Energy major Total has launched a hunt for up to six LNG carriers to cover its upcoming shipping requirements as the French giant grows its gas portfolio.
Those following the business said it is seeking offers of either newbuildings or vessels no older than 10 years.
Total is understood to be offering five-year charter periods on newbuildings, with options to extend the hire by two years. It is proposing three-year charters on any existing tonnage, also with two-year optional periods.
The company is seeking delivery times from the third quarter of 2022.
Financing concerns
Some industry players questioned whether the enquiry is something of a benchmarking exercise and expressed concerns that a five-year deal on a newbuilding is barely financeable.
Total had been expected to emerge for new LNG tonnage early in 2020.
The major had spent months working with shipbuilders to design a new breed of LNG carriers that would offer efficiency gains, which would pay back on its expanded LNG trading fleet.
Total became an LNG shipowner again in 2018 by default when the company bought compatriot Engie’s upstream assets, which included interests in 10 LNG carriers.
Since then, the company has signed a series of charter deals with companies including Japan's NYK Line, Russia’s Sovcomflot (SCF Group) and Greek-owned TMS Cardiff Gas.
The period deals were seven-year charters at rates reported to be in the mid-to-low $60,000 per day range.
Total’s requirement for LNG tonnage comes as Shell has boosted the number of LNG carrier newbuildings it is taking on charter to 14 with the addition of six more vessels last month.
Under chief executive Patrick Pouyanne, Total has been growing its LNG portfolio.
In its second quarter results briefing last week, the company ranked itself as the second largest player in the LNG business and described its position in LNG as “solid” for the long run.
Total is the lead shareholder in the under-construction, 12.88-million-tonne-per-annum Mozambique LNG project, Russia’s Arctic LNG 2 development with Novatek and the sanctioned Nigeria LNG train 7.
Answering questions on a results call, Pouyanne said all these three projects will deliver LNG at a time when the market is expected to have become more balanced.
Driving costs down
Pouyanne also said Total would be looking to drive down costs in the longer term and hinted the company had already achieved this on its upcoming LNG newbuilding orders for Mozambique.
“We've done it on the LNG tankers .. and we got a decrease of 10% or 15%,” he added.
He said Total’s trading team is thinking of cancelling around 30 US LNG cargoes this year. He said US LNG today is “not profitable”. But he added that this does not change what the company thinks about the long term.
“Fundamentally, this LNG business is a business we will continue to grow,” Pouyanne said. “ ... you don't make the energy transition in this planet, shifting from coal to gas without involving LNG market. And so that's a fundamental. And so we'll keep it.”
He said Total is an offtaker but the company believes the right model is to be integrated on the upstream, midstream and downstream aspects of the LNG chain.
“I think LNG development and growth is really anchored in the strategy of the group,” he added.
