Energy giant Petronas has selected South Korean shipowner Hyundai LNG Shipping Co to build the LNG carriers it requires to lift its planned volumes from the under-construction liquefaction project LNG Canada.

TradeWinds understands an order will be placed at Hyundai Heavy Industries for up to three firm vessels, with options on a similar number of ships.

The selection will allow Hyundai LNG to extend its international reach. The company controls six older Moss-type vessels and two modern ME-GI ships and was seen last year shortlisted for Polskie Gor­n­ic­two Naftowe i Gazownictwo business to acquire chartered LNG tonnage.

But the move signals a departure for Petronas from business with its own in-house group shipping subsidiary, MISC. In 2019, MISC teamed up with Japan’s NYK Line and Mitsubishi Corp to co-own two LNG carrier newbuildings for the LNG Canada project, separately from Petronas' 2020 enquiry for vessels.

Peter Zebedee, CEO at LNG Canada. Photo: LNG Canada

The choice also marks a win for South Korean shipbuilder HHI over its Chinese competitor Hudong-Zhonghua Shipbuilding (Group). This publication reported in January that the two had been battling it out for the business, which was floated last year.

At that time, Petronas asked for offers on up to six LNG carrier newbuildings for delivery dates in 2024.

Shrinking berth space

Market observers said the Malaysian company has taken its time in assessing the offers.

They suggested that the emergence of Qatar Petroleum’s tender to shipowners for a large raft of LNG tonnage, new business for Novatek and the filling up of shipyard berths with containership orders may have galvanised the company into taking a decision on the vessels it requires.

Work is underway on the marine facilities for LNG Canada as this shot from March 2021 shows. Photo: LNG Canada

Petronas controls a 25% stake in the 14-million-tonne-per-annum LNG Canada project in Kitimat, British Columbia.

The energy company has signed up to supply Vitol with 0.8 mtpa of LNG over a 15-year period with the bulk of volumes coming from LNG Canada.

Back on track

The $30bn, Shell-led LNG Canada project has been set back by the Covid-19 pandemic. During 2020, construction work was slowed and the site shutdown at times due to coronavirus cases and, in February, Petronas warned that these delays could affect its LNG sales.

This month, LNG Canada chief executive Peter Zebedee told an International Gas Union webinar that the project, which was sanctioned in 2018, is “on track” to produce its first cargo by the middle of this decade.

The project comprises two 7-mtpa liquefaction trains with cargoes from these targeted at markets in Asia. There is potential to expand the development with an additional pair of trains.

Shell holds a controlling 40% stake in LNG Canada with Petronas on 25%, PetroChina and Mitsubishi Corp both owning 15% shareholdings and Kogas 5%.