The Kuwait Oil Tanker Company (KOTC) says it is to place orders for eight new ships worth more than US$1 billion (Dh3.67bn) as it accelerates its fleet replacement programme despite a global glut of tanker tonnage.
The latest order - expected to go to South Korean yards - will be for five new product tankers designed to ship refined oil cargoes and three LNG (liquefied natural gas) tankers to be delivered between 2017 and 2018. This will be the fourth phase of the company's building programme.
The news came as the Italian tanker company Montanari said it was preparing to sell two of its newest tankers for almost half the cost of building them.
At the same time, data from the Baltic Exchange in London showed a surplus of oil tankers seeking cargoes in the Arabian Gulf was expanding, curbing charter rates for tanker owners worldwide.
KOTC's announcement of the fourth phase of the company's expansion strategy was made by the chairman Bader Al Khashti in an interview with the Kuwait daily Al Rai.
He said, once delivered, the latest signings would increase KOTC's fleet to 31 tankers by 2017 or 2018 and that phases three and four of the company's fleet expansion would cost in total about $1.75bn.
All KOTC's ships are on long-term charter to its parent, Kuwait Petroleum Company (KPC), and it transports about 20 per cent of KPC's crude oil and refined products. Kuwait pumps some 3 million barrels of oil per day (bpd) and its refinery capacity delivers more than 1.5 million bpd.
Phase one of the KOTC fleet renewal programme began in 2003 after the company decided to scrap its fleet of single-hulled VLCCs (very large crude carriers).
Ten new tankers were ordered and delivered up to 2007.
The deliveries were followed by a phase-two order for four VLCCs from South Korea's Daewoo Shipbuilding & Marine Engineering at a cost of $708 million, as well as a pair of tankers of less than 120,000 tonnes, at a cost of about $75m, each with the same builder.
Two of the VLCCs were delivered in October 2010 and February last year. The other pair was delivered in the autumn. The smaller tankers were delivered this year.
Currently, phase three of the programme includes four 317,000-tonne VLCCs and a tanker of 110,000 tonnes, from Daewoo, and four 46,000 deadweight-tonne medium-range tankers from another South Korean yard, Hyundai Mipo Dockyard.
Despite a rush of relatively young tankers coming on to the second-hand market, KOTC is unlikely to be interested. The company has a reputation of only settling for the best for its fleet renewal.
"It is unlikely that KOTC will rush to place [the] orders for its fourth-phase new buildings as the company has a reputation for taking its time in choosing high-specification ships and being willing to pay a premium for them," says the shipping journal Tradewinds in its latest edition.
The two 109,000-tonne Montanari tankers up for sale are the sister ships Valconca, built in 2009 and the Valpiave, built in 2010. Tankers of this size would usually spend up to 20 years sailing under their launch flag but this week they were offered for buyers' inspection.
Each cost $60m to build but the shipbroker site VesselValue.com, based in the United Kingdom, priced them at just $32.2m.
The glut of tankers was further emphasised yesterday by Bloomberg's Tanker Index.
"There are 20 per cent more very large crude carriers for hire over the next 30 days than there are cargoes," according to the median estimate of seven shipbrokers on the index. "A week ago, the excess was 16.5 per cent."
The transport capacity of the global VLCC fleet will swell 6.9 per cent this year to 188 million tonnes but demand for the vessels will grow by only 4.7 per cent, according to Clarkson, the world's largest shipbroker.
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