The global liquefied natural gas (LNG) trade has continued to grow in 2017 boosted by additional volumes from Australia and the US and a rise in demand for the fuel in Asia, most notably in China. New production volumes also helped to ease the oversupply of tonnage in the LNG shipping market that itself witnessed a record-breaking year.
For three consecutive years, the global LNG trade set new records, reaching some 263.6 million tonnes in 2016, according to GIIGNL, the International Group of LNG Importers.
This trend has continued into 2017. Many predicted that the global LNG trade would hit the 300 million tonnes mark this year. While it is still early to say whether this number will be reached, the preliminary numbers show that global trade in 2017 could record a rise of about 10 percent year-on-year.
“LNG trade has grown strongly this year, ” Vincent Demoury, the general delegate of GIIGNL told LNG World News on Wednesday.
“First estimates indicate that LNG imports in 2017 could be nearing 300 million tonnes,” he said.
In line with growing trade, the global fleet size has rapidly expanded in the last five years also influenced by events such as the 2011 tsunami in Japan and the collapse in oil and gas prices in 2014.
According to the data by VesselsValue provided to LNG World News, the total LNG fleet currently stands at 584 vessels out of which 480 ships are in service, 24 have been launched and 80 ships are on order.
This data does not include floating storage and regasification units (FSRUs). It includes large LNG carriers, midsize and small-scale vessels and RLNG.
Total operational capacity of the $52.6 billion-worth live LNG fleet amounts to 72.3 million cubic meters, the data said.
The data also shows that 11 new orders (six in 2016) were placed this year while 27 LNG vessels worth $4.8 billion have been delivered so far in 2017.
Three FSRU’s were delivered so far in 2017, while 4 of these units were ordered during the year, VesselsValue said.
GIIGNL’s Demoury added “2017 has been a busy year for the LNG fleet given the number of LNGCs delivered and the variety of vessel categories delivered and ordered. Preliminary numbers indicate that the expansion of the global LNG fleet has been slightly outpaced by the growth in LNG trade, with a remarkably strong surge of LNG imports into China.”
World’s largest LNG shippers comment on the shipping market
As the year-end approaches, LNGWN has invited some of the world’s largest shipowners such as Nakilat, Teekay, and Excelerate Energy to comment on how they saw the LNG shipping market this year and their expectations for 2018.
Nakilat: shipping market “on a path towards recovery”
Qatar’s Nakilat, the world’s largest LNG shipping company, said in a comment to LNG World News that the shipping market was improving following two years of stagnation.
Nakilat commented, “In 2017, additionally produced LNG supply was mostly absorbed by emerging LNG markets such as China, India, Europe, Bangladesh, and Pakistan. With over 100 mtpa of liquefaction capacity under construction, LNG supply is expected to increase close to 30% over the next 3 to 5 years.
“The LNG shipping market is on a path towards recovery from the previous two years’ doldrums, with the increase in LNG shipping spot market rates, number of spot fixtures and slowed down newbuild order book. Growing liquidity and flexibility in supply contracts has helped LNG’s shift towards a more efficient and commoditized market, akin to more mature commodities such as crude oil,” it said.
“We expect the spot rates to be volatile in the next 18-24 months due to the significant size of the current orderbook (~130 vessels) in 2018-19, and due to additional liquefaction capacity which is currently under construction. However, we expect LNG shipping charter rates to be strong by the end of 2019 due to the expected shortfall in LNG shipping supply resulting from the recent dearth in orders for new vessels,” Nakilat concluded.
Chinese demand boosts charter rates
Bermuda-based Teekay, one of the world’s largest owners of LNG carriers, expects Chinese demand to continue to push spot charter rates in 2018.
Mark Kremin, Chief Executive Officer of Teekay Gas Group, a company that provides services to Teekay LNG Partners said:
“LNG ending 2017 with a bang bodes well for 2018. Yamal is enjoying a particularly exciting end to the year. Despite the doubters and obstacles, it is exporting LNG from the Arctic on time and budget.
Just as Russia is ending 2017 with a bang, so is China. Chinese ship finance changed the game in 2017. Chinese LNG demand will do the same for spot charter rates in 2018.”
Kremin said that “the lucky owners” had limited spot charter exposure in 2017, but spot charter rates were suddenly rising faster than expected. A rising tide lifts all ships, so higher rates in 2018 will be good for all owners, he remarked.
He continued: “As spot charter rates rise, over-ordering of newbuilds of conventional LNG carriers and FSRUs will follow, and so start another cycle to which LNG is no longer insulated from other shipping sectors.
There was no consolidation in 2017, but rising charter rates will prompt some owners to look for ways to exit, and so there will be consolidation in 2018.
Long-term value will become unconventional. As for LNG bunkering, the question for small-scale LNG shipping is not if, but when. Sooner rather than later for both, we believe.”
Excelerate sees big potential for the floating LNG import market in the Middle East and Africa
US-based FSRU operator and project developer Excelerate Energy shared its view on the floating storage and regasification market.
Demand for FSRU’s among countries that are looking to import LNG is growing rapidly as they are a faster and cheaper option then land-based projects.
Rob Bryngelson, Chief Executive Officer of Excelerate sees a big potential for the floating LNG import market in the Middle East and Africa.
“FSRU projects are becoming increasingly complex, with customers looking for integrated projects. By way of example, for Excelerate’s first project in Bangladesh – Moheshkhali Floating LNG – we are responsible for everything from the point at which the delivering LNG carrier arrives at the pilot station to the interconnection with the customer’s pipeline system onshore.”
“This means our customer has a single point of contact and ensures that all the interfaces between the various project components are handled efficiently and effectively,” he added.
Excelerate doesn’t look at a new opportunity as simply the provision of an FSRU. Instead, the company considers a project as a whole and work with their customers to guarantee the level of service that they need, Bryngelson explained.
The company sees persisting growth potential in the Middle East and South America, with Southeast Asia and Africa gaining momentum, and having “amazing potential.”
“The new supply coming online is adding to the overall length of LNG in the market, so it is a positive for the FSRU business. We see continuing growth potential in our two largest markets – the Middle East and South America. Along with that, we’re seeing a number of new projects in Southeast Asia gaining momentum. We see amazing potential on the horizon for Africa as the continent’s nations move to develop cleaner electricity generation and spur economic growth,” Excelerate CEO said.
Apart from Nakilat, Teekay and Excelerate, LNG World News has reached out to BW, MISC, Maran Gas, Dynagas, Golar LNG, GasLog, Höegh LNG and K Line LNG shipping (UK).
BW declined to comment while no other response has been received by the time this article was published.
By Mirza Duran