High LNG Demand Puts Samsung Heavy Industries on a Roll

by | May 11, 2023

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Courtesy of Shell

The South Korean Ship maker Samsung Heavy Industries will build two liquefied natural gas (LNG) carriers for an Asian Pacific maritime company by November 2026. The deal is worth $512 million — a slice of the $2.5 billion sales it has already made this year.

The company is on a roll, having netted roughly $12 billion in sales in 2021 and $9.4 billion in 2022 — the same goal for 2023. Asia and Europe are thirsty for LNG, mainly because their companies pay high prices for natural gas. As for Europe, its supplies have previously come from Russia, which it is now boycotting. For it, the United States has stepped up and replaced much of that gas. Indeed, manufacturers are lapping up LNG, used to make plastics, fertilizers, and many other products used in life.

According to Clarksons Research’s Shipbuilding Review 2022, shippers ordered a record 182 LNG ships worth $39 billion, per Ship Management International. China and South Korea dominated the market, followed by Japan. Clarkson predicts 70 new orders for ships will hit this year. Importantly, LNG is first super-cooled before being transported in carriers to where plants liquefy it.

As for Samsung Heavy Industries, one of its offerings is a floating LNG plant — a complement to one onshore that helps the globe meets natural gas needs. Shell defines a floating LNG plant as a floating production storage and offloading unit that conducts LNG operations to develop offshore natural gas resources. 

“This is the “best solution to meet customers’ needs who want easy, simple, and fast LNG development,” says Haeki Jang, chief technology officer for Samsung Heavy. “We will continue to take a lead in FLNG through customer-oriented technology innovation.”

Earlier in the year, the company netted a $495 million deal to build two LNG ships in Oceana — to be delivered by 2027. And that contract follows one to build a floating LNG production facility worth $1.5 billion for Petronas, a Malaysian state-run energy company, says KED Global.

“Orders for more than 70 LNG carriers will be placed around the world this year amid growing demand for eco-friendly ships,” a Samsung official told KED. “With our competitive FLNG technology, we aim to overachieve our goal for three years running.”

Manufacturers Thirsty for LNG

Royal Dutch Shell, Exxon Mobil, Chevron, and Chenier Energy are among the leading exporters of LNG. Before the Russian invasion of Ukraine, natural gas prices jumped from $2 per million BTUs to $6. Europeans paid $25, while Asians forked over $30. During the war, those prices spiked much higher. Now they have settled down. But Asia and Europe are building out their LNG infrastructure.

“The world is so tight for energy that everything is needed,” Charif Souki, chief executive of Tellurian told this writer. “We have gone through a period of very low prices — until this summer. We have become complacent and have thought it would always be the case. But the reality is that 15% of the world uses 40% of the world’s energy. For the other 85%, they aspire to the same living standards. The demand for energy on a global basis will outpace our ability to supply it. This country has an enormous amount of natural gas, and our business model — arbitrage — will work out just fine.

“I’m worried,” Souki adds. “The world will need a lot more gas and we may not be able to supply it.” He is also the founder of Cheniere Energy, which started as an offshore exploration enterprise.

Renewables are valued and essential. But Souki says it is unrealistic to think that global electricity networks will run entirely on wind and solar — a function of changing weather conditions and an inadequate transmission infrastructure. Natural gas complements wind and solar: those electric generators can power up and seamlessly support sustainable sources. Moreover, he thinks that the need for universal energy access is paramount. 

According to the National Bureau of Economic Research, a 1% increase in “fast-reacting” fossil fuel technologies leads to a .88 percent increase in renewables over the long run.

Broadly, natural gas’ share of the power generation market could hit 50% percent in the coming years, with industrial growth accounting for 60% of that expansion, according to the US Energy Information Administration.

Manufacturers, for example, use natural gas as a feedstock for refining and making chemicals and metals. They are using both “dry” natural gas and the “wet gas” that is separated from it. Those so-called natural gas liquids comprise chemicals such as butane, ethane, methane, and propane — all of which can serve as the foundation for finished goods consumed domestically and exported around the globe. Steel, chemical, and fertilizer industries are among the beneficiaries. 

Indeed, the world is thirsty for natural gas, preeminent manufacturers. That’s good news for shippers like Samsung Heavy, which makes carriers specializing in moving LNG globally. 

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