Asia/Pacific News
LNG Orders Take Up Slack at Korean Shipyards
An analyst at CIMB Securities has said South Korean yards are picking up orders for Liquefied Natural Gas (LNG)-fuelled ships to replace waning offshore projects, IHS Maritime 360 reports.
"Given the drop in offshore orders caused by weak oil exploration and production (E&P) capex, the Korean yards choose to pursue yard migration and selective bids for the profitable production platforms," said an analyst for CIMB Securities in a note for investors.
"Limited risks are expected to backlog accretion potential ahead, as the absence of drilling rigs could be supplemented by the relatively stronger recovery in tankers, still-firm gas carrier orders, and new replacement demand for overall commercial vessels premised on the new fuel designs."
Shell recently announced it has ordered a LNG bunkering vessel from South Korea's STX Offshore & Shipbuilding, demonstrating a commitment to infrastructure investment for the use of LNG as a marine fuel.
Such commitments bode well for the momentum behind a new era of LNG-fuelled ships, said the note.
"LNG fuel designs will trigger strong replacement orders, which cannot be retrofitted by simply changing the engine spectrum."
In addition, prices achieved for newbuild ships are improving and South Korea is maintaining its 34 percent market share.
Improved profitability for South Korean yards is predicted during 2016 to 2018, the note continued.
A BIMCO-published article said Wednesday that low oil prices could "provoke a startled rethink" of plans for LNG-fuelled newbuilds.
