The charterer of two VLEC orders from Hyundai Heavy Industries has been revealed to be Satellite Petrochemical.

2021-04-12 09:00

Hyundai Heavy Industries Group's latest order for two ultra-large ethane carriers (VLECs) reportedly comes from Singapore shipowner Eastern Pacific Shipping (EPS), with Zhejiang Satellite Petrochemical as the end-user for these two new vessels.

Previously, on April 1, Hyundai Heavy Industries Group announced receiving orders for seven new vessels, totaling approximately US\$502 million, including two 98,000 cubic meter VLECs from an Asian shipowner. However, Hyundai Heavy Industries Group did not disclose specific information about the shipowner.

According to foreign media reports, these two VLECs were ordered by EPS, with each costing nearly US\$110 million. Similar to the transfer agreement for four VLECs reached between EPS and Satellite Petrochemical in October last year, the latest two VLECs will also sign a long-term charter contract with Satellite Petrochemical.

It is understood that in October last year, EPS acquired four VLECs ordered by Satellite Petrochemical from Hyundai Heavy Industries and Samsung Heavy Industries. Satellite Petrochemical ordered these four VLECs from the two South Korean shipyards in August last year, at a total price of approximately US\$440 million, and they are expected to be delivered successively starting in the second quarter of 2022. Both parties also signed a vessel time charter transportation service agreement for these four vessels, starting from the second quarter of 2022, with a lease term of 15 years and a total agreement value of approximately US\$1 billion.

With the addition of the latest two VLECs ordered from Hyundai Heavy Industries by EPS, the number of VLECs leased by Satellite Petrochemical has increased to 14, including six from MISC (Malaysia's national oil shipping subsidiary), also built by Hyundai Heavy Industries and Samsung Heavy Industries; two from Tianjin Southwest Shipping, built by Jiangnan Shipyard; and six from EPS. All VLECs have signed 15-year charter contracts with Satellite Petrochemical.

These VLECs ordered by Satellite Petrochemical are 230 meters long, 36.6 meters wide, and 22.8 meters high, making them the largest ethane carriers in the world to date, capable of carrying raw materials such as ethane, propane, and ethylene.

As the largest domestic and one of the top five global acrylic acid manufacturers, Satellite Petrochemical is the first privately-owned listed company in China to form a C₃ integrated industrial structure using propane as a raw material. In December 2017, Satellite Petrochemical signed a cooperation agreement for the Lianyungang Petrochemical Project with the National East-Central-West Regional Cooperation Demonstration Zone (Lianyungang Xuxu New Area), constructing China's first ethane cracking ethylene production facility in Lianyungang. This olefin comprehensive utilization demonstration industrial park project has an annual output of 4 million tons, with a total investment of approximately 33 billion yuan (including tax), and includes a 2.5 million-ton-per-year ethane cracking ethylene production facility and a 1.5 million-ton-per-year propane dehydrogenation propylene production facility.

In March 2018, Satellite Petrochemical's subsidiary, Satellite petrochemical USA corp., signed an agreement with Sunoco Partners Marketing & Terminals L.P. to establish ORBIT as a joint venture, jointly constructing US chemical raw material export facilities to ensure stable operation of the Lianyungang Petrochemical Project and provide raw material supply security for future import and export trade. To establish a stable ethane transportation route from the US to China, Satellite Petrochemical needs to order VLECs to transport ethane raw materials for the Lianyungang Petrochemical Project.

The Lianyungang Petrochemical Project is implemented in two phases. Phase one started in March 2018, with installation completed and handed over for commissioning at the end of October 2020. The six VLECs from MISC were built for Phase one, and the first vessel, "Seri Everest," completed its first unloading in Lianyungang at the end of February. Phase two is planned to be completed and begin trial production in mid-2022.

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