Giant-sized newbuilds ordered by Venture Global LNG and Dynagas highlight LNG carrier order boom that saw contracts signed for 37 new ships in Q1 2022, reports Riviera.
New contracts
Following a record number of newbuilds contracted at shipyards in 2021, orders for new LNG carriers have shown no signs of slowing in Q1 2022, even as average prices have risen at least 17% since the start of the pandemic two years ago.
Clarksons Research reported orders were placed for 37 LNG carriers with capacities of 140,000 m3 or more in Q1 2022, 26 of which were won by South Korean shipbuilders. These gas carriers were among a total of 259 new ships of all types ordered with an aggregate of 9.2M compensated gross tonnes (CGT) during the quarter. South Korean shipbuilders were major beneficiaries, winning just a shade under 50% market share on a CGT basis, with orders for 97 ships totalling 4.57M CGT. Chinese shipbuilders trailed with a 42% market share, signing orders for 130 ships totalling 3.86M CGT. As result, the global shipbuilding backlog rose by 1.55M CGT to 94.71M CGT in March. Between the orders for container ships and LNG carriers, shipyards slots are disappearing at shipyards.
“The take up of LNG tonnage knows no bounds with more vessels landing in our order columns this week and even more on the horizon” reports BRL in its BRL Weekly Newbuilding Contracts, noting, “There is no let up, with deliveries spanning 2025 and 2026 and prices going higher.” The analyst reports several new significant LNG carrier orders during Q1 and early Q2 2022, and positive developments in QatarEnergy’s massive, multi-billion-dollar newbuild programme.
Ordering surge continues in Q2
Optimism about the future of the LNG market has continued to drive orders for new LNG carriers in Q2, with European shipowners Celsius Tankers and Knutsen OAS LNG Shipping signing contracts with South Korean shipyards, according to BRL. Celsius, which has ambitions to grow its fleet to as many as 20 LNG carriers, placed an order with Samsung Heavy Industries (SHI) for a 180,000-m3 vessel priced at US$208M with delivery in January 2025. No details were available on the dual-fuel propulsion for the vessel, but in its most recent gas carrier newbuilds, Celsius specified MAN Energy Solutions’ two-stroke, dual-fuel Otto-cycle ME-GA engines. Besides the low-pressure, two-stroke engines, these ships are being built with air lubrication systems and coated with the “best available paint” to reduce hull friction for its ultra-eco LNG carriers. Celsius now has nine 180,000-m3 LNG carriers under construction at SHI.
Indicative of the price jumps being seen at shipyards, is Knutsen OAS LNG Shipping’s order for two 180,000-m3 LNG carriers. Ordered from Hyundai Samho, the ships were reported priced at US$224.5M apiece and will be equipped with two WinGD 5X72DF dual-fuel engines producing 16,125 kW at 89 rpm. The Norwegian owner now has 18 LNG carriers on order, with the earliest priced at US$187M — a US$37.5M jump, reports BRL.
Newbuilding prices continue to grow
Data published by Fearnleys shows the cost to build a typical LNG carrier has surged since the start of the pandemic. The shipbroker reports the average cost of an ME-GI-propelled, 170,000-m3 LNG carrier newbuilding has jumped US$32M in two years, rising from US$189M to US$221M at the end of March. This represents a 17% increase for the same vessel ordered in March 2020.
Clarksons Research reports LNG newbuilding prices rose in March 2022 from US$218M to US$220M. This is part of an overall trend of rising prices for all types of new ships. For instance, the average cost for a new container ship with capacities of 13,000 to 14,000 TEU increased from US$148.5M to US$149.5M.
In March, the Clarksons Newbuilding Price Index climbed two points to 156.17 — the 16th consecutive month the index has risen.
New larger-size vessel emerging
Besides higher newbuild costs, some owners are beginning to order a larger size LNG carrier that surpasses the capacity of conventional size vessels, rivalling Q-Flex-size carriers. US LNG producer Venture Global LNG has contracted for three giant-sized 200,000-m3 LNG carriers from South Korea’s Daewoo Shipbuilding Marine & Engineering (DSME) for delivery in H2 2025. These ships cost $235.7M apiece.
The first cargo from Venture Global LNG’s Calcasieu Pass LNG export facility in Cameron, Louisiana, was loaded on Maran Gas Maritime’s 174,000-m3 Yiannis in Q1 2022. Greece-flagged Yiannis is under charter to JERA Global Markets.
Greece’s Dynagas is confirmed as the ‘undisclosed European owner’ that booked three 200,000-m3 LNG carriers at Hyundai Heavy Industries (HHI) in Q1 2022. Each vessel is priced at US$234M, with deliveries in 2025. Dynagas has six additional sister vessels on order at HHI, all of which have long-term charter employment with US LNG exporter Cheniere Energy.
