In a deal worth potentially US$3Bn in newbuilding contracts, Qatar Petroleum (QP) agreed to reserve LNG ship construction capacity through 2027 at China’s Hudong-Zhonghua Shipbuilding Group
The shipbuilding capacity would be used to meet part of QP’s future LNG carrier fleet requirements, including those supporting its ongoing North Field expansion projects and fleet renewal.
Newbuild rates for LNG carriers with capacities of 170,000 m3 are US$189M, according to ship broker Fearnleys, meaning roughly 15 to 20 LNG carriers could be built by Hudong-Zhonghua Shipbuilding, a subsidiary of China State Shipbuilding Corporation Limited (CSSC). Depending on its needs, QP could order upwards of 80 new LNG carriers. It is expected to sign contracts with South Korean shipbuilders for additional LNG carriers this year.
Amid the uncertainty injected into the energy market by the Covid-19 pandemic, the agreement signals QP’s confidence in a recovery in the global LNG market, its plans to expand its LNG production capacity and China’s ability to construct new-generation LNG carriers.
That confidence was reflected in remarks at the virtual signing ceremony by Minister of State for Energy Affairs and QP president and chief executive Saad Sherida Al-Kaabi. “Today, we have taken yet another concrete step to reinforce Qatar’s commitment to its global reputation as a safe and reliable LNG producer at all times and under all circumstances,” said Minister 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 we are on the right track to ensuring our future LNG fleet requirements will be met in due time to support our increasing LNG production capacity.”
Added Minister Al-Kaabi, “The value of this landmark agreement has the potential to be well in excess of QR11Bn (US$3Bn), depending on our requirements and the extent of China’s LNG shipbuilding capacity expansion. To this end, Qatar Petroleum is pleased and proud to support the expansion of the LNG ship construction capacity in China and looks forward to further growth in the near future.”
Also speaking at the virtual signing ceremony, CSSC chairman Lei Fanpei said, “The 174,000-m3 LNG carrier for Qatar Petroleum is the latest generation of LNG carrier design customised by CSSC for Qatar. The carrier has the world’s leading performance for efficiency, reliability and environmental conservation, demonstrating CSSC Group’s great efforts and commitment to the success of Qatar Petroleum’s projects.” Mr Fanpei called the deal “an important milestone.”
The North Field expansion projects will increase Qatar’s LNG production capacity from 77 mta to 126 mta. To support Qatar’s LNG capacity expansion, QP could order 100 or more LNG carriers to underpin its the shipping needs for local and international LNG projects, and replace some of its existing fleet.