'The largest order in shipbuilding history'

While the exact timing of Qatar Petroleum’s latest liquefied natural gas capacity expansion remains uncertain, what is sure is that as many as 120 newbuild LNG carriers will be required by the state-owned player.

QP is looking to book up to 120 newbuild slots at global yards, including options, to help support its North Field Expansion (NFE) project that will incrementally increase the nation’s liquefaction capacity from 77 million to 126 million tonnes per annum.

Based on the expected firm orders for 60 to 80 LNG carriers, the Qatari order is the largest in shipbuilding history, and will consume between 50% and 60% of global shipyard capacity.

QP recently secured slots for the construction of eight 174,000-cubic metre capacity G4+ Changhui series LNG carriers, with the option for another eight vessels, with China’s Hudong–Zhonghua Shipbuilding Company.

The deal, worth close to $3 billion, sees the LNG carriers scheduled for delivery in 2024-2025.

The first train of NFE phase one is expected to come into operation in 2025.

"We are confident that we are on the right track to ensuring that our future LNG fleet requirements will be met in due time to support our increasing LNG production capacity," says QP chief executive Saad Sherida Al-Kaabi.

Meanwhile, South Korea’s Big Three — Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering — are expected to pick up most of the remaining spoils from QP’s mega-tender, having already been shortlisted for the vessels’ construction.

The trio currently has upwards of 90 LNG carriers above 150,000-cubic metre capacity on their combined order books versus just two such vessels at Hudong-Zhonghua — a wholly owned subsidiary of China State Shipbuilding Corporation (CSSC).

“We believe Qatar Petroleum was able to strike the deal with Hudong-Zhonghua at a competitive price of $180 million per vessel given its strong bargaining position,” notes maritime consultant Drewry.

“This price is about 5% lower than the newbuilding price of similar vessels ordered in December 2019.”

Not only do Chinese shipbuilders intend to expand their construction of more profitable vessels such as LNG carriers, the Qatar award could translate into Chinese companies coming on board the NFE project itself.

Such a move could allow China to secure offtake LNG volumes from this expansion project.

Compared with its South Korean rivals, Hudong-Zhonghua has less of a track record in LNG carrier construction and QP’s award is said to have surprised some market observers.

However, other sources point to the experience and transfer of technology the Chinese contractor has gained of late while constructing LNG carriers in close collaboration with shipping companies such as Mitsui OSK Lines (MOL).

Other industry players are also expected to benefit from QP’s latest vessels tender.

“We expect Nakilat [also] to benefit from Qatar’s mega LNG carrier order given Nakilat’s longstanding relation with Qatar Petroleum,” adds Drewry.

“As Nakilat has [the] majority of its wholly owned Q-Flex and Q-Max vessels on longer-term charter with Qatargas (subsidiary of Qatar Petroleum), we believe some of the newbuilds will become part of Nakilat’s fleet, either as wholly owned or through a joint venture.”

The newbuilds from this tender will service QP’s local and international LNG projects — QP and ExxonMobil are partners in the under-construction 15.6 million tpa Golden Pass project in the US — and also replace some of its existing fleet.

The South Korean Big Three won the entire 2004 order for 53 LNG carriers for Qatar.