* CBI Energy and Chemical would be new player in LNG trade
* Firm has ambitious plans for LNG supply network in Asia
* Shipbuilders have seen new orders slump to 20-year lows
* South Korean firms seen as leaders in building LNG tankers
* LNG capacity rising amid demand for cleaner energy
(Add comments from CBI official)
By Benjamin Kang Lim and Hyunjoo Jin
SEOUL/BEIJING, Oct 12 A little-known investment
company said it intends to order up to 20 liquefied natural gas
(LNG) carriers, probably from South Korean shipbuilders. The
contracts would be worth as much as $3.8 billion, two people
with direct knowledge of the matter told Reuters.
CBI Energy and Chemical, which is controlled by Australian
and Canadian investors and has offices in Hong Kong, also said
in a statement to Reuters that it would be seeking to buy
floating LNG production and import facilities as part of an
ambitious plan for Africa and Asia.
The orders would be a major shot in the arm for South
Korea's ailing shipbuilding industry, which has been hit by a
collapse in new orders as global trade growth slows and after
the slump in commodities prices in recent years.
CBI Energy would be taking advantage of low shipbuilding
costs and cheap credit, which make it easier for newcomers to
tap into a global switch towards cleaner sources of energy, LNG
traders said. Depressed LNG prices were encouraging demand for
the fuel, they added.
The "depressed" energy price "is a very good opportunity for
us to secure supply at a very favourable rate and we have lined
up both suppliers and buyers for our LNG projects," Tony Leung,
a director at CBI Investment Management Limited, said in an
email to Reuters.
The company said in a separate statement to Reuters that
"there is a need to custom-build speciality LNG carriers that
will meet CBI's business needs".
It said that CBI has plans for Africa and Asia that include
natural gas extraction, pipelines, marine transportation
logistics, LNG plants, rail transport, power generation,
chemical plants, and an LNG distribution network, including
retail gas stations.
CBI has entrusted Korea Offshore and Ship's Technology Co
Ltd (KOST) to find South Korean shipbuilders for the projects,
officials from the two companies said.
"South Korea's LNG carriers are the best in terms of design,
shipbuilding and delivery speed," an executive at CBI, who
declined to be identified, told Reuters. "The shipbuilding
industry is in a slump. This would be a stimulus."
KOST could approach STX Offshore & Shipbuilding, Daewoo
Shipbuilding & Marine Engineering Co, Samsung Heavy
Industries and Hyundai Heavy Industries Co Ltd
to build the vessels, the person added.
It is not yet clear whether the contract would be
concentrated with one or two shipbuilders or be spread more
widely, said the official from KOST, who also declined to be
identified. Initially there would be 10 firm orders, with an
option to buy 10 more carriers, this person said.
South Korean shipbuilders have also been hit by increased
competition from Chinese and Japanese yards, and massive
overcapacity in the shipping industry.
The collapse of Hanjin Shipping, the world's
seventh largest container shipper at the end of August, dealt a
further blow to sentiment. Korea Development Bank forecast in a
report the same month that the country's shipbuilders would
suffer a 92.3 percent plunge in orders this year.
"Global shipyards including those in the main shipbuilding
countries of South Korea, China and Japan, have seen the volume
of orders in tonnage terms slump this year to the lowest level
in more than 20 years," said Peter Sand, chief shipping analyst
at ship owners lobby group BIMCO.
LNG carriers are a bright spot, though, because of demand
for cleaner energy, said the KOST official.
The person said talks with shipbuilders would start after
detailed plans were made, adding that it would take two to three
months to select contract winners based on price, quality and
the ability to meet delivery deadlines.
The vessels would each have the capacity to transport
120,000 to 175,000 cubic metres of LNG, the two sources said.
The first ship was due to be delivered in 2019, they said,
adding the remaining vessels would be delivered at a rate of one
ship every two-to-three months.
SHIPPING LNG TO CHINA
CBI Energy is a holding company registered in the British
Virgin Islands and lists offices in Hong Kong, Beijing and
Its core investments are in coal poly generation, a "clean
coal" technology, as well as LNG and associated supply chain
businesses, according to the company statement.
The CBI executive said the group was 70 percent Australian
owned and 30 percent Canadian owned. He declined to provide
It has raised 2 billion euros from European private equity
investors to fund the orders, the executive added.
The KOST official said CBI planned to ship LNG from Africa
and the Middle East to China.
KOST, which is based on South Korea's southeastern island of
Geoje, the country's shipbuilding hub, supervises shipbuilding
The order would increase the global fleet of LNG tankers by
more than 3 percent, making CBI a significant new player in the
LNG logistics business if it opted to operate all the vessels
itself. There are currently 460 tankers in service, with a
further 170 on order.
A 174,000 cubic metre LNG carrier costs around $198 million
to buy, down from $205 million two years ago, shipping services
firm Clarkson said.
South Korean shipbuilders, Samsung Heavy and Daewoo
Shipbuilding and Marine Engineering, are the most popular
shipbuilders for LNG tankers, having built 22 percent and 21
percent respectively of the LNG carriers operating worldwide,
according to data from shipbroker Banchero Costa (Bancosta). Of
the LNG carriers under construction and on order, 37 percent of
the current order book is placed at Daewoo shipyards, 14 percent
at Hyundai Heavy and a further 11 percent at Samsung, Bancosta
Between 2016 and 2020, global LNG production capacity is
expected to rise by about 50 percent to around 370 million
tonnes a year, with major new projects in Australia, the United
States and elsewhere, and this expected run-up in supply has
dragged on prices.
"Although as many as 2,200 new cargoes of LNG are set to
come on-stream by 2019 or 2020, the growth in the sector
continues to be quite uncertain," according to a Bancosta report
"European Union demand is fairly stable, global gas demand
has slowed in the face of competition from other energy sources
within the power sector, and from the persistence of low prices
in energy commodities."
(Reporting by Benjamin Kang Lim in BEIJING and Hyunjoo Jin in
SEOUL; Additional reporting by Keith Wallis in SINGAPORE;
Editing by Alex Richardson and Martin Howell)