Delayed Mozambique LNG Project Resumes... Korean Shipbuilding and Samsung Heavy Industries Expect LNG Boom Next Year

Delay in Final Contract Due to Civil War Impact
17 LNG Carriers Ordered
Expected to be Confirmed in First Half of Next Year
New Ship Price $260 Million
Order Amount Likely to Reach 5 Trillion Won

LNG carrier built by Hyundai Heavy Industries [Image source=Yonhap News]

The LNG (liquefied natural gas) project in Mozambique, Africa, is resuming operations, and contracts for 17 LNG carriers ordered by Korea Shipbuilding & Offshore Engineering and Samsung Heavy Industries are expected to be finalized in the first half of next year.

On the 8th, the shipping and shipbuilding specialized media TradeWinds reported, "With the previously delayed Mozambique project restarting, Hyundai Samho Heavy Industries (a subsidiary of Korea Shipbuilding & Offshore Engineering) and Samsung Heavy Industries are in the final stages of contracts for 9 and 8 vessels, respectively." Once the contracts are confirmed, the delivery dates for the ships will be shifted to 2027 and 2028, and the newbuilding price per vessel is expected to be around $260 million (approximately 343 billion KRW). This is slightly higher than the recent rising LNG carrier price of $250 million (approximately 329.8 billion KRW). The LNG carrier newbuilding price exceeding $250 million is the first time in 14 years since the 2008 global financial crisis.

The Mozambique LNG project, in which Korea Shipbuilding & Offshore Engineering and Samsung Heavy Industries are participating in construction, is led by the French energy company TOTAL. Although a letter of intent (LOI) for construction was signed with domestic companies in December 2020, the final contract had not been reached due to the civil war in Mozambique and other factors. At that time, concerns arose that the volume of LNG carriers ordered might change due to delays in the LNG development. Among the 40 LNG carriers deployed in the Mozambique LNG project, 17 are to be built by the two domestic shipbuilders. The amount ordered from shipowners in Bermuda, Panama, Africa, and Oceania reached a total of 3.5 trillion KRW at that time. This scale could increase to the 5 trillion KRW level due to rising newbuilding prices and exchange rates.

LNG is gaining attention as a ‘carbon-neutral transitional fuel’ because it emits less carbon dioxide and sulfur oxides compared to other fossil fuels such as oil and coal. Therefore, large-scale projects developing LNG fields are underway worldwide. Korean shipbuilders are leading ship construction with their LNG carrier technology. According to Clarkson Research, a shipbuilding and shipping market analysis firm, the global market share of Korean shipbuilders including Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries, and Daewoo Shipbuilding & Marine Engineering from January to November this year was 40.3%, up from 33.8% in the same period last year. Meanwhile, China’s cumulative market share in November was 47.2%, slightly down from 49.2% in the same period last year. Notably, this year saw an increase in Korean LNG carrier orders with the start of LNG carrier projects from Qatar. The ‘shipbuilding boom’ driven by the Mozambique LNG project is also expected next year.

Mozambique currently ranks 12th in confirmed LNG reserves worldwide, but since exploration began in 2004, it is expected that a large amount of LNG remains undiscovered. It is anticipated to emerge as the world’s second-largest natural gas producer after Qatar by the mid-2020s.