Illustration; Image by WMNQatar’s prospective LNG ship orders will have minimal impact on short-term charter rates, but could drive newbuilding prices up, according to shipping consultancy Drewry.
Qatar Petroleum’s plan to order more than 100 LNG ships is massive in size and equivalent to about 23% of the existing LNG shipping capacity, assuming that these units would feature 180,000 cbm capacities. However, Drewry does not expect LNG charter rates to be affected by the delivery of these ships as they will be tied to the upcoming projects and hence will not be competing with other ships in the open charter market.
Continuing with the historical trends, the Qatargas orders are expected to be backed by long-terms charter contracts from LNG liquefaction projects where Qatar Petroleum has invested.
However, if new orders are confirmed, LNG shipbuilding slots will become limited, in turn, pushing newbuilding prices up, the shipping consultancy said.
Qatar opted for the massive newbuilding plans in order to meet ship requirements associated with the expansion of the Qatargas LNG liquefaction project and the Golden Pass LNG project in the US. The Golden Pass LNG liquefaction project will have a nameplate capacity of 16 mtpa of LNG and is expected to come online by 2024. These two projects alone are expected to generate demand for 60 LNG ships.
The new units would also be replacement tonnage for old steam turbine ships in Qatargas’s shipping portfolio. Nakilat, Qatar’s national shipping company, has a fleet of 69 LNG ships with an average age of 10 years, but by 2030 the average age of this fleet will be approximately 21 years, so some replacement is likely, Drewry explained.
The order would fuel Qatar’s aim to increase LNG production capacity from 77 mtpa presently to 110 mtpa by 2024.
While newbuild prices have inched up a little over the last six months, they are still low when compared with newbuild prices in 2015. With sparse orders in the last three years, shipyards have ample capacity to take big LNG orders in our view.
“We believe most of Qatar’s LNG ship orders will go to Korean shipyards as the country has previously used all three major Korean shipyards – Daewoo, Samsung and Hyundai – for building similar ships. However, we expect these orders to be staggered, as Qatar Petroleum has indicated that the company expects to order the 100 new LNG ships over the next decade,” Drewry said.
