LNG

South Korean shipbuilders have managed to overtake Chinese shipyards in the May index of orders, led by more liquefied natural gas carrier newbuild placements, while more LNG tanker orders continued to be received in June.

DNV GL, the European maritime classification society and risk management company with widespread operations in the LNG sector, said its name would change to DNV from March 2021.

Sovcomflot, the Russian shipping line with 31 gas carriers in operation or on order in an overall fleet of almost 150 vessels, has taken delivery of its latest LNG carrier “SCF Barents”, chartered to Royal Dutch Shell and named after the 16th-century Dutch Arctic explorer Willem Barents.

The ship with capacity of 174,000 cubic metres was handed over at the Hyundai Heavy Industries shipyard in South Korea.

After the vessel’s naming ceremony, it embarked on its maiden voyage under a long-term time charter agreement with one of Shell’s subsidiaries.

Sovcomflot President and Chief Executive Igor Tonkovidov, attended the ceremony along with Cederic Cremers, Chairman of the Shell subsidiary in Russia.

Also representatives at the event were the executives of the three European banks which provided the shipping finance, ING Bank of the Netherlands, France’s Crédit Agricole and KfW IPEX-Bank GmbH of Germany.

Shell executive Catherine Hall, the General Manager of Global Operations and Commercial Services at Shell Trading & Supply was the vessel’s sponsor at the ceremony.

“SCF Group and Shell have enjoyed a long-standing partnership, which both parties seek to consistently expand and reinforce,” said CEO Tonkovidov of Sovcomflot, also known as SCF Group.

“For many years, Shell has been amongst the largest charterers of SCF’s vessels,” he added.

“The delivery of ‘SCF Barents’ is important as growing our fleet of gas carriers is a strategic priority for SCF,” stated Tonkovidov.

“With the delivery, we now have 15 gas carriers in operation, with another 16 under construction. Thus, two-thirds of all vessels currently ordered by SCF are destined to expand our gas fleet,” he explained.

The “SCF Barents” is the second vessel in a series of three with 174,000 cubic metres capacity in the new-generation Atlanticmax series ordered by SCF in 2018.

The first vessel of the series, “SCF La Perouse”, was delivered in February 2020.

“All vessels in the series are designed to maximise their energy efficiency and meet the most stringent environmental standards, with their fuel consumption substantially reduced compared to the preceding generation of vessels,” said SCF.

“Each LNG carrier is equipped with an advanced Mark III Flex cargo containment system, slow-speed dual-fuel X-DF engine, and a system that reduces nitrogen-oxide emissions while the vessel sails in liquid fuel mode,” the shipping line added.

“In addition, all vessels of the series are among the first globally to feature a boil-off gas partial re-liquefaction system, which significantly reduces cargo losses while on long voyages or awaiting cargo operations,” said SCF.

SCF is developing into one of the world’s premier energy shipping companies, specialising in crude oil, petroleum products and liquefied gas, as well as the servicing of offshore oil and gas production.

The Group’s fleet has total deadweight of over 12.7 million tonnes, including vessels owned through joint ventures. More than 80 vessels are of ice class for Arctic waters.

The European Commission’s antitrust regulator has delivered its interim report and asked for more data on the proposed takeover by one of the world’s main LNG carrier builders, South Korea’s Hyundai Heavy Industries, of its Korean shipbuilding rival, Daewoo Shipbuilding & Marine Engineering.

The decision by the European Union Commission’s competition body has gained more importance after Qatar Petroleum signed the largest LNG shipbuilding agreements in history at the start of June to book berths for more than 100 ships valued at around $20 billion from the three largest South Korean yards.

Hyundai Heavy Industries, DSME and Samsung Heavy Industries are the recipients of the Qatar Petroleum berth bookings.

The EU executive body opened its probe into HHI’s acquisition of DSME when the takeover deal was first announced in March 2019.

“We have received the interim report (from the EC), but we could not reveal its details as the party concerned with the investigation,” said a Korean shipbuilding executive.

He added that the EU antitrust body had asked for more data from the companies and a final decision was now expected by September 2020.

The deal needs regulatory approval from six jurisdictions, the EU, South Korea itself, China, Kazakhstan, Japan and Singapore.

The EU Commission had temporarily suspended its probe in March 2020 because of the Covid-19 pandemic

In March 2019, Hyundai Heavy Industries Group signed a deal to buy a 55.72 percent stake in DSME for US$1.8 billion. If the deal is finally confirmed it would create the world's biggest shipbuilder with a 21 percent share in the global market.

In an attempt to reorganise before acquiring DSME the Hyundai Heavy Industry Group split Hyundai Heavy Industries into two entities, Korea Shipbuilding, a sub-holding company that governs the shipbuilding units in the group, and a reorganized Hyundai Heavy Industries Co.

Korea Shipbuilding & Offshore Engineering (KSOE), the Hyundai Group holding company, now oversees shipbuilding units in the group.

KSOE currently manages the group's three shipbuilding companies, Hyundai Heavy Industries, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries.

Under the Qatari deal for newbuilds, HHI, DSME and Samsung are reserving a major portion of their LNG ship construction berths for Qatar through to 2027.

The Qataris in May 2020 also signed a deal with Korea’s main shipbuilding rival, China.

They booked slots to build eight 175,000 cubic metres capacity LNG carriers at China’s Hudong–Zhonghua Shipbuilding and options for eight others, giving a possible final order value of around $3Bln.

The Gulf state has now secured around 60 percent of global LNG shipbuilding capacity through to 2027 and will slowly expand its fleet over the next seven or so years as its own production increases.

Qatar’s North Field expansion in the Gulf will raise the nation’s LNG production capacity from 77 million today to 126 million tonnes per annum by 2027.

