After Covid-depressed ordering in 2020, South Korean and Chinese shipyards are awaiting word on what will be the largest LNG shipbuilding programme in history
After Covid slowed ship orders to historic lows in 2020, South Korean and Chinese shipbuilders are poised to cash in on a shipbuilding bonanza. Last year, Qatar Petroleum (QP) reserved shipbuilding capacity at South Korean and Chinese shipyards to build more than 100 LNG carriers worth US$19Bn – the largest LNG shipbuilding programme ever.
In mid-March, QP issued an invitation to tender to select LNG shipowners for the long-term time charter of the vessels. Those LNG carriers will be used to support QP’s North Field expansion project – which will raise Qatar’s LNG production capacity from 77 mta to 126 mta by 2027 – and LNG volumes from the Golden Pass LNG export project in Sabine Pass, Texas. QP owns a 70% stake in Golden Pass LNG, with ExxonMobil retaining a 30% interest. Qatargas will manage the selection of the shipowners. When the tender in process is completed, QP will assign the winning shipowners to construction slots secured at South Korean and Chinese shipyards.
South Korea’s big three shipyards – Korea Shipbuilding & Offshore Engineering, Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries (SHI) – dominated LNG carrier construction in 2020, winning 49 out of 53 orders, according to Clarksons Research Services. This figures to be the case this year, underpinned by QP’s mega-shipbuilding programme.
Overall, Clarksons Research Services estimates that 51 large LNG carriers will be ordered annually between 2021 and 2025, based on the increasing demand for LNG as well as supporting new projects in the US, Mozambique, Russia, Canada and Papua New Guinea. New shipowners are also entering the LNG carrier market.
One of those is Chinese gas distributor Shenzhen Gas, which signed a contract in mid-March for the construction of a 79,960-m3 LNG carrier at Hudong-Zhonghua Shipbuilding. Flying the Chinese flag, the LNG carrier will have an overall length of 239 m, beam of 36.6 m, depth of 21 m and draught of 8.5 m, with propulsion supplied by a single Wärtsilä 5RT-Flex50DF dual fuel engine. Priced at US$140M, the vessel will be delivered in June 2023, according to BRL Newbuilding Weekly.
The newbuild for Shenzhen Gas was one of 16 LNG carriers with a total capacity of 2,012,874 m3 placed in Q1 2021, according to BRL Shipping Consultants. The current orderbook stands at 176 vessels, with an aggregate capacity of 26,392,122 m3.
“South Korean’s ‘big three’ dominated LNG carrier construction in 2020”
A steel cutting ceremony was held at Hudong-Zhonghua Shipbuilding in March for the third in a series of three 174,000-m3 LNG carriers for PetroChina and COSCO Shipping Energy Transportation Co (CSET).
Designed by the Chinese shipbuilder, the vessel is being constructed to both class rules for Lloyd’s Register and China Classification Society. Each vessel in the series will have a length overall of 295 m, beam of 45 m and depth of 26.25 m, with a speed of 19.5 knots. Propulsion will be supplied by WinGD X-DF Otto-cycle, dual-fuel, low-pressure engines.
Hudong-Zhonghua anticipates the daily fuel consumption for the ship will be less than 100 tonnes.
Each LNG carrier in the series is priced at US$185M, according to BRL Weekly Newbuilding – putting the value of investment in the series at US$555M.
COSCO SHIPPING LNG Investment (Shanghai) Co (Shanghai LNG), a wholly owned subsidiary of CSET, and China LNG Shipping (Holdings) Limited (CLNG), in which the group holds 50% equity, are currently the only two large-scale LNG shipping companies in China.
Among others actively looking to expand their presence in the LNG carrier sector is the UAE’s ADNOC Logistics & Services. ADNOC has reportedly approached shipyards about the construction of four 174,000-m3 LNG carriers, with an option for another. Deliveries would be between Q1 2024 and Q1 2025, with a tender submitted by the end of May 2021, according to BRL.
Among deliveries in early 2021 is the 180,000-m3 LNG Rosenrot, built by DSME for a joint venture of energy trader ITOCHU Corp and Mitsui OSK Lines (MOL) under long-term charter for Germany’s Uniper, transporting US LNG to Europe. Like sister vessel LNG Schneeweisschen, delivered by DSME is 2018, LNG Rosenrot has an overall length of 297.9 m, beam of 47.9 m and draught of 11.5 m, with two-stroke, Otto-cycle, low-pressure dual-fuel WinGD X-DF propulsion.
