Shipbuilding giants rake in $2.5 billion from UAE player’s LNG fleet expansion rush

UAE’s ADNOC Logistics & Services (ADNOC L&S), the shipping and maritime logistics arm of the Abu Dhabi National Oil Company (ADNOC), has gone on a spending spree to bolster its liquified natural gas (LNG) carrier arsenal with multiple newbuild vessels. The LNG boost is expected to provide a shot in the arm to the UAE firm’s decarbonization journey, as it navigates its growth strategy and fleet expansion plans.

ADNOC Logistics & Services is shelling out $2.5 billion for eight to ten LNG carriers, which will be constructed by two Korean shipyards, Samsung Heavy Industries and Hanwha Ocean, with each shipbuilder getting contracts for four firm vessels alongside the option for an additional one. These shipbuilding contracts represent the formalization of letters of intent signed with the Korean pair for up to ten new LNG carriers on May 29.

Captain Abdulkareem Al Masabi, CEO of ADNOC L&S, commented: “The shipbuilding contracts with Samsung Heavy Industries and Hanwha Ocean are major steps forward in our transformational growth strategy, demonstrating ADNOC L&S’ steadfast commitment to value-accretive strategic investments. We have now committed to over 50% of our medium-term strategic investment target one year post our record-breaking IPO in 2023.”

These ships, slated for delivery beginning in 2028, will be time chartered for 20 years to ADNOC Group subsidiaries and pave the way for the UAE player’s fleet of LNG carriers to increase from 14 to at least 22 vessels, helping to support the growing export volumes of natural gas, which is described as an in-demand critical lower-carbon transitional fuel.

While targeting investments of $4-5 billion (AED 14.7-18.4 billion) over the medium term to capitalize on high-probability, value-accretive business opportunities, the company’s financial performance and activities across all business segments in Q1 2024 prompted it to revise its growth guidance upwards, planning to invest more than $5 billion (AED 18.4 billion) in energy-related maritime logistics over the medium term to meet growing demand in and beyond the UAE. 

After committing $3.9 billion (AED 14.3 billion) to organic growth capex, predominantly against long-term contracts, ADNOC L&S revealed an agreement to acquire Navig8 TopCo Holdings for $1.4 billion (AED 5 billion), offering incremental realization of opportunities to advance growth across its fleet size, customer base, and geographical footprint.

“These LNG carriers will employ cutting edge technology to increase fuel efficiencies and carbon intensity reductions in line with the company’s sustainability goals and will open up new opportunities for customer and geographical expansion while unlocking increased value for our shareholders. ADNOC L&S is proud to partner with these two world-class shipyards, strengthening our industrial relationship with South Korea,” underlined Captain Al Masabi.

Embracing sustainability technologies enables the vessels to feature a cargo conditioning system designed to curb LNG cargo evaporation while in transit, systems to direct cargo boil-off gasses to the engines that will raise fuel efficiency and lower fuel consumption, a real-time emissions monitoring system, and cargo containment systems to slash methane emissions. 

With a capacity of 174,000 cubic meters, the LNG vessel additions, sporting MEGA and XDF2.2 engines, are anticipated to produce the best fuel economy and lowest emissions in the firm’s global fleet. The new vessel orders come only weeks after ADNOC made a final investment decision (FID) for its lower-carbon intensity LNG development designed to be powered by clean and low-carbon energy to enable the UAE to reach its net zero by 2045 goals.

Recently, the energy heavyweight made a move to up its global LNG ante by investing in major projects in the United States (US) and Mozambique while using its portfolio of low-carbon energy to power the growth of AI and accelerating the integration and deployment of AI solutions across its value chain to unlock further value, bolster operations safety, and lower emissions.

ADNOC is not the only player in the Middle East working on expanding its LNG fleet, as QatarEnergy has embarked on a historic program through the execution of shipbuilding contracts and time charter agreements for 104 conventional LNG vessels and 18 QC-Max class LNG ships, amounting to a total of 122 ultra-modern vessels. The firm expects to take delivery of the first new ship by the end of the quarter.