DOHA – Qatar is about to approve the overhaul of 45 of its largest tankers from 2012 to 2015 to burn natural gas after the decision to run them on petroleum fuel backfired when oil prices rose, senior industry sources said.
Some experts say the cost could be as high as $1.4 billion, assuming each retrofit costs $30 million. Exact costs will be established at a meeting between counterparties at the end of the month, the sources said.
Qatar is nearing the end of a year-long consultation on the $1 billion upgrade involving shipowners, shareholders and engine manufacturers, which was prompted by an unexpected fall in natural gas prices versus oil in recent years, according to people present at the ongoing discussions.
"Qatar wants to make a decision as soon as they can. These ships are coming around to their first scheduled five-year service," a shipping source said. Retrofitting is expected to begin in mid-2012.
Qatar Petroleum and ship owner Qatar Gas Transport Co (Nakilat) were unavailable for comment.
Upgrades will allow engines to switch between burning gas and bunker fuel.
"Exxon took a punt that LNG was going to be more expensive than oil. When this project started, the United States was going to import gas and LNG prices were going to rocket, but then it discovered all this gas and that changed," the ship broker source said.
Exxon Mobil declined to comment. The upgrades would allow tankers to save on fuel costs by switching to gas, in this case the gas that boils off from LNG during transit, which Qatari tankers now capture to re-liquefy.
Qatar stands to make substantial savings. Its cost of production and liquefaction is about $1 per mmBtu, a source said. – Reuters