Shell homes in on shipowners for LNG-fuelled LR2 dozen
Several names in the frame as energy major turns its attention to next tranche of aframax tanker tonnage
Shell is in talks with a shortlisted group of shipowners for a series of up to 12 LNG dual-fuelled LR2 tankers worth about $740m.
Brokers said Shell is speaking to at least four companies for six firm vessels, with an option for a further six.
Among those named as being in the final round of talks are fund manager JP Morgan and China’s Shandong Shipping, ICBC Financial Leasing and Bank of Communications Financial Leasing (Bocom Leasing).
Eastern Pacific Shipping is also believed to have looked at the business but it is unclear whether the company is still working on it.
Shandong Shipping previously worked with Shell on a series of up to 16 scrubber-fitted MR tankers under the energy major’s Project Solar. It stepped into the breach when others pulled back, contracting 10 firm ships and options for up to six more at China’s New Times Shipbuilding for between $36m and $37m each.
Last year, JP Morgan teamed with Shell on dual-fuelled chemical carriers and on LNG newbuildings. Its shipping arm booked four IMO type 2 newbuildings of 25,000 dwt at Hyundai Mipo Dockyard and two LNG carriers at Hyundai Samho Heavy Industries, all against time charters with Shell.
A spokesman for Shell said the company had no comment to make on the reports.
This looks set to be the third haul of dual-fuelled aframaxes for Shell, which has been pioneering the development of LNG fuelling across a range of tanker tonnage and moving to develop shoreside and marine infrastructure to facilitate its roll-out.
In August, the company signed up with South Korea’s Sinokor Merchant Marine to charter 10 LNG-fuelled aframax newbuildings priced at $62m each and contracted at Samsung Heavy Industries.
Before this, Shell was first to market with aframax tonnage, chartering two of eight 114,000-dwt so-called Green Funnel tankers contracted by Russia’s Sovcomflot (SCF Group) at Hyundai Heavy Industries in South Korea.
Key year ahead
This is shaping up to be a key year for LNG fuelling.
It is more economic to build these vessels than to retrofit gas-burning propulsion units.
Many owners delayed newbuilding decisions last year in a climate of tight finance and uncertainty over fuelling choices. This year, shipbrokers and yards are promoting LNG-fuelled designs to owners as a way of meeting emissions targets for their next generation of vessels.
But owners are battling to make the increased capital outlay stack up against the charter rates offered by major operators, such as Shell.
In addition, owners and operators looking to meet the IMO’s 2050 target of halving CO2 emissions from shipping are concerned that LNG, which offers a 30% reduction, may not meet future regulations.
Class society DNV GL lists 381 LNG-fuelled ships in operation and on order, nearly 10% of the 3,868 vessels on its LNGi database.
Of the vessels capable of bunkering LNG, 175 are already in operation but these are outstripped by the 206 vessels on order.
There are 19 LNG-fuelled tankers in operation, with 29 newbuildings under construction.