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LNG World Shipping

Dynagas reaps reward of ice class LNG play

Wed 15 Aug 2018 by Craig Jallal, tankers and markets editor

Dynagas reaps reward of ice class LNG play
Boris Vilkitsky is the first of the five Arc7 icebreaking LNG carriers in which Dynagas Holdings has a stake

Dynagas has a private and a public side and one is feeding LNG carriers into the other, as the group’s long-term contracts to service Russian Arctic LNG exports commence

It is often said the barriers to entry are high in the LNG carrier business and there is no doubt that sound credentials are de rigeur. For George Procopiou, founder of Dynacom, it was his reputation and track record in other shipping sectors that convinced his banks to support him when his tanker company ordered its first LNG carrier in 2004. Furthermore, they did not hesitate to provide their backing even though he had taken the bold step of ordering ice-class vessels.

Today, his shipping group has two companies in the LNG sector, Dynagas Holdings and Dynagas LNG Partners. The role of Dynagas Holdings is to provide newbuilding supervision and crewing, as well as commercial and technical management, for the group’s LNG carriers.

Ice specialist

In recent years Dynagas Holdings has been busy supervising the construction of fully winterised, icebreaking Arc7 LNG carriers built for the carriage of Yamal LNG cargoes loaded at Sabetta high in the Russian Arctic.

The company has an interest in five of the 15 such ships that Daewoo Shipbuilding & Marine Engineering in Korea is building for the project. Two of the Dynagas five have been completed and the remaining three are due for commissioning in 2019.

When Dynagas LNG Partners was floated on NASDAQ in 2013, its assets comprised three existing Finnish Swedish ice class 1A (equivalent to Arc4) Dynagas Holdings LNGCs - Clean Energy, Ob River and Clean Force - a US$30M revolving credit from George Procopiou and an option to buy the ice class LNGCs Dynagas Holdings had on order.

Clean Planet’s employment in the Cool Pool is being followed by a 17-year charter with Yamal LNG, until 2035

At the time Dynagas Holdings had a 58% interest in Dynagas LNG Partners, and had agreed to pay the management company, which is wholly owned by George Procopiou, US$2,500 per day (increasing annually by 3%) for each vessel, plus 1.25% gross of charter hire.

In due course, seven new Dynagas Holdings LNGCs earmarked for the Yamal LNG project will be sold, with their time charter contracts, to Dynagas LNG Partners. The complement comprises the five 172,410 m3 Arc7 ships constructed by DSME and two Arc4 ships that will be utilised to shuttle cargoes transshipped from the Arc7 vessels to their final customers.

This ship purchase pattern is clearly laid out in the Dynagas LNG Partners prospectus: “We will receive the right to purchase these vessels, which we refer to as the optional vessels, at a purchase price to be determined pursuant to the terms and conditions of the omnibus agreement within 24 months of their delivery to our sponsor.”

“Some of the contracts that the Dynagas group had been offered required too low rates for too short a period. This might be tempting for those owners looking to enter the LNG business, but one had to think of the employment possibilities of a vessel at the end of five-year contract”

The sale value is set by an independent appraiser and the right to purchase is not an obligation. Nor does the prospectus prohibit the family from retaining the newbuildings and competing against the public company.

Speaking at the Analyst & Investor Capital Link Shipping Forum, organised as part of Posidonia week in Athens in June 2018, Dynagas LNG Partners chief executive Tony Lauritzen (George Procopiou’s son-in-law), said, “It is Dynagas group policy to always have some LNG ships on order speculatively.”

He noted that it was very important to arrange the right sort of contract. Some of the contracts that the Dynagas group had been offered required too low rates for too short a period. This might be tempting for those owners looking to enter the LNG business, but one had to think of the employment possibilities of a vessel at the end of five-year contract, he warned.

Ultimately, Dynagas will have 11 LNGCs on charter to Novatek, operator of the Yamal LNG project. The fleet will comprise the five Arc7 icebreaking ships and six ice class Arc4 vessels. Novatek is employing the Arc4 ships for the final leg of the delivery voyages, to opimise the time the Arc7 vessels work in the Arctic high latitudes for which they were designed.

FSRU play

In 2016 it was rumoured that the Dynagas group had signed for two newbuilding slots with Hudong-Zhonghua Shipbuilding in China and that engineering proposals had been drawn up for two floating storage and regasification units (FSRUs) for the slots in question. The decision to order the two FSRUs on a speculative basis was later confirmed. Previously, in 2012, the Dynagas group was reported to have cancelled a speculative FSRU order at STX Offshore.

When asked about FSRUs at the Capital Link Forum, Mr Lauritzen was, not surprisingly, bullish. “We believe in the FSRU market. We are impressed with how the industry has been making increasing use of regas vessels. We have seen a market that has gone from being extremely long term to one where units are often being chartered in for seasonal need.

