Shell Strikes Major Product Tankers Deal With China

Oil company Shell has sought the Chinese newbuilding market for the production of 10 MR2 tankers worth approximately $480 million, further expanding the sector’s orderbook.

Shipbroking sources have reported that Shell has entered into contract with Guangzhou Shipyard International, a subsidiary of the China State Shipbuilding Corporation (CSSC) Group, for the production of ten 50,000 DWT tankers.

Founded as a shipping company, Shell launched its first oil tanker in 1892. At present, Shell manages a fleet of 28 vessels, consisting primarily of LNG carriers and oil/chemical tankers.

Shell was last linked to an MR tanker order in 2021, when Shandong Shipping Corp commissioned 10 newbuildings from New Times Shipbuilding against charter contracts for the oil company.

These conventionally-fuelled new tankers, which will cost around $48 million per vessel, are expected to be delivered between 2027 and 2028.

With over 1700 units on the water, MR2 tankers make up approximately 23% of the total tanker fleet, with a total carrying capacity of 86.3 million DWT. MR2 tankers have become a preferred choice amongst shipowners for newbuildings.

However, this segment has faced an increasing age profile, with the number of tankers crossing the 20-year mark reaching an all-time high over the past two years. The average age for container ships has reached a record-breaking 14.2 years - the highest amongst the main shipping sectors.

Of the current fleet, 21% is now over 20 years old, making them prime candidates for recycling. The top 10 container shipping operators have over 400 new ships on order, with a combined capacity of 5.9 million TEU, helping to mitigate the strain felt by the older tonnage.

The renewal of the MR2 fleet is required to match the growing demand and need to comply with stricter environmental regulations. The new vessels are built to have better fuel-efficiency and be more environmentally friendly, helping the industry to reduce its carbon footprint.

This surge in newbuilding orders is also a response to the record profits shipping lines made during the pandemic, as buying demands shifted wildly in their favour.

Shell’s deal with Guangzhou Shipyard International is a significant step forward for the container shipping industry, which not only expands Shell’s fleet, but also contributes to the industry’s efforts to modernise and upgrade its ageing vessels.

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