French cryogenic technology engineering company GTT reports it has received an order from HHI for the tank design of three new LNG carriers, each with a capacity of 200,000 m3. The tanks will be fitted with the GTT Mark III Flex+ membrane containment system. The vessels are scheduled for delivery during Q1, Q2 and Q4 2025.
Elsewhere, BW Gas is confirmed as the previously undisclosed buyer of two 174,000-m3 LNG carriers at DSME. These vessels are priced at $214.5M apiece. Deliveries are scheduled by the end of 2025. Six vessels are now order at DSME for BW Gas, two of which will be delivered in 2022.
More positive news emerged for over 100 LNG carriers where berth space is reserved in South Korea and China. Many of these newbuilds are likely to be chartered by QatarEnergy rather than owned outright. The first owner has now been confirmed as Mitsui OSK (MOL) who will own four LNG carriers already reserved over a year ago from Hudong-Zhonghua Shipbuilding. Deliveries are scheduled within 2024 and 2025.
The long delay on the Qatar project is now producing a ’crisis’ in South Korea due to the order boom elsewhere and delivery schedules for other non-Qatar vessels are bound to be affected.
Dalian Shipbuilding Industry has landed an order for two 175,000-m3 LNG carriers for China Merchants Energy Shipping, with deliveries set for 2025. This contract contains options for two more ships.
Among the other contracts in discussion, is one being negotiated between China’s CNOOC and Hudong-Zhonghua Shipbuilding for six 174,000-m3 LNG carriers.
BRL, which tracks LNG carriers slightly differently from others, reports orders for 36 LNG carriers with a total capacity of 5,741,800 m3 have been placed as of 11 April. This puts the total orderbook at 246 LNG carriers with an aggregate capacity of 37,778,432 m3.
Overall, global LNG demand is expected to grow from 380M tonnes in 2021 to 700M tonnes a year by 2040 — a 90% increase, according to Shell forecasts. Asia is expected to consume the majority of this growth as domestic gas production declines, regional economies grow, and LNG replaces higher-emissions energy sources, such as coal and oil to mitigate concerns about greenhouse gas emissions.
Besides expanded LNG trade, other drivers seen in the LNG shipbuilding surge are impending international environmental regulations that will go into effect as of 1 January 2023. Older LNG carriers are unlikely to meet the requirements of IMO’s Carbon Intensity Indicator (CII) by 2025, forcing vessels out of the market, according to Lloyd’s Register global gas segment manager Panos Mitrou. Mr Mitrou makes the point that about 250 ‘elderly steam turbine vessels’ and even 150 newer LNG carriers with four-stroke, dual- or tri-fuel diesel-electric propulsion systems, will be challenged to meet IMO’s new Carbon Intensity Indicator (CII).
He says, “Well over half of the existing fleet are unlikely to achieve CII ratings of A, B, or C when they are gauged next year. This means ships rated E will have to undergo carbon-efficiency improvements immediately and owners of D-rated vessels will have to ensure ships become more fuel efficient within the three following years.”
Adds Mr Mitrou, “However, since CII assessments will become progressively stricter from 2027 until the end of the decade, ships which are adapted to meet CII requirements by 2024/5 may subsequently fall into categories D and E later in the decade. Owners of these older vessels will then be faced with the decision over whether to invest in expensive sustainability measures, sell them for conversion to floating LNG plants, or dispose of them for recycling.”
Newbuild boom spurred by Russian gas retreat
The replacement of Russian natural gas transported by pipeline from Russia to Europe with LNG will require 160 conventional-size LNG carriers costing US$35Bn, according to The Institute of Shipping Economics and Logistics.
The Bremen-based maritime logistics research company says, “Additional transport capacities for approximately 280M cubic meters of LNG would be required. At today’s standard size of 174,000 m3 per unit and a transport performance of about 10 voyages per year, this would mean a fleet increase (hypothetical) of about 160 LNG carriers. At a construction price of currently US$220M per unit, this would be an investment of about US$35Bn.”
New orders for LNG bunker vessels
Meanwhile, in the small-scale and LNG bunkering market, Mitsubishi Heavy Industries has secured a contract to build a 3,500-m3 LNG bunkering vessel for KEYS Bunkering West Japan for delivery in March 2024.
As LNG Shipping & Terminals reported, Singapore’s second and largest LNG bunker vessel, Brassavola, was launched at Sembcorp Marine in early April. Owned by MOL, the 12,000-m3 LNG bunker vessel will be shared by Pavilion Energy and TotalEnergies Marine Fuels when it enters service later this year.
Overall, there are 36 LNG bunker vessels in operation and another 28 on order, with at least 15 others under discussion, according to DNV’s Alternative Fuels Insight platform. Orders for newer LNG bunker vessels are trending towards higher capacities (of 5,000 m3 and up), representing an increasingly larger percentage (almost 47%) of the global fleet to meet the demands of a growing fleet of LNG-fuelled vessels.
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Source: Riviera