The American Bureau of Shipping, the US classification society, has awarded an approval in principle to Samsung Heavy Industries for an LNG boil-off gas expander system that will become one of the core technologies of the South Korean shipbuilder for future LNG carriers.

Five South Korean shipping lines are making a pitch to Qatar to be the operators of the 60 new LNG carriers the Gulf state has said it needs to transport cargoes worldwide from the North Field gas expansion and construction of four new liquefaction Trains at Ras Laffan.

Gaztransport and Technigaz (GTT), the French storage tank technology company, reported a more than 25 percent fall in first-half net profits as revenues and royalties from selling its designs also declined.

First-half revenues came to 122.63 million euros ($136.8M) compared with 127.24M euros in the same six months a year ago.

Of this total, royalties for newbuild LNG carriers came to 114.71M euros versus 120.43M euros in the first half of 2018.

The order book at the end of the first half, excluding LNG as fuel, stood at 107 units,  including 95 LNG carriers, seven floating storage and regasification units (FSRUs), two LNG production hulls and three onshore storage tanks.

GTT’s net income tumbled 25.2 percent to 56.60 euros from 75.72M euros in the same six months of 2018.

Regarding LNG as fuel, GTT said there were seven additional orders in the six months and the number of vessels in the order book stood at 18 at the end of June.

GTT said that recent highlights in its activities included the June 2019 order from the Chinese Jiangnan Shipyard for the design of LNG tanks for five new giant container ships on behalf of a European shipowner.

Each of these tanks will have a capacity of 14,000 cubic metres and the design will be the Mark III Flex technology.

The ships will be built on behalf of France’s global container line CMA CGM, based in the French Mediterranean port of Marseilles.

GTT also received an order in the earnings period from the Sembcorp Marine shipyard in Singapore for the design of tanks for an LNG bunker vessel on behalf of the shipowner, Indah Singa Maritime, a subsidiary of Japan’s Mitsui OSK Lines.

GTT said it would design the tanks for that vessel based on the Mark III Flex membrane containment solution with a capacity of 12,000 cubic metres.

“The first half of 2019 was characterized by intense business activity and LNG carrier orders still at record levels,” said Philippe Berterottière, GTT Chairman and Chief Executive.

“In the field of LNG as fuel, the attractiveness of GTT membrane technologies to shipowners is increasingly evident with recent orders, including for five new very large container ships,” added the CEO.

“From a financial perspective, revenues were down slightly. However, the intake of orders from the last 24 months is beginning to bear fruit and revenues have risen 8.2 percent between the first quarter and the second quarter of 2019,”

“In terms of results, while the first half of 2019 is down on last year on account of the technical and human resources deployed, GTT will feel the wider benefit of the increase in activity as from the second half of 2019,” he stated.

“We are also proposing an interim dividend of 1.50 euros, up 12.8 percent compared to last year,” Berterottière told shareholders.

South Korean shipbuilders saw their shares surge by more than 5 percent on speculation Qatar is about to order between 30 and 40 new liquefied natural gas carriers as it advances with plans to build four new processing Trains and to regain its position as the largest global LNG producer.

Korean shipyard executives have been sounded out by Qatar Petroleum officials on freeing up berths over the next 12 months for a wave of Qatari LNG newbuilds.

Samsung Heavy Industry shares jumped 5.63 percent on January 28 on the South Korean stock exchange to 8,400 won ($7.53) per share on the reports, Daewoo Shipbuilding & Marine Engineering shares rose 4.78 percent to 36,200 won ($32.4) and shares in Hyundai Heavy Industries, the largest shipbuilder, increased by 3.24 percent to 143,000 won ($128) each.

The Korean yards specialize in constructing the Qatari Q-Flex and Q-Max tanker with between 210,000 cubic metres and 266,000 cubic metres capacity.

A South Korean government spokesman said that the Qataris had outlined their LNG carrier building plans during a bilateral summit in Seoul.

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.

The Qataris are also in talks with global oil majors about selling partnerships in the additional four liquefaction Trains being planned to boost production by 40 percent.

The scope of the expansion at the Ras Laffan production complex involves an additional three liquefaction Trains, each with 7.8 million tonnes per annum of output and with pre-investment to add a fourth new Train soon after.

This would take nameplate output up to 108.2 MTPA from 77 MTPA when the four Trains at Ras Laffan are completed by 2023 and 2024.

The Qatari expansion by 31 MTPA amounts to more in volume than the LNG currently produced by nations such as Malaysia, Indonesia and Nigeria, hence the large shipping requirements.

Qatar’s foreign shareholders in the existing LNG Trains are ExxonMobil, the largest with stakes in 10 Trains, French major Total with shares in three Trains and Royal Dutch Shell and ConocoPhillips, each with a stake in one Train.

Other holders of small stakes in Qatar LNG Trains include foundation customers, including the Japanese trading houses, Marubeni Corp, Mitsui & Co. and Itochu Corp., as well as Korea Gas Corp.

All are expected to express interest in the tenders set to be launched by Qatar for potential shareholders in the Ras Laffan expansion, along with possible newcomers such as Chevron Corp., Equinor of Norway, Italy’s Eni and Far East national oil companies.

Qatar’s new onshore facilities will receive about 4.6 billion standard cubic feet per day of feed gas from the southern sector of Qatar's North Field gas reserves in the Gulf.

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

The liquefied natural gas shipping sector has seen its largest number of orders since 2014 as traditional and new entrants sign contracts with South Korean, Japanese and Chinese shipyards for vessels to handle the LNG production surge, while the impact has been felt in average annual charter rates.

South Korea, the world’s largest builder of liquefied natural gas carriers and other ships, has brought in a package of measures to help ease the financial pressures facing medium-sized shipyards, including confirmation of government backing for the ordering of 140 LNG-powered vessels.