As Qatar ramps up its exports of liquefied natural gas (LNG), gas transport company Nakilat is building up one of the largest shipping fleets in the world and investing in marine infrastructure
A decade of Qatari investment in liquefied natural gas (LNG) infrastructure will come to fruition in 2010, as the country’s production capacity rises to 77 million tonnes a year, from 62.2 million tonnes in 2009 and 39.9 million tonnes in 2008.
Four new liquefaction trains coming on stream this year will allow Qatar to start shipments of gas on long-term supply contracts to Spain, the UK, the US, Japan and China.
“In March 2006, Nakilat launched the largest spending spree the industry has seen since the Second World War”
Gas has already overtaken oil as Qatar’s -single largest source of revenue. Qatar will earn more than $59bn from gas exports this year, up from $37.3bn in 2009.
It will produce nearly a third of the world’s natural gas in 2010 and the country’s gross domestic product is forecast to increase by 24.5 per cent, compared with a rise of 9.2 per cent in 2009, driven by the increase in LNG exports.
Two Qatar Petroleum (QP) affiliated companies, Qatargas and RasGas, have led the development of the country’s LNG industry in conjunction with various international partners, using Qatar’s vast North Field reserves, which are estimated at more than 900 trillion cubic feet and account for about 20 per cent of the world total.
But another key player in the drive to develop the sector has been Qatar Gas Transport Company, known as Nakilat. Founded in 2004, the company was intended to extend national control along the LNG distribution chain. Nakilat started out creating joint ventures with some of the world’s largest shipping companies and within two years, the company had built up a fleet of part-owned LNG carriers.
In April 2005, Nakilat became a joint-stock company, following the flotation of half its equity on the Doha Securities Market.
Nakilat has authorised capital of QR5.6bn ($1.5bn) and employs 220 people, excluding crew. Its major shareholders are Qatar Shipping Company and Qatar Navigation, each holding 15 per cent; Qatar Pension Fund with 7 per cent; QP and Qatar Foundation for Education, Science & Community Development each holding 5 per cent; Qatar Education and Health Fund with 2 per cent; and Qatar Fuel, with 1 per cent.
In March 2006, Nakilat decided to move from investment to outright ownership of vessels to support development of the Qatargas 2 project, in which QP partnered the US’ ExxonMobil and France’s Total. In doing so, it embarked upon the largest spending spree the shipping industry has seen since the Second World War, ordering 45 high-tech LNG ships.
Once the final three ships are delivered in mid-2010, Nakilat will own or part-own 54 LNG carriers. “We are also pretty close to 100 per cent complete when it comes to recruitment and training of the crews on the ships,” says Muhammad Ghannam, managing director at Nakilat.
Nakilat has invested more than $11bn in developing its fleet. The new ships include some of the largest LNG tonnage ever built: Q-Flex and Q-Max carriers, specifically -developed to meet Qatar’s export needs and built to order in South Korea. With all the deliveries in place, Nakilat’s fleet will include 31 Q-Flex vessels, with capacity for 210,000‑216,000 cubic metres of LNG, and 14 Q-Max vessels, able to carry 263,000-266,000 cubic metres.
With all its orders in place, Nakilat will be the world’s largest owner of specialist LNG tonnage, controlling more than 18 per cent of market capacity. Such is the confidence in the company that in 2009 Nakilat concluded a $1bn ship finance deal with 17 local and international banks, bucking the global downturn in syndicated shipping finance.
Timing is everything in matching cargo demand to ship capacity. Recession descended on the world’s major economies just as Qatar’s new capacity was poised to come into operation, raising fears that depressed economies will consume less LNG than forecast.
“We will never diversify away from our core business – but we will certainly expand our marine activity”
Muhammad Ghannam, MD, Nakilat
Ghannam brushes away reports that delays to the new LNG trains saw several of Nakilat’s newly delivered Q-Max and Q-Flex ships laid up at anchor off the east coast of the UAE in summer 2009, after the launches of the fifth Qatargas train and the sixth RasGas train were held back to August.
“Everything is in line with our original expectations,” says Ghannam. “When we ordered the tonnage, we sought early deliveries because we did not want the new trains to be completed and lie idle because transportation was not available. We deliberately sought to have all the ships delivered for 2010.
