LNG - Market

By Paul Bartlett

The Global Sea Spirit

New LNG tanker for Nakilat

Qatar’s Nakilat has taken delivery of a newbuild LNG tanker, Global Sea Spirit, which will be commercially and technically managed inhouse by Nakilat Shipping Qatar Limited (NSQL). Built by South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME she is the third of four LNG newbuild tankers to be delivered to Global Shipping, a joint venture between Nakilat (60%) and Greece’s Maran Ventures (40%). The first two LNG tankers (ME-GI type) were delivered in May 2020 and January 2021 respectively and are currently in service. She is chartered to Cheniere Marketing International.

With a cargo carrying capacity of 174,000 m3 , Global Sea Spirit is the first vessel with X-DF propulsion to join the Nakilat fleet, with the second newbuild (also with X-DF propulsion) expected to be delivered early next year. Like the ME-GI system, vessels running with X-DF engines propulsion are proven to be more fuel efficient, reduce greenhouse emissions and environmentally friendly due to their low carbon emission. Like the rest of Nakilat’s fleet, the newbuild fully complies with all mandatory international and national regulations pertaining to environmental protection. They also have significantly lower boil-off rates, and equipped with onboard reliquefication units, thus providing greater operational flexibility for charterers.

The delivery of all four newbuild LNG tankers by 2022 will bring Nakilat’s fleet to 74 vessels, which is just under 12% of the current global LNG fleet based on carrying capacity. To date, there are 24 LNG tankers, four LPG tankers and one FSRU managed and operated in-house by NSQL.

The Methane Princess and Methene Progress laid-up after the completion of the 20 year contract

LNG sector on a roll as demand ramps up

Few shipping sectors have undergone so radical a transformation as the LNG market. From the first commercial shipment of the cargo in 1964 from Arzew, Algeria to the new LNG terminal at Canvey Island, UK, aboard the 27,400 m3 Methane Princess, there followed decades in which the global business was confined to a handful of low-profile, long-term, fixed-contract trades, and a small and relatively stable fleet of similarlysized vessels dedicated to specific projects, the sector has undergone a transformation.

Prior the Methane Princess, and her sistership, Methane Progress, experimental cargoes were carried to Canvey Island on-board a converted cargo vessel Methane Pioneer (5,090 m3 of LNG from Lake Charles, Louisiana to the UK) and the Esso Puerto Rico, although she was designed in 1958 to carry LPG. Both the Methane Princess and Methane Progress were operated by Shell and had Conch containment systems. This containment design was never ever used again, although the ships spent some 20 years on the Arzew – Canvey Island service

There was, at that time, virtually no short-term or spot market. But today, a wide range of new trades has evolved and more are constantly developing. The sector’s composition has changed – from the risk-averse owners whose ships were tied in to 20-year contracts to one in which a significant number of newcomers vie for business – short, medium or long. Ships are ordered on spec and make spectacular returns from time to time in a volatile spot and short-term market.

As global LNG trades have diversified, so too have the ships themselves. There are still nearly 250 steam turbine vessels and close to 200 dual-fuel diesel electrics. There are about the same number of low-pressure and high-pressure dual-fuel two-stroke engine installations. These generate different levels of methane emissions, a growing concern in shipping’s increasingly visible sustainability drive. GTT membrane containment systems are used on most vessels in operation today and on order. About 120 ships have Moss ‘spherical’ tanks but no ships on order have this containment technology.

A diverse fleet ranging from small-scale vessels to the largest 266,000 m3 Q-max ships are deployed in a varied market. They are employed in some of the original dedicated supply contracts agreed by producers including Abu Dhabi, Australia, Indonesia, Malaysia, and later, Qatar. But today they also operate in more diverse trades out of northern Russia, Canada, Africa, South America and, of course, the US.

