Novatek is set to sign contracts and reserve berths for up to 10 ice-class LNG carrier newbuildings to support planned projects in the Arctic.
Industry sources said the Russian energy company has selected Hudong-Zhonghua Shipbuilding (Group) and South Korea’s DSME as its preferred yards.
Novatek is expected to sign contracts with DSME for at least five vessels in the next few weeks and with Hudong-Zhonghua for a similar number.
The Chinese shipbuilder has already signed up to a slot reservation agreement with Qatargas for up to 16 LNG newbuildings.
Those following this business said it may not be firmed up until the end of the year and added that the ships for Novatek will probably be firmed up once the Qatari tonnage has been finalised.
Shipyards submitted offers to Novatek on the 10 ships in February.
South Korea’s big three shipbuilders — Hyundai Heavy Industries, DSME and Samsung Heavy Industries — are understood to have put in bids, along with Hudong-Zhonghua.
Moving quickly
At the time, those working on the business said Novatek wanted to move quickly on the vessels, after it requested delivery dates from 2023 onwards to dovetail with the start-up of its 19.8-million-tonnes-per-annum Arctic LNG 2 and 4.8-mtpa Obsky LNG projects.
The new vessels would be used in conjunction with specialised ice-breaking LNG carriers.
In March, it emerged that Novatek had also approached selected shipowners with a request for proposals on the 10 ships. The owners are believed to include those that worked on shipping for Novatek’s Yamal LNG.
The order would be a coup for DSME. The yard built the 15 Arc7, ice-breaking LNG carriers for Yamal LNG, but missed out to SHI, which was selected to partner Russia’s emerging Zvezda Shipbuilding Complex on building the next 15 Arc7 ships for Novatek and its partner Sovcomflot (SCF Group) for Arctic LNG 2.
So far, five of these 15 specialised ships have been firmed up. The first was contracted by Russian shipowner Sovcomflot and four by the Novatek-Sovcomflot joint venture Smart LNG. SHI is expected to build the hull blocks for that order, with assembly and completion to take place in Russia.
A further 10 due to be inked by Smart LNG in the first quarter of 2020 have yet to materialise.
Forging ahead
Novatek would appear to be forging ahead at a time when other liquefaction developers are taking a more cautious approach.
Broker and consultant Poten & Partners expects at least 20 planned new projects from the 228 mtpa of new liquefaction scheduled to be sanctioned this year will be pushed back due to the effects of coronavirus, low oil prices and a challenging financing environment.
Novatek said at the end of April that it will delay its final investment decision on its next-up Arctic development, Obsky LNG.
Announcing cuts in capital investments, mainly on oil-related developments, company officials said Novatek is considering postponing the launch of Obsky LNG. But the Arctic LNG 2 project is scheduled to go ahead as planned.
Consultants said global LNG trade, which has been growing at 7% to 8% per annum, is expected to fall this year, but it is likely to revive to between 3% and 4% from 2021.
They added that Russia will not want to miss out on market share as Qatar and companies in the US continue with expansion plans due to come online from around 2024.
