Shipowner Adnoc Logistics & Services (Adnoc L&S) has pencilled in an order for up to six VLCC newbuildings worth more than $500m at South Korea’s Daewoo Shipbuilding & Marine Engineering, as the company moves to grow its crude trading fleet.
Brokers and shipbuilding sources said Adnoc L&S, which is the shipping arm of Abu Dhabi National Oil Co (Adnoc), has signed a letter of intent (LOI) for three firm VLCCs and a trio of optional berths.
A deal has yet to be inked with the yard, but the business is expected to progress during December.
All eyes are on Adnoc L&S’ fuelling choices.
The shipowner has been considering taking the dual-fuel route and opting for LNG fuelling.
Costly
Speaking at the ADIPEC Virtual 2020 meeting this month, Adnoc L&S chief executive Captain Abdulkareem Al Masabi told a panel: “We are looking at a hybrid fuel solution on the VLCC.”
He said the spread between the cost of a conventionally fuelled newbuilding and one built to bunker LNG is $15m to $17m, which he described as “still costly”.
But he added that LNG is “the only proven solution as of today to replace heavy fuel oil or very low-sulphur fuel oil".
Clarksons currently prices a conventionally fuelled VLCC newbuilding at approximately $85m.
A spokeswoman for Adnoc L&S said the company cannot comment on reports about LOIs. But she referenced a statement made on 22 November by Abu Dhabi’s Supreme Petroleum Council, which also functions as the Adnoc board of directors.
This said: “Adnoc will expand its shipping capabilities by purchasing a fleet of VLCCs through Adnoc Logistics & Services.”
The move, which will see the company enter a new sector, is to support growing customer demand and a move by Adnoc into trading, the Supreme Petroleum Council said.
Price slide
TradeWinds reported in August that Adnoc L&S had requested offers from shipyards on up to six VLCCs and eight aframax LR2 tanker newbuildings worth more than $900m.
Aside from the VLCCs, the Middle East owner was looking for a quartet of aframax tankers, with options on four more vessels.
At the time, the new enquiry was one of the only new pieces of business around and brokers said they expected some fierce competition on pricing of the vessels.
They estimated the VLCCs will cost in the region of $87m each and the LR2 tankers close to $50m apiece, with elevated prices if the company opted to take the dual-fuel route.
But prices have since slipped. Clarksons currently prices a conventionally fuelled VLCC newbuilding at around $85m and an aframax at $46m.
In the interim, Adnoc L&S already took its first dive into VLCC ownership.
After a slow start on a secondhand enquiry for large tanker tonnage, which kicked off in 2019, the company moved quickly to secure two of Hunter Group’s VLCCs.
In October, Adnoc L&S moved in on the 300,000-dwt, scrubber-fitted Hunter Laga and Hunter Saga (both built 2019).
The company is paying around $84.2m each for the ships in a deal that is set to conclude in December.
