Scorpio Eyes Entry Into LPG Market, Orders up to 10 VLGCs

Scorpio says it has ordered up to 10 of the LPG carriers

Newbuld hungry Scorpio Tankers Inc. [NYSE: SNG] (Scorpio) said Tuesday it has cancelled orders for four LR2 product tankers that were to be built at Samsung Heavy Industries, and has instead reached agreement with two different South Korean yards for between five and ten liquefied petroleum gas (LPG) carriers.

The 84,000 cubic meter capacity Very Large Gas Carriers (VLGCs) will be built at Hyundai Samho Heavy Industries (HSHI) and Daewoo Shipbuilding and Marine Engineering Co., Ltd. (DSME) at a cost of approximately $74 million each.

The cancelled LR2 newbuildings were placed at a cost of approximately $52.0 million each.

"We are excited about our entry into LPG which we have long considered an extension of the product market. With common customers, shipbuilders, and trade lanes, and offsetting seasonal swings, the product tanker and LPG markets are highly complementary," commented Scorpio's chief executive officer, Emanuele Lauro.

"Most importantly, LPG, as with refined products, is competitively priced in the global marketplace and winning new, distant customers, and this is reflected by accelerating export volumes out of the US Gulf.

"The structure of the LPG market presents an array of opportunities for us to build value with our shareholders," he added.

The five confirmed VLGCs will be delivered in the second, third, and fourth quarter of 2015.

Scorpio also said it had taken delivery of the ninth MR product tanker under its newbuilding program, STI Le Rocher.

In May Scorpio said it had ended a 6 month vessel ordering spree, during which it put 54 new vessels on order.