Qatari shipowner Nakilat is enjoying the benefits of joint ventures and long-term charters that help mitigate rate volatility
Qatari shipowner Qatar Gas Transport Co, better known as Nakilat, is the critical marine transportation link in Qatar’s LNG supply chain, connecting its production at Ras Laffan and Qatargas customers around the world. Underpinning Nakilat’s success are long-term relationships with a pool of leading international gas shipowners in Japan, Greece, Germany, India, Canada, and the US. Among the strongest of these is with billionaire Greek shipowner John Angelicoussis and his Maran Gas Maritime.
That relationship will deepen further in May when Nakilat welcomes Maran Gas Maritime’s 173,400-m3 newbuild LNG carrier (LNGC), Hull 2478, to its fleet. Under construction at South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME), the vessel is the first of four under Global Shipping Ltd, a joint venture between Nakilat and Maran Ventures Inc formed in March 2019. Plans call for two of the vessels to be delivered in 2020, followed by two others in 2021. All four are being built in South Korea, two equipped with MAN Energy Solutions’ high-pressure two-stroke ME-GI and the other two with WinGD’s low-pressure two-stroke X-DF technology. These would be the first vessels in Nakilat’s fleet with either type of propulsion system.
Nakilat has a 60% stake in the joint venture, with Maran Ventures holding the remaining 40% interest. The four LNGCs will increase Nakilat’s LNGC fleet to 69, meaning it will effectively control about 12% of the world LNG carrier fleet capacity.
Nakilat’s gas shipping capacity is required to underpin Qatar’s growing LNG production, which will rise from 77 mta to 126 mta before the end of the decade, resulting from the North Field expansion project. North Field lies about 80 km from Ras Laffan, the main site of Qatar’s LNG production. In 2019, Nakilat’s fleet carried an impressive 59M tonnes of LNG.
Of the 69 wholly owned and joint venture vessels in Nakilat’s gas shipping fleet, 19 conventionally sized LNGCs are chartered or in joint venture control with Maran Gas. Teekay, Pronav, NYK, MOL, K-Line, Milaha, Petronet and Excelerate are among the other owners working with Nakilat. Nakilat’s remaining LNGC fleet includes five other conventional LNGCs, 31 Q-Flex vessels, with capacities of 210,000 to 217,000 m3, and 14 Q-Max ships, with capacities of 263,000 to 266,000 m3.
In October 2019, Nakilat bought a 49.9% ownership interest in US-based tanker owner International Seaways’ four Q-Flex LNGCs for US$123M. The four Q-Flex carriers are Al Gattara, Al Gharrafa, Al Hamla and Tembek.
|Nakilat LNG carrier, gas ship & FSRU fleet|
|Wholly & jointly owned|
|Owner||# of ships|
|Nakilat (wholly owned)||29|
Nakilat also has a 55% interest in one floating storage and regasification unit (FSRU) and four very large gas carriers (VLGCs) jointly owned with its major shareholder Qatari maritime and logistics company Milaha for the LPG trade.
In describing the company’s gas shipping strategy in February, Nakilat head of investor relations Fotios Zeritis said: “I would like to emphasise that we have chartered our fleet on multi-year fixed contracts with first-class charterers to mitigate any seasonality or volatility in short-term charter rates.” Added Mr Zertis: “Our consistent commercial strategy enhances the fleet utilisation and eliminates the current volatility of spot rate earnings across quarters. It is worth mentioning that our company’s long-term fundamentals have not changed due to the coronavirus outbreak and remain robust.”
For Q1 2020 ending 31 March, Nakilat had a net profit of Qr279.5M (US$76.8M) compared to Qr236M (US$64.8M) during the same period in 2019, an increase of 18.3%. Overall, revenue was up 13.2% to Qr1,022M (US$280.8M) for the quarter as compared to Qr902M (US$247.8M) for the same period year-on-year.
The strong Q1 2020 results follow in the wake of Nakilat’s record performance in 2019, when it posted profits of QR1Bn (US$275.5M) for the year ended 31 December, an increase of 12.4% year-on-year as compared to QR892M (US$245M) in 2018.
“Nakilat will effectively control about 12% of the world LNG carrier fleet capacity”
Nakilat also noted in its results the second phase of its fleet management transition from Shell International Trading and Shipping Company Limited (STASCo) to its own ship management for seven additional vessels.
Nakilat added a 55% stake in the FSRU Exquisite in 2018 through a joint venture with US-based Excelerate Energy. Exquisite has been operation at Pakistan’s Engro Elengy terminal at Port Qasim since 2015. As Pakistan’s first LNG import terminal, the facility has a regasification capacity of 690 MMscf/d.
In January, Excelerate Energy and Engro Elengy Terminal reached a heads of agreement to expand the send-out capability at the Port Qasim LNG import terminal to 150 MMscf/d. This will be accomplished by swapping out the Exquisite with Hull 2477, a newbuild FSRU under construction at DSME for Maran Gas. Excelerate was expected to take delivery of Hull 2477 in April, with expanded operations beginning in Pakistan in H2 2020. In September 2019, Houston-based Excelerate signed a five-year bareboat charter that contains an option to buy the FSRU from Maran Gas.
Q vessel conversions
One of the major projects that has not yet moved forward is the conversion of the Q-Max and Q-Flex vessels to two-stroke, dual-fuel, gas injection (ME-GI) propulsion. The conversion work will significantly reduce emissions when compared with marine diesel oil (MDO) or heavy fuel oil (HFO) in terms of CO2, NOx, SOx and particulate matter (PM).
Only one of the vessels has been converted thus far. Conversion of the two MAN B&W S70ME-C HFO-burning engines to the dual-fuel ME-GI concept on the Q-Max LNG carrier Rasheeda took place in 2015.
Nakilat joint venture manager Bader Al Mulla presented on the lessons learned from the ME-GI conversion for the Q-Max LNG carrier Rasheeda at Riviera Maritime’s LNG Ship/Shore Interface Conference in November.
He explained: “The project team, led by Qatar Petroleum, Qatar Gas and other international oil companies, evaluated different options and focused on different elements of the regulation requirements: either do nothing; make minor modifications for compliant fuel; or go with scrubbers. Given the uncertainties of accepting open-loop scrubbers, we looked at using LNG as a fuel as the most viable option.”
He ticked off several ME-GI conversion benefits, among which were flexibility of fuel supply, allowing optimum reaction to market changes and reduced bunkering activities.
The modification took place over 45 days at the Erhama bin Jaber Al Jalahma Shipyard in Ras Laffan, operated by Nakilat-Keppel Offshore & Marine (N-KOM).