We have chosen a flexible FSRU design able to accommodate this change in the regas vessels sector. Our new ships will be tailor-made for use as both conventional, trading LNG carriers and FSRUs. The Hudong pair will be built with dual-fuel, diesel-electric propulsion systems and twin skegs and will be able to sail at 19.5 knots. For regasification duties they are being provided with the ability to vaporise LNG, using either the open-loop or closed-loop technologies, or even a combination of the two.”

With the speculative FSRU orders, the Procopiou shipping group is again going boldly into a new sector, albeit with the adaptability to work in the pure LNG carrier market, if need be. One thing is certain, Mr Procopiou is not afraid to take a punt on the LNG market.

  Dynagas Holding LNG carrier fleet and employment
  Name Built Builder Containment Propulsion Ice Class Employment
  Boris Vilkitsky 2017 Daewoo 172,410 m3 GTT NO96 4 × Wärtsilä 12V50DF & 2 × Wärtsilä 9L50DF Arc7 Yamal to 2045
   
Clean Horizon
2015 Hyundai  162,000 m3 GTT Mark III  Wärtsilä 12V50DF  FS 1A (Arc4) Cool Pool; then Yamal 2018 to 2035
  Clean Ocean 2014 Hyundai  158,643 m3 GTT Mark III Wärtsilä 12V50DF  FS 1A (Arc4) Yamal / Cheniere to 2036
  Clean Planet 2014 Hyundai  161,815 m3 GTT Mark III Wärtsilä 12V50DF  FS 1A (Arc4) Cool Pool then Yamal; 2018 to 2035
  Clean Vision 2016 Hyundai  155,000 m3 GTT Mark III Wärtsilä 12V50DF  FS 1A (Arc4) Cool Pool then Yamal; 2018 to 2035
  Fedor Litke 2017 Daewoo 172,410 m3 GTT NO96 4 × Wärtsilä 12V50DF & 2 × Wärtsilä 9L50DF Arc7 Yamal to 2045
               
  Newbuildings            
  Boris Davydov 2019 Daewoo 172,410 m3 GTT NO96 4 × Wärtsilä 12V50DF & 2 × Wärtsilä 9L50DF Arc7 Yamal: from delivery to 2045
  Georgiy Brusilov 2019 Daewoo 172,410 m3 GTT NO96 4 × Wärtsilä 12V50DF & 2 × Wärtsilä 9L50DF Arc7 Yamal: from delivery to 2045
  Nikolay Zubov 2019 Daewoo 172,410 m3 GTT NO96 4 × Wärtsilä 12V50DF & 2 × Wärtsilä 9L50DF Arc7 Yamal: from delivery to 2045
  Source: Dynagas LNG Partner, VesselsValue, LNG World Shipping, August 2018    

 

 

Dynagas LNG Partner LNG carrier fleet and employment
Name Built Builder Containment Propulsion Ice Class Employment
Armur River 2008 Hyundai  149,743 m3 GTT III   UA400 Turbine  FS 1A (Arc4) Gazprom TC ends July 2028
 
Arctic Aurora1
2013 Hyundai  155,000 m3 GTT Mark III  Wärtsilä 12V50DF FS 1A (Arc4) Equinor TC ends 2023
Clean Energy 2007 Hyundai  149,700 m3 GTT Mark III UA400 Turbine FS 1A (Arc4) Gazprom TC ends Mar 2026
Lena River2 2013 Hyundai  154,880 m3 GTT Mark III Wärtsilä 12V50DF FS 1A (Arc4) Gazprom / Yamal 2034
Ob River 2007 Hyundai  149,735 m3 GTT Mark III UA400 Turbine FS 1A (Arc4) Gazprom TC ends Apr 2028
Yenisei River 2013 Hyundai  154,880 m3 GTT Mark III 4 x Wärtsilä 12V50DF FS 1A (Arc4) Gazprom / Yamal 2034
             
Newbuildings            
Hull No 1786 (FSRU Rmax) 2021 Hudong Zhonghua 174,000 m3 GTT NO96 4 × MAN B&W 8L5160DF n/a Speculative
Hull No 1787 (FSRU Rmax) 2021 Hudong Zhonghua 174,000 m3 GTT NO96 4 × MAN B&W 8L5160DF n/a Speculative
Source: Dynagas LNG Partners, VesselsValue, LNG World Shipping, August 2018      
Notes:             
1 = Arctic Aurora sold by Dynagas Holding to Dynagas LNG for US$235M in June 2014. Approx., value US$185M.  
2 = Lena River sold by Dynagas Holding to Dynagas LNG for US$240M in June 2014. Approx., value US$180M.  

 

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