Qatar has signed a milestone LNG newbuilding berth reservation deal for a potential 16 vessels worth CNY 20bn ($2.85bn) with China’s Hudong-Zhonghua Shipbuilding (Group).
The deal comes as it moves to ink agreements on up to 120 slots over the coming few months.
Photos released in China show a “deed of agreement” (DOA) for the reservation of slots and options to purchase LNG carriers being signed over video conference by officials from CSSC and Qatar Petroleum.
TradeWinds understands that under the DOA shipyard berths for eight firm LNG newbuildings, plus a similar number of optional slots, have been reserved at Hudong-Zhonghua.
Sources said the vessels’ capacity will be around 175,000 cbm and will be priced at around $180m each.
They are scheduled for delivery dates in 2024 and 2025.
This is the first step by Qatar on its mammoth LNG ship acquisition exercise, which looks set to be among the largest newbuilding projects undertaken.
Some LNG market players expressed initial surprise that Qatar had gone to China for the first batch of newbuilding berths instead of South Korea where it has previously ordered its LNG tonnage.
But one commented: “If they want to sell some gas to China then they have to build some ships there.”
Producers Qatargas went out to shipyards last year asking for offers on 40 firm vessels and the same number of options for ships delivering across a four-year period from 2023.
Deed of agreement
The yards submitted final offers in February and were whittled down to four shortlisted contenders — South Korea’s big three Hyundai Heavy Industries, DSME and Samsung Heavy Industries, along with Hudong-Zhonghua — China’s only builder of large LNG carriers.
A parallel process with shipowners was also started a little later.
Qatargas is aiming to first secure slots at yards and then sign time-charter deals on the vessels with selected shipowners.
Yards involved in the process had been told that Qatargas and its associates would move to put a “deed of agreement” in place on the newbuilding berths this month in advance of the start of Ramadan on 22 April.
This week, Qatar’s energy minister, Saad Sherida Al-Kaabi, said in an interview with S&P Global Platts that at least 60 to 80 ships will be built but the exact number will depend on who is ordering the LNG.
Al-Kaabi, who is also chief executive of Qatar Petroleum, revealed that the first batch would be signed with a shipyard on Wednesday, without naming the yard. He said the remainder of the slots needed would be inked before the summer.
The minister said Qatar will likely need a minimum of 60 to 80 vessels but will book shipyard capacity for 120 vessels.
He said the cost will run into “billions of dollars”, adding that Qatar may be taking up “60% of the entire shipbuilding capacity of the world, for LNG”.
Expansion plans
Qatar needs the tonnage to lift the new volumes from its planned North Field Expansion project which will boost its production from 77 million tonnes per annum of LNG to 126 mtpa.
Initially, the plan was to boost production to 110 mtpa by 2024. In November, this was expanded with a planned second phase, which would see output grow to 126 mtpa by 2027.
Al-Kaabi said this month that Qatar would not scale back on these plans for six new liquefaction trains but would postpone the first phase by three to six months, pushing its start-up into 2025 due to the coronavirus challenges faced by contractors bidding for the work.
On top of this, it requires additional ships for its 15.6-mtpa Golden Pass LNG project in the US, run under the Qatar Petroleum and ExxonMobil joint venture Ocean LNG, and to replace older tonnage coming off charter.
