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One-quarter of 2017 LNG newbuilding completions will be delayed

Wed 19 Apr 2017 by Mike Corkhill

One-quarter of 2017 LNG newbuilding completions will be delayed

LNG carrier owners and builders continue to agree delays in newbuilding delivery dates where possible, deriving mutual benefit from their decisions. In the past eight weeks, postponements in the handover of 12 of the 48 LNGCs scheduled for completion in 2017 have been finalised.

Delayed LNGC deliveries are assisting shipowners by easing the effects of the current fleet overtonnaging and speeding a return to healthier freight rates. Shipbuilders are benefiting from later completions because they help to extend and spread construction workloads, and hence defer layoffs and redundancies, at a time when further newbuilding orders are scarce.

The majority of the 12 LNGCs leaving their shipyards later than originally intended will be delayed by only a month or two. However, several will be tardy by up to six months.

Four ships scheduled for completion this year will now be pushed back into 2018 and notable among this quartet are the 174,000m3 Flex Endeavour and Flex Enterprise. Both will now enter service six months later than planned due to recent negotiations between John Fredriksen’s Flex LNG, their owner, and Daewoo, their builder.

The LNG World Shipping LNG carrier orderbook as of 14 April 2017 shows that 11 ships have been delivered so far this year while another 37 ships are scheduled for completion during 2017.  

Notable year

Among the ships already commissioned in 2017 are the 5,000m3 Engie Zeebrugge, the first purpose-built LNG bunkering vessel, and JS Ineos Innovation and JS Ineos Intuition, the last two in a series of six 27,500m3 multipurpose gas carriers built by Sinopacific for Evergas and charter to Ineos. 

This year’s upcoming deliveries include five floating storage and regasification units (FSRUs) and the world’s second and third LNG bunkering vessels. The latter pair are the 5,800m3 Coralius that the Royal Bodewes yard is building for Sirius Veder Gas and chartering to Skangas commencing in June and the 6,500m3 Cardissa that STX Offshore & Shipbuilding is due to hand over to Shell in May. 

A fourth LNG bunker vessel will be put into service this year but its non-propelled status means that it is not included in LNG World Shipping’s list of LNGCs on order. The 2,200m3 barge Clean Jacksonville, now nearing completion at Conrad’s Orange, Texas yard, will be utilised by Tote Maritime to fuel its LNG-powered trailer carriers and container ships, initially at Tacoma, Washington and later at Jacksonville, Florida.

JS Ineos Innovation and JS Ineos Intuition, like their sisterships, can carry a variety of gas cargoes, including LNG and ethane, and can run on either LNG or ethane cargo boiloff gas (BOG). Ineos is employing these Dragon-class ships in the carriage of US ethane to Europe for use as petrochemical feedstock and burns ethane BOG as propulsion system fuel. 

However, Evergas has embarked on the construction of two Ineos Max pure ethane carriers of 32,000m3 for the same charterer and holds options for additional ships of this type. The idea is to replace Dragon-class ships with Ineos Max vessels, enabling the 27,500m3 ships to come off charter with Ineos and enter the small-scale LNG trades. The Evergas drive to build an LNG presence will take a step forward in 2018 when the first two Ineos Max gas carriers are completed.

The only new LNGC orders logged since LNG World Shipping’s previous bimonthly orderbook/fleet review are a pair of 173,400m3 vessels that Daewoo will build for Flex LNG and August 2019 delivery. The John Fredriksen company now has six LNGCs on order.    

First past floater post

This year will go down in history as the first in which a cargo transshipped from a floating LNG production (FLNG) vessel was dispatched to the world market. The historic shipment, produced by PFLNG Satu off Malaysia’s Sarawak coast and offloaded to the 150,000m3 Moss spherical tank Seri Camellia in a side-by-side ship-to-ship (STS) transfer operation, was made earlier this month.

For several years the industry has been watching to see which of four contenders would be the first to put an FLNG vessel into service. First mover advantage went to Shell and Exmar, both of which made final investment decisions (FIDs) in May 2011, Shell to proceed with its 3.7 million tonnes per annum (mta) Prelude FLNG scheme and Exmar to press forward with its 0.5 mta Caribbean FLNG barge. 

Petronas did not get around to the FID for its 1.2 mta PFLNG Satu FLNG project until March 2012 while Golar LNG entered the fray in September 2015 when it won the contract to supply the FLNG vessel to service the 1.2 mta Cameroon LNG export project. The Golar solution is based on the conversion of its 125,000m3, 1975-built, spherical tank LNGC Hilli into a floating LNG producer.

Many expected Exmar, with its small-scale Caribbean FLNG scheme, to be first past the finishing post. However, the anticipated charter with debt-ridden Pacific Rubiales and employment off Colombia’s Caribbean coast, complete with LNG sales to Gazprom, began to unravel in 2015. The project was subsequently cancelled and Exmar has been exploring alternative opportunities for the FLNG vessel ever since.

The Wison yard in China has completed construction and commissioning work on Caribbean FLNG and Exmar recently stated that it will formally accept possession of the vessel from the shipbuilder this month. Exmar and Wison have agreed that the FLNG barge will be laid up at the yard until suitable work is found. The principals also reported that an Exmar order for a second FLNG vessel at the yard, of 0.7 mta in capacity, would be cancelled.

There is no chance that Caribbean FLNG will be functioning as a floating LNG production vessel before 2018 at the earliest, the same year Prelude is set to commence operations off the coast of Western Australia as the world’s largest FLNG project.

In contrast Hilli, now renamed Hilli Episeyo, could be operational later in 2017 as the world’s second functioning and first converted FLNG vessel. The modification work, at the Keppel yard in Singapore, has entered its final phase and Hilli Episeyo is due to commence trial operations in the Kribi fields off the Cameroon coast in September this year. 

Golar LNG has concluded an eight-year time charter contract with Societe Nationale des Hydrocarbures (SNH) and Perenco Cameroon, developers of the fields, to underpin employment of Hilli Episeyo. The SNH/Perenco scheme is based on production of 1.2 mta and Gazprom has signed up for the full output.

Hilli Episeyo is being provided with the capacity to liquefy up to 2.4 mta of LNG, so Cameroon will have the potential to boost exports. This option will depend on the extent to which any newly discovered gas reserves exceed the needs of planned domestic fertiliser and power plants.  

Golar LNG, in tandem with its One LNG joint venture partner Schlumberger, is making progress in efforts to secure employment for a second converted spherical tank ship into an FLNG vessel. If negotiations are successful, Gandria would process LNG on behalf of Equatorial Guinea’s Fortuna project. 

One LNG and Fortuna project partner Ophir Energy are expected to make an FID on the scheme in the first half of 2017, enabling Gandria to commence work as an FLNG vessel in 2019. 

LNG World Shipping lists FLNG newbuildings in its LNGC orderbook statistics but not FLNG conversion projects.