Shipowners battle for Shell LNG carrier order

Russia’s largest shipper by tanker capacity, Sovcomflot, is competing with Korean and Japanese shipping companies for a $350 million order from Royal Dutch/Shell’s Russian venture to ship liquefied natural gas.

Sovcomflot is bidding with Nippon Yusen KK, Japan’s largest shipping line, to build two LNG tankers to transport gas from Shell’s Pacific Ocean fields in Russia’s Sea of Okhotsk. The partners are battling for the contract with the Mitsui-led group and Hyundai Merchant Marine, South Korea’s second-largest shipping line, and the Belgian shipping group Exmar.

According to a spokesman from the Russian company, Sovcomflot is already short-listed and preliminary results will be known later this month. Even if the company does not win the order, it will still build the ships since it wants to diversify into the LNG market. Sovcomflot is expanding its LNG services at a time when Gazprom, one of the world’s largest natural gas producer, is planning to invest as much as $15 billion with the US energy company ConocoPhillips to produce the fuel in the Arctic.

Sakhalin Energy Investment, in which Shell has a 55% stake, Japan?s Mitsui 25% and Mitsubishi 20%, will invest at least $10 billion in the Sakhalin-2 project, Russia’s largest single oil and gas development, to pump oil and produce LNG for supplies to Japan and South Korea. Mitsui OSK is bidding for the Sakhalin contract with Russia?s Primorsk Shipping Corporation while Hyundai Merchant is bidding in alliance with Seoul-based Korea Line, which already owns two LNG ships.

The winner will need to build two ice-class ships with capacity of 145,000 cubic meters before 2007.