The small number of dedicated contracts has expanded into a complex network of supply deals. In some cases, notably in the US, entire trades have reversed. New terminals built to import the LNG that the US traditionally required have been converted to key export hubs and, in 2020, gas shipments accounted for 23% of US energy exports, measured

Fleet diversification

A Q Max ‘membrane’ LNG tanker in operation A Moss-type ‘spherical’ LNG tanker

on an energy equivalent basis, according to the US Energy Information Administration (EIA).

Global LNG trade has continued to expand at percentage rates in the high single figures or low double digits. Even in 2020, when global energy dipped sharply, seaborne trade in LNG continued to rise. Clarksons Research estimates that volumes shipped by sea increased by just over 1% in 2020, despite the pandemic, making up 12.5% of gas demand and 39% of gas trade. This year, the analysts expect volume growth of close to 6%, followed by around 4% in 2022. Tonne-mile increases will be higher, however, reflecting longer and more diverse trades, notably out of the US to Asia and Europe. Clarksons expects tonne-mile growth of 10% this year, and 6% in 2022.

The 1% increase in 2020 increase followed a growth of nearly 9% in 2018 and more than 12% in 2019. Meanwhile liquefaction and regasification capacity continue to expand around the world and the number of bunkering ports has more than doubled from the 79 in 2017 to 161 this year. At least another 23 LNG bunkering ports are likely to be operating by the end of 2022, according to Clarksons figures.

Meanwhile, the floating sector has taken off. By the end of this year, there are expected to be six floating production facilities in operation, including Shell’s vast Prelude facility, stationed over the Browse Basin 125 miles off the coast of Western Australia. About 50 floating storage and regasification units (FSRU) are likely to be operating by the end of the year.

Experts predict that the number of FSRUs will increase significantly in the years ahead, despite the fact that LNG is a hydrocarbon. Despite this, it is a far cleaner source of energy than other hydrocarbons – including coal and oil – which are still the primary source of energy in many countries. In poor parts of Africa, for instance, there are no energy grids and many people still use wood as a primary energy source, sometimes inside their dwellings without proper ventilation. Respiratory diseases are common.

Environmentalists invariably oppose new projects – Greenpeace recently daubed a new FSRU, LNG Croatia, with the words ‘Climate Killer’. However, energy experts point out that natural gas is dramatically better than coal and a significant improvement on oil, in terms of sustainability. Until new low- or zero-carbon fuels become available in sufficient scale, LNG is a valid option, they say.

During May this year, Singapore’s Sembcorp Marine delivered a FSRU to KARMOL for deployment offshore Senegal. The 125,470 m3 KARMOL LNGT Powership Africawill supply LNG, via the Karadeniz Powership Ay egül Sultan, to generate electrical power to regions currently lacking domestic gas production/infrastructure. KARMOL, a joint venture between Karpowership and Mitsui OSK Lines, has commissioned another FSRU for deployment off Mozambique. This conversion involves the former LNG tanker Northwest Shearwater, which is currently in Sembcorp Marine’s Admiralty Yard (AY) for the conversion. She will be renamed Karmol LNGT Asia .

Sembcorp Marine is also currently converting NYK Lines’ 127,700 m³ LNGFlora into an FSRU for infrastructure operator Gasfin Development, to be operated offshore Ghana on the Torma Gas Field. When delivered she will be renamed Torman II. NYK and Gasfin are also collaborating on an FSRU barge called the Project Lisa.

In a latest development, Qatar’s Nakilat and Karpowership have signed a Memorandum of Understanding (MoU) to collaborate in the LNG-topower market and jointly own and operate Floating Storage Regasification Units (FSRUs).

Nakilat’s Chief Executive Officer Eng. Abdullah Al-Sulaiti said, “We are very pleased and excited to sign this agreement with Karpowership today. This fits very well with Nakilat’s long-term growth plan to expand and diversify our shipping portfolio and strengthens our position as a global leader in the energy transportation sector.”

Karpowership’s Chief Executive Officer Orhan Remzi Karadeniz added,

More floating capacity

The KARMOL LNGT Powership Africa– converted by Sembcorp Marine