a very conservative industry,” said a spokesman at Samsung.

“Safety always comes first before looking into new technology and functions. Shipowners or shippers don't want their vessels to become a test bed for new products,” stated the South Korean company.

Against this backdrop, the local shipbuilding industry is also lamenting the failure of the KC-1 tank, the country's first LNG membrane system to be applied in LNG vessels.

The KC-1, developed by the state-run Korea Gas Corp. (Kogas) in collaboration with the three South Korean shipbuilders, made its commercial debut last year after it was installed in two LNG carriers operated by the local shipping line SK Shipping Co.

However, defects were detected later and one of the LNG carriers had to suspend operations.

“It's a pity because the KC-1 could have really benefited the entire industry with a good first impression,” the report cited a Kogas researcher as saying.

“We'll keep working to fix problems and develop a better version of the KC-1,” he added.

LNG tanks must be designed to maintain cryogenic conditions, at least minus 162 centigrade, and failing to do so could lead to the ship being endangered.

The Koreans also claim that Daewoo's Solidus system offers a daily LNG boil-off rate (BOR) of 0.049 percent, lower than the GTT’s Mark III Flex-Plus system's 0.07 BOR. Samsung's KCS tank is also listed as having a low boil-off rate.

“We believe the technology is there, but what we need is a track record,” said Kang Joong-kyoo, head of Daewoo Shipbuilding's Research and Development centre.

“We'll obviously try to gain credibility with global customers, but I think South Korean-owned LNG ships should use local LNG containment systems first and show they are safe,” stated Kang.

The South Koreans in the report acknowledged that GTT had proven systems with a first-class safety record.

“GTT has been in the LNG tank designing business for more than 50 years, so you can't ignore its relationship with shippers and ship owners,” said an official at the Korean Intellectual Property Office.

“So far, no South Korean companies have managed to sell their patents for LNG tank containment systems,” stated the official.

Dec 10 (LNGJ) - South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering said it received an order to build an LNG carrier for Maran Gas Maritime of Greece, the LNG unit of the Angelicoussis Shipping Group. The vessel is scheduled for delivery in the first half of 2021. Daewoo noted that the Angelicoussis group had placed a total of 101 ship orders with Daewoo since 1994, with 85 of them delivered and 16 under construction in South Korea. Daewoo said it had obtained $6.22 billion worth of orders so far this year, achieving 85 percent of its sales target of $7.3Bln.