Chinese financing backs massive Qatar LNG carrier order, says analyst

The order, valued at US$3Bn, is China’s largest shipbuilding export contract to date.

Hana Financial Investment analyst Moo-hyun Park said the order was placed despite the delays on the massive LNG-powered container ship CMA CGM Jacque Saade ordered by French container shipping giant CMA-CGM in 2017. Mr Park said although CMA-CGM’s 23,000-TEU LNG-fuelled container ship was delayed by about seven months, Qatar placed orders for LNG carriers with Chinese shipyards.

“The reason is that China is known to have supported ship financing and is a major customer of Qatar as one of the world’s largest LNG importers.” Mr Park emphasised, “In other words, Chinese shipyards’ large orders for LNG carriers are not the result of their technology, but rather a substantial domestic order by financing support from the government and Chinese banks.” He added, “It is not necessary to attach much meaning to China’s recent LNG ship orders.”

Mr Park also noted that Qatar’s energy minister recently expressed his desire to place orders for 100 LNG carriers at South Korean shipyards. Qatar’s Minister of Energy is Saad Sherida Al-Kaabi, who is also Qatar Petroleum (QP) president and chief executive.

Part of a nine-vessel order, CMA CGM Jacque Saade was originally scheduled to be delivered in November 2019 but was delayed by seven months to June 2020. The nine vessels were initially ordered by CMA-CGM from Hudong Zhonghua shipyard and SWS, but construction was later shifted to SCS shipbuilding and Jiangnan shipyard.

“Hudong Zhonghua has no experience in installing two-stroke LNG propulsion engines, and SWS has no experience in building LNG carriers,” said Mr Park. “SCS shipbuilding delivered two LNG carriers equipped with X-DF (two-stroke LNG propulsion engine) to Mitsui OSK Lines but the construction was delayed for three months,” he said.

He expected the orders for 100 LNG carriers for Qatar would fill the drydocks of South Korean shipyards and possibly stimulate European shipowners’ sentiment for new orders.

The large number of LNG carriers are needed by Qatar to underpin its fleet renewal plans and massive increase in LNG production capacity from its North Field expansion project.

Full steam ahead on expansion

“We are going full steam ahead with the North Field expansion projects to raise Qatar’s LNG production capacity from 77M today to 110M tonnes per annum by 2025 and 126M tonnes per annum by 2027,” Mr Al-Kaabi confirmed during a recent webinar.

Mr Al-Kaabi said a number of important milestones in the development of the North Field have begun, including starting a drilling campaign for 80 development wells, insulating offshore well head jackets, and reserving capacity to build LNG ships that would ensure meeting Qatar’s future LNG fleet requirements.

While QP is committed to the North Field expansion, it has also been impacted by the demand destruction caused by Covid-19 and the low oil price environment. Mr Al-Kaabi said Qatar was not considering cutting production for now but confirmed in response to a question during the webinar that Qatar Petroleum would reduce its capital and operating expenses by 30% in June.

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