Shell is being named as the “European owner” behind a letter of intent (LOI) for 10 LNG-fuelled VLCC newbuildings at Daewoo Shipbuilding & Marine Engineering.

Numerous sources close to the yard said Shell had reserved a slew of large tanker berths with the South Korean yard for dual-fuel VLCCs priced at about $100m each.

Several said the intention is to match shipowners with the berths in the coming weeks before firming up term charters and newbuilding contracts.

Asked about the LOI, a Shell spokeswoman declined to comment.

DSME took the unusual step of announcing the LOI on Tuesday.

The yard, which last week inked a contract with Adnoc Logistics & Services for up to six VLCC newbuildings, described the company it had signed with as “Euro­pean shipowners that promoted LNG dual fuel” and said contracts on the ­vessels are expected to be concluded in the first quarter of next year.

DSME priced the 10 vessels at around KRW 1.1trn ($1bn). The current price for a South Korean-built VLCC is about $85m, which would suggest a premium of around $15m for a dual-fuel ship.

Shell and ExxonMobil are understood to have approved the use of high-manganese steel in the construction of LNG bunker tanks, which is a cheaper solution than the one being promoted by DSME.

In September, Shell spoke publicly about an internal project to cut the capital expenditure (capex) on LNG-fuelled VLCC construction.

It estimated it could slash additional capex for LNG fuelling on a newbuilding — with a range of 6,000 nautical miles (11,100 km) and 6,000 cbm of LNG fuel storage in type-C tanks — by 40%, from $13m to $7.6m.

As part of these savings, Shell looked at the use of a single bunker tank instead of two and said the use of high-manganese steel for these tanks over cryogenic stainless steel would help cut $1.2m.

This week’s statement by DSME prompted mass speculation in tanker and broking circles as to the name behind the order.

Top of the initial list was shipowner Euronav. But sources close to the company were quick to dismiss this as incorrect.

Maran Tankers, perhaps due to its historic allegiance to DSME, and Capital Maritime & Trading, on the back of an earlier but later parked project for LNG-fuelled VLCCs, were also floated as possible names but later canned.

Shell, which aims to achieve net-zero emissions on its shipping by 2050, has been working on LNG-fuelled VLCCs for several years.

In mid-2019, it was said to be closing in on the business, with John Fredriksen’s Frontline, Euronav and Capital Maritime & Trading named as having pricing discussions on the vessels.

But in June this year, the action appeared to switch to China, where Shell had previously ordered dual-fuelled LR2 tanker tonnage.

TradeWinds reported that it was in talks with three Chinese leasing companies for up to eight LNG-fuelled VLCC newbuildings, with Chinese yards vying for the orders.

DSME has signed or pencilled in orders for up to 16 VLCCs this month. Photo: DSME