Scorpio Enters the Gas Transportation Market with $370 Million Newbuild Order

Scorpio Tankers Inc. (NYSE: STNG) has announced a big investment into the liquefied petroleum gas (LPG) transportation sector.

The product tanker owner has just signed newbuild contracts for at least 5, possibly up to 10, Very Large Liquefied Petroleum Gas (VLGC) tankers at Hyundai Samho Heavy Industries (HSHI) and Daewoo Shipbuilding and Marine Engineering (DSME). The contract value for each vessel is approximately $74 million each according to a statement on Scorpio’s website.

In recent months, NYK Lines, Stealth Gas, K-Line, Teekay, Epic Pantheon International, and others have been positioning themselves for the growing LPG sector, driven largely by increased exports from North America and higher demand from Latin America and India.

Scorpio Tankers also announced this week that they have taken delivery of their 9th MR product tanker newbuild, the STI Le Rocher, as well as agreed to time charter-in a 2013 built LR2 product tanker and declare options on two existing time chartered-in vessels.

Upon delivery, the STI Le Rocher immediately commenced a time charter for up to 120 days at $19,000 per day, notes Scorpio.

Emanuele Lauro, chief executive officer and chairman of the board, commented, “We are excited about our entry into LPG which we have long considered an extension of the product market. With common customers, shipbuilders, and trade lanes, and offsetting seasonal swings, the product tanker and LPG markets are highly complementary. Most importantly, LPG, as with refined products, is competitively priced in the global marketplace and winning new, distant customers, and this is reflected by accelerating export volumes out of the US Gulf.

We are pleased with our agreements with two of the most reputable builders of VLGC vessels. These orders replace a previously announced order for 4 LR2 vessels, and the structure of the LPG market presents an array of opportunities for us to build value with our shareholders.”

The VLGC newbuildings are 84,000 cubic meters and the first two will be delivered in the second quarter, one in the third quarter, and two in the fourth quarter of 2015. These agreements replace the previously announced agreement to construct four LR2 vessels at Samsung Heavy Industries.

Time Charter-In Agreements

Scorpio agreed to time charter-in a 2013-built, 105,708 dwt LR2 product tanker for one year at $16,500 per day with an option to extend the charter for an additional year at $17,550 per day. This vessel is expected to be delivered in September 2013. In addition, Scorpio declared options extending the time charters on two LR2 vessels that are currently time chartered-in. The first option is for a 2012-built 99,993 dwt LR2 product tanker for six months at $15,000 per day, and the other is for a 2008-built, 115,406 dwt LR2 product tanker for six months at $16,250 per day.

Both extensions begin in July 2013.