Global Energy Ventures Ltd’s (ASX:GEV) CNG Optimum 200 is construction ready after the company executed a letter of intent with leading Chinese shipyard Yantai CIMC Raffles Offshore Ltd to build the ships.
The CNG Optimum 200MMscf ship has been designed by GEV and approved by the American Bureau of Shipping (ABS) to transport Compressed Natural Gas (CNG).
GEV’s milestone agreement with CIMC Raffles is based on a firm order for four 200MMscf CNG ships with the option for GEV to order up to an additional four ships.
“A key milestone”
Non-executive director Jens Martin Jensen said: “Executing our first LOI with a respected shipyard to deliver our first CNG Optimum contract is indeed a key milestone for GEV representing a major de-risking event.”
CIMC Raffles is one of China’s leading offshore builders dedicated to specialised projects with the full support of three shipyards, including the main yard Yantai, where the CNG ships are planned to be built.
The shipbuilder has completed in excess of US$6 billion in EPC contracts since 2012 and has provided a contract price range of US$135-140 million subject to final terms of a shipbuilding contract being finalised.
CIMC Raffle’s Yantai shipbuilding construction base in China.
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Both parties have executed the LOI with the intention of entering a shipbuilding Engineering, Procurement & Construction (EPC) contract, employing GEV’s CNG Optimum design.
Jens Martin Jensen said: “In my 30 years of new ship builds, CIMC Raffles has proven to be a highly credible and very capable yard for new builds.
“They are without doubt an investment grade shipyard for GEV’s first marine CNG project.
"CIMC Raffles are the logical choice for GEV given their scale of operations to support a multiple ship order, their history of building the only CNG ship to date, and a track record in successful EPC delivery.”
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Three shipyards, including CIMC Raffles, completed comprehensive technical specifications employing the CNG Optimum design approved by the ABS.
This followed a targeted selection process led by Jens Martin Jensen and run over the past 12 months supported by the company’s ship broker Clarksons Platou and SeaQuest Marine Project Management Ltd providing ship engineering experience to assist in finalising the technical specification.
“Together with our advisors Clarksons and SeaQuest, we continue to focus on our preferred shipyards to refine their technical specification and capital cost improvements, and work towards a final draft contract,” Jens Martin Jensen added.
Strong track record
The selection of CIMC Raffles has been driven by the commercial terms under the LOI, track record of delivering EPC contracts since 2012, experience with CNG systems, and moving forward, their scale of operations.
Under the proposed shipbuilding contract the CNG Optimum ship will be:
- Designed, procured, built, tested and delivered by the shipyard;
- Capable of operating for the intended and defined waters for the purpose of delivering CNG from gas supply to gas buyer in generally accepted ocean shipping conditions; and
- Delivered on a fixed contract price and on a 30-month construction schedule for the first ship, then every four months for the following three firm ships.
LOI has 90-day term
Major terms of a shipbuilding contract, including final contract price, payment terms, scope of supply, and delivery date, are subject to further discussion and agreement by both parties.
The term of the LOI is for 90 days from the date of signing.
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Executive chairman and CEO Maurice Brand said: “The culmination of 12 months’ work by our shipping team will now accelerate GEV’s regional gas supply agreements that are being progressed across multiple regions.
“Our target projects are either seeking to commercialise stranded gas assets, commercialise associated gas production, or provide a transport solution to high growth markets with bankable long-term offtake customers in place.
“Our ship capital cost for the 200MMscf is transformational for CNG to become a viable alternative to FLNG or sub-sea pipelines.”