Flex LNG was one of a reported 37 companies invited to bid on Qatar Petroleum's charter tender, but its leadership seems unenthusiastic about the prospects.
"We've been invited, we'll look into it. It's a long process," the gas carrier owner's chief executive, Oystein Kalleklev, said during a Value Investor's Edge Live panel on Thursday.
"So maybe. Again, we need to get sufficient return on our capital if we're deploying capital."
Kalleklev told moderator J Mintzmyer that he would rather pay dividends and he needs to be convinced the deal is worth it.
As TradeWinds reported in March, Qatar Petroleum sent out a 450-page document to 37 shipowners as it looks to build ships at the 150 berths reserved at four shipyards.
Qatar Petroleum has two vessel designs, one with an ME-GI propulsion system and the other with X-DF engines, and is looking to charter the ships for periods of 10, 12, 15 or 20 years, with options to extend that to 25 years. It appears to want to build ships with 174,000-cbm capacity, due for delivery between 2023 and 2026.
Qatar is looking to build out its LNG production with the $28.75bn North Field Expansion project, which will boost its production from 77 million tonnes per annum to 110 mtpa.
Kalleklev told the panel that Qatar would probably increase output to 126 mtpa as US production ramps up and eclipses the Gulf state.
"All this new capacity, then you need new ships to carry," he said. "It's not really Qataris going into the market to order ships on a speculative basis ... they're ordering ships to transport the cargoes they need."
The first jump in production, from 77 mtpa to 110 mtpa, requires 45 to 50 ships, he said.
Add a further 25 ships necessary to carry cargoes from the Golden Pass LNG project in Texas, which is majority-owned by Qatar Petroleum, and at least 70 ships are needed.
"Then the Qataris also have 25 steamships in their current fleet which they probably want to retire once they're getting off contracts, which is another 25 ships," he said.
Big uncertainty
A further 20 ships from the second bump to 126 mtpa bring the total to 120, and possibly more, as Qatar has LNG carriers that burn heavy fuel oil.
"How long these ships will be trading is a big uncertainty," Kalleklev said.
"I actually do think Qatar will eventually order more than 100 ships, but I don't worry about it because it's for new volume and the replacement of older ships."
Kalleklev said Flex is unlikely to invest in newbuildings any time soon, as prices have been driven up by a run on containerships.
"It's not really in the interest of shareholders to invest in ships costing $200m," he said.
The company has the capacity to buy back shares, he added, and the ability to continue paying a $0.40-per-share dividend, even through the traditionally weak second quarter.