“Reaching capacity to supply 77 million tonnes of LNG a year by 2010 means Qatar will reach full production by 2011, and so we arranged for all of our ships to be in position by the middle of 2010.
“All our vessels are committed to Qatargas and to RasGas. Within these agreements, of course, some of the tonnage has been farmed out or diverted away from the destination originally planned – away from the US to markets such as Japan, China, South Korea or Brazil, because the prices were more attractive.”
The 25-year charter agreements with RasGas and Qatargas guarantee Nakilat’s revenues, protecting it from an uncertain global economic climate. This is why – although the company’s stock dipped in 2009, reflecting the general downturn on the Qatar Exchange – -ratings agencies Standard & Poor’s and Moody’s Investors Service have both awarded the company a ‘stable’ outlook rating.
Nakilat’s development of its own fleet is part of a wider drive to consolidate control over the entire Qatari LNG supply chain, and to use the country’s vast gas resources as a stepping-stone to create a new maritime infrastructure that will generate employment for Qatari nationals. The company has established a series of other partnerships and ventures to facilitate this.
In 2007, Nakilat signed a master service agreement with Shell International Trading & Shipping Company (Stasco) to manage the LNG fleet.
Stasco provides ship management support and helps Nakilat recruit crew. The fleet is estimated to need more than 1,400 employees. Under the agreement, Stasco will transfer knowledge to enable Nakilat to build its own workforce of Qatari and expat seafarers.
Group subsidiaries include Nakilat Agency Company, founded in 2005 as a joint venture between Nakilat and QP, the minority partner, holding a 5 per cent stake. The company is exclusive agent for all ships calling at the Port of Ras Laffan.
In 2006, Nakilat joined forces with Denmark’s SvitzerWijsmuller to create Nakilat-SvitzerWijsmuller, a 70:30 joint venture company that owns and operates 21 service vessels, including pilot and tug boats at Ras Laffan under a 22-year service contract with QP to provide towage and mooring services. A year later Nakilat Shipping (Qatar), a wholly owned subsidiary of Nakilat, was launched to manage transport of LNG, sulphur, liquefied petroleum gas (LPG) and other products.
In 2008, Nakilat set up Gulf LPG Transport, a 50:50 joint venture with Qatar Shipping (Q-Ship), to own and operate four very large gas carrier vessels, delivered from Hyundai Heavy Industries’ shipyard in Korea by March 2009.
And last year, Nakilat signed a deal with Qatar Fuel to secure technical services and marine lubricants for its fleet.
Most ambitious of all, however, is the joint venture with Singaporean shipyard giant -Keppel Offshore & Marine. Nakilat—Keppel -Offshore & Marine (N-Kom) was -incorporated in late 2008 and will operate a ship repair yard at Ras Laffan.
The N-Kom yard will handle repairs and maintenance for Nakilat’s LNG carriers. It will also aim to attract third-party business to include conversion of tankers to floating production, storage and offloading systems, and other services. The deal forms part of a wider five-stage plan by Nakilat and QP to develop marine and offshore services at Ras Laffan. The port is already the largest LNG port in the world, having added a fourth LNG berth in 2008.
Meanwhile, Nakilat also wants to establish a naval academy to train nationals to become seafarers and ship’s officers, making it easier to place them in key roles as Qatar expands its maritime infrastructure and shipping industry.
Ghannam says future ventures at home and abroad will be based on Nakilat’s core maritime business. Qatar has already invested in LNG-receiving terminals overseas – the South Hook terminal in west Wales, the Adriatic -terminal in northeast Italy and Golden Pass -terminal in Texas in the US.
Ghannam sees additional port development as a possibility for Nakilat. “We will never diversify away from our core business,” he says. “But we will consolidate our services. We dominate towage services in Ras Laffan and see this as an opportunity to expand our overseas business.
“We will definitely consider investing internationally in marine terminals and will look at any new opportunities that make strategic sense.
“When we started out, our ambition was limited to partial vessel ownership. Nakilat was simply an investment vehicle. And now, here we are, building a marine industry in Qatar and an LNG fleet that is the largest in the world. Everything has happened for us incredibly quickly. The shock is what we have been able to achieve in such a short time.”