China's Jiangnan Shipyard and Dalian Shipbuilding Industry Co (DSIC) are poised to join the small coterie of international shipbuilders capable of constructing large LNG carriers.
The two shipyards — under the control of state-owned China State Shipbuilding Corp (CSSC) — have each inked letters of intent (LOI) for one firm 175,000-cbm LNG ship with an option for an additional vessel with domestic owners.
CSSC Leasing has struck the newbuilding agreement with Jiangnan, while China Merchants Energy Shipping (CMES) has inked its LOI with DSIC.
A shipbuilding source familiar with the deals confirmed the LOIs, saying that the signing of official contracts would likely take place in 2022.
He added that the vessels will be fitted with GTT Mark III Flex membrane containment systems.
TradeWinds understands that Jiangnan and DSIC will give themselves up to 36 months to construct the ships once contracts are signed.
Slot scrambling
The entry of the two major Chinese shipyards into the mainstream LNG carrier sector comes as shipowners and project players are scrambling for scarce LNG berth slots at South Korean yards, which are the main builders of large-size vessels.
Hudong-Zhonghua Shipbuilding (Group) is currently the only Chinese shipyard building full-size LNG carriers. The Shanghai-based shipbuilder delivered its first vessel in 2004 and has constructed more than 20 ships.
But LNG industry watchers pointed out that Hudong-Zhonghua took some time to master the complexity of LNG carrier construction.
Aside from South Korea and China, several Japanese yards have experience of building LNG carriers but have not attracted any orders in recent years.
Russia's Zvezda Shipbuilding Complex is also taking its first steps in full-size LNG carrier construction with assistance from Samsung Heavy Industries. But these ships are for domestic buyers.
In a disclosure to the Shanghai Stock Exchange, CMES said the total value of both the firm and optional carrier at DSIC will not exceed $380m.
It said the validity of the LOI is for six months. The company did not disclose the delivery date but said they will use the latest LNG dual-fuel low-speed main engine that would meet the International Maritime Organization's regulations.
Entry efforts
Jiangnan and DSIC have been striving to break into the large LNG carrier segment for some time. But they have not been successful in winning any deals as shipowners prefer to have their LNG vessels built by shipyards that have delivered the ship-type before.
Shanghai-based Jiangnan, which has made gas ships a speciality, was the country’s first yard to break into the sector by winning a domestic order to build a 3,000-cbm pressurised LPG carrier in the late 1980s.
In June, it was commissioned by Chinese clean energy supplier Jovo Group to build a single 79,800-cbm LNG ship worth more than $120m for delivery at the end of 2023.
Jovo will be using the LNG newbuilding to transport LNG from Malaysia and Indonesia to China.