Commenting on the importance of the delivery, Uniper chief commercial officer Niek den Hollander said: "LNG is helping to diversify gas sources around the world and strengthen both competition and security of supply — especially in European markets and in Germany, where reliance on certain supply regions is the subject of much discussion. Without LNG, there would be no global gas market.”
Added Mr den Hollander: “Liquefied natural gas now plays an important role in the energy supply, as well as in industry, the heating market and transport. As the production of natural gas in Europe continues to undergo a significant decline, the demand for imported natural gas will increase considerably in the coming years.”
Uniper traded 225 cargoes of LNG in 2020, compared to 134 in 2019. The Asia-Pacific region in particular has seen strong growth in the LNG trade in recent times: Uniper traded about two-thirds of its volumes of LNG in this region last year.
Gas carrier vessels on order or under construction
Type # of vessels
LNG carrier 176
LPG carrier 130
LPG other* 16
* include LPG/ethane, LPG regriferated and LPG/ethylene carriers
Source: BRL Weekly Newbuilding Contracts
India’s appetite for LNG
Demand for LNG in India is being driven by the country’s refineries, fertilser industry, power generation and transport sector. To handle this increase in demand for LNG, the country will more than double its existing LNG receiving terminal capacity, from 21.3 mta to 47.5 mta by 2022. India’s appetite for LNG and natural gas is underpinning new vessel projects.
A naming ceremony was held in February for GAIL Bhuwan, a new LNG carrier built by a wholly owned subsidiary of MOL to serve under charter to state-run GAIL, transporting LNG from the US Gulf Coast to India.
Japan’s MOL signed a charter agreement with GAIL – India’s largest natural gas company – in June 2019. Built by DSME, GAIL Bhuwan has an overall length of 297.9 m, breadth of 47.9 m, draught of 11.5 m and capacity of 180,000 m3. MOL LNG Transport (Asia) Ltd will manage the LNG carrier, supporting a 20-year sales and purchase agreement (SPA) signed by state-run GAIL to purchase 3.5 mta of LNG from Cheniere Energy’s Sabine Pass Liquefaction.
Newbuild FSRU for India
MOL has other LNG interests in India besides transporting US LNG. An Indian subsidiary of MOL holds an interest in what will be India’s first LNG receiving terminal, based on a newbuild floating storage and regasification unit (FSRU). Built by South Korea’s Hyundai Heavy Industries (HHI), the newbuild FSRU, Vasant 1, will be moored at the Jafrabad LNG receiving terminal project, which is being led by Swan Energy Ltd, at Jafrabad, Gujarat, India. Development of the project requires the construction of a breakwater and jetty, where the FSRU and floating storage unit (FSU) will be moored side by side to receive, store and regasify LNG for transmission to shore. The terminal will have a regasification capacity of 5 mta.
The development of the project is under a public-private partnership basis under a concession agreement executed between Swan Energy subsidiary Swan LNG Pvt Ltd (SLPL), Gujarat Maritime Board (GMB) and the Government of Gujarat. SLPL holds a 63% equity stake, with Government of Gujarat holding 26% interest, (made up by a 15% holding from GMB and 11% by Gujarat State Petronet Ltd), with the remaining 11% held by FSRU Venture India One Pvt Ltd, the Indian subsidiary company of Mitsui OSK Lines (MOL).
MOL serves as the technical partner for the project and has a long-term contract to operate and maintain the FSRU and FSU.
Swan Energy plans to operate the LNG import terminal on a tolling business model; out of 5 mta capacity, Swan Energy has already executed regasification agreements aggregating to 4.5 mta for 20 years with GSPCL (1.5 mta) and BPCL, IOCL and ONGC (1 mta each).
Commercial operations are expected to start 31 March 2022.
Besides being India’s first newbuild FSRU, Vasant 1 also incorporates new regasification technology. Since delivering the world’s first FSRU, PGN Lampung, in 2014, HHI’s Shipbuilding & Marine Business Department has been developing various new technologies with the Korea Institute of Shipbuilding and Ocean Future Technology, one of which is a new regas technology.
Introduced in 2018, the proprietary water-glycol regasification indirect heating system has been installed on three FSRUs. It uses a glycol mixture with a lower freezing point as a heat medium to significantly increase durability and safety compared to the conventional propane gas heating method, according to HHI.