Shell has added 12 LR2 tankers to its newbuilding programme of LNG dual-fuel tankers and has set the standard design for the next generation of tankers
In a video ceremony reported in the Chinese press, state-owned China State Shipbuilding Corporation (CSSC) signed contracts with China’s Bank of Communications’ leasing arm, BoComm Financial Leasing for the construction of 12 LNG dual-fuel LR2 tankers. The aggregate sum of the contracts was reported as CNY4.6Bn (US$650M), or approximately US$54M each.
The LR2 tankers are reported to be 120,000 dwt, larger than the 110,000 dwt standard type used by VesselsValue as the generic vessel for this sector. The shipping data and valuation provider currently estimates newbuilding prices for the LR2 sector at US$53M. Given the unreported but significant premium for LNG dual-fuel power, the calculated US$54M appears to be good value.
Four of the LR2 tankers are to be built at Shanghai Waigaoqiao Shipbuilding (SWS) and eight at Guangzhou Shipyard International (GSI). All are to be built and delivered in 2023.
According to Chinese press reports, the SWS and GSI design for the LNG dual-fuel LR2 tankers builds on the yards’ existing experience of LR2 tanker design and will incorporate the latest elements from R&D. Together the yards have constructed 22 LR2 tankers and have four on order.
The vessels are reported to have been chartered by Shell for 15 years against long-term contracts with Chinese state interests. Shell is also the commercial operator of 10 LNG dual-fuel Aframax tankers on order from Samsung Heavy Industries and has been active in the shuttle tanker sector.
Shell Shipping & Trading has made a huge commitment to LNG dual-fuel operations, including an LNG bunker operation, and the oil major’s vice president of shipping and maritime Dr Grahaeme Henderson has made it clear that LNG is the cornerstone of its journey to a low carbon fleet.
He said at the time of the Samsung LNG dual-fuel tanker announcement “LNG is a cleaner-burning and lower-carbon fuel, so shipowners are increasingly using it to help achieve their environmental ambitions in a cost-effective way.”
One outcome of Shell’s LNG dual-fuel powered tanker orders at CSSC in China and Samsung in South Korea is that when these tankers are in the water and trading, it will be difficult for the company to justify chartering in vessels that are not of equal environmental status. Indeed, the threshold for chartering out to Shell in the next five to 10 years might include LNG dual-fuel as a minimum. For those independent tanker operators looking at ordering the next generation of tankers, Shell might have set the pathway.
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