Three shipowners are poised to ink time-charter contracts with energy major Shell on 10 LNG-fuelled VLCC newbuildings to be built in South Korea.
TradeWinds understands that Turkish-controlled Advantage Tankers will sign up to four of the vessels, with US-based International Seaways and AET of Malaysia taking three each.
The ships, which will be constructed at Daewoo Shipbuilding & Marine Engineering, are believed to be priced at around $100m each. That reflects a premium of about $15m to build them as dual-fuel vessels that will be able to bunker LNG.
Details of the charter-hire period and the rates on the vessels have yet to emerge. Final negotiations are said to be ongoing, with contacts due to be signed early this month.
Fearnley Securities expects the charters could be around seven years in duration, with rates in the region of $40,000 per day.
This leave returns in the 8% to 10% range, depending on leverage.
Hush hush
All parties are said to have signed extremely strict confidentiality terms.
Aside from AET, Advantage Tankers and International Seaways are slightly unexpected names for LNG-fuelled VLCCs. One broker described the trio as "an eclectic mix".
Some large tanker players, including Maran Tankers and Capital Maritime & Trading, had previously been linked to Shell’s long-running enquiry and talks with owners.
AET has already stated its commitment to LNG fuelling, with orders for tanker tonnage including VLCCs. Last year, the company contracted the first two LNG-fuelled VLCCs to be ordered in South Korea, booking a pair of vessels at Samsung Heavy Industries against charter contracts with French energy major Total.
Shell has consistently declined to comment on its commercial business deals.
DSME flagged up its upcoming haul of pioneering dual-fuelled VLCCs in December.
Unusually, the outfit announced it had signed a letter of intent with a European shipowner for 10 vessels worth about $1bn to be firmed up in the first quarter of 2021. However, the shipbuilder did not name the counterparty involved.
The statement by the yard sparked intense market speculation about the buyer’s identity, with Shell emerging as the name behind the berth reservations.
But the energy major declined to comment at the time.
Shell has been pursuing its ambition to build LNG-fuelled VLCCs for several years.
The ships are expected to be constructed with high-manganese steel bunker tanks — a material that has been promoted by DSME as a means of lowering capital expenditure (capex) costs on LNG-fuelled tonnage.
Capex-cutting efforts
Shell has made its own study into reducing the capex.
Last year, the company unveiled some of the results that showed it was possible to slash construction costs by 40% — from $13m to $7.6m — for a VLCC carrying 6,000 cbm of LNG fuel, which would give it a range of 6,000 nautical miles (11,100 km).
The use of high-manganese steel for these tanks over cryogenic stainless steel was one of the cost-reduction factors cited by Shell.
DSME's contracts with the three owners will bring the number of LNG-fuelled VLCCs on order to 13.
Cosco Shipping Energy Transportation Co ordered the world's first LNG-fuelled VLCC at Dalian Shipbuilding Co last year.
In April 2020, Total booked its two ships with AET at SHI priced at around $105m each. Options held at the yard were allowed to lapse.
Other LNG-fuelled VLCC newbuilding projects are believed to be in the works.
