League Table

LNG LEAGUE TABLE

LNG LEAGUE TABLE

“We are very excited to be working with Nakilat as this will enhance our ability to offer a one stop shop tailor-made solution to our customers through our integrated business model where we design, develop, engineer and construct our entire assets. FSRUs together with Powerships deliver energy to any country around the world, by utilising a cleaner and more reliable fuel than many existing options”.

The MoU outlines an ambitious plan for the immediate future. Nakilat and Karpowership hope to set up a new joint venture and deliver the first FSRU by 2023.

During August this year, Singapore’s Keppel Offshore & Marine delivered the BW Tatiana a FSRU, which will be deployed in El Salvador, Central America’s first FSRU. The 137,000 m3 will be stationed offshore the Port of Acajutla, El Salvador, and be part of the Energia del Pacifico LNG-to-power project.

Keppel in 2020 won a contract from the BW LNG-Invenergy joint venture to convert Shell’s moss-type LNG tanker Gallina into the FSRU, which has regasification capacity of 280m ft3/day of gas.

Keppel is also currently completing the GimiFSRU project for Norway’s Golar LNG. The unit will start a 20-year contract with BP for the Greater Tortue Ahmeyim project offshore Mauritania and Senegal in the fourth quarter of 2022.

Fleet expansion continues as capacity sets new record

The 665-ship LNG tanker fleet comprised 611 ships of more than 40,000 m3 in the closing week of October, and a further 54 vessels of smaller sizes. The total fleet represents just over 100m m3, up 7.2% year-on-year, according to statistics from Clarksons Research, and the first time that it has broken through the 100m m3 threshold. Deliveries over the first three quarters of this year totalled 7.9m m3 which, according to the analysts, is the largest volume recorded to date.

The orderbook represents almost a quarter of this capacity, a figure that has remained fairly constant since the beginning of 2018. However, the fleet has grown by more than 20% since the end of that year. Fleet capacity is expected to increase by about 5% in 2022 but tonne-mile trade is likely to grow faster. This follows a period in which seaborne trade of LNG has undergone rapid expansion. Clarksons figures show a 44% increase between 2015 and 2020. And what is more, the outlook for trade growth is still positive.

Experts suggest that the LNG fleet will continue to grow rapidly, partly as a result of the many projects that are being developed. The most notable is expansion in Qatar which could require as many as 100 new ships, according to estimates. But there are many other start-ups, both confirmed and likely, with substantial vessel requirements.

A range of key developments have characterised the global LNG market this year, including the highest-ever spot rates early in the year, with some fortunate owners fixing ships at more than US$200,000 a day in January. Rates have been volatile but profitable, and the spot market had another exceptional rise in October, with ships fixed close to $200,000 a day. The combination of high gas prices and relatively low stocks has meant that demand for LNG shipping capacity has been exceptional.

However, energy analysts are uncomfortable with the outlook. The economic rebound as the global vaccination drive took effect and the sustainability strategy of adopting gas as a more sustainable hydrocarbon fuel than coal or oil is putting the supply chain under pressure. Gas prices have climbed as never before. Spot prices in Asia, for example, averaged $33/m BTU during the first two weeks of October, an eight-fold increase on the prices prevailing in October 2020. Meanwhile, high shipping costs are good for those lucky owners with ships available, but it is not good news for others along the LNG supply chain.

Consumers, in particular, are in the firing line, whether individual households or entire countries. Some energy experts, therefore, are now warning of a developing crisis over the coming winter in the northern hemisphere, and economists are expressing concern about industrial disruption as a result of high energy costs, rising inflation, and cuts in economic output.

However, soaring gas prices are likely to underpin further growth in the LNG sector and spur exporters with additional capacity, such as the US. Australia is still ahead of Qatar at the top of the exporters’ rankings, with 77.8m tonnes shipped out last year and an expected 78.9m tonnes of experts likely this year. Corresponding figures for Qatar are 77.1m tonnes

One of the new Arctic LNG tankers The Gallina being converted to the FSRU BW Tatiana in Keppel Shipyard

Record spot rates

Further growth

With a wealth of experience and capabilities in gas-related repairs and conversions, Keppel Offshore & Marine is today’s preferred partner of choice in meeting the world’s growing demand for LNG in a fast and cost-efficient way.

Demand for floating units remains buoyant

and 77.9m tonnes. But vast expansion of production facilities in Qatar could see a change in the rankings in 2022.

On the importing side, however, high gas prices may constrain volumes to some extent over the northern hemisphere winter, but Chinese imports in August, for example, still increased by 12% month-on-month and 7% year-on-year, Clarksons figures show. This massive requirement, equivalent to about 80% of entire UK production, has absorbed large volumes of gas that could have been available elsewhere, resulting in looming supply issues in Europe, for example, and sharply higher prices. Over the whole of 2021, Chinese imports are expected to increase by 18% over 2020 volumes, followed by another double-digit hike of 12% forecast for 2022.

As demand for floating units remains buoyant, conversion candidates are being monitored carefully. Larger vessels are usually favoured for such projects but many of the most suitable ships have already been taken. There are still 15-20 vessels in the fleet built before 1990 but their suitability for conversion to FSRUs or FSUs is not clear. A further 40 vessels were commissioned between 1990 and the end of the century.

Demolition has continued mostly at low single-digit numbers over the past decade. The six ships sold for recycling in 2020 was the highest annual tally so far this century. Five vessels have been sold for recycling over the year to date, with strong earnings holding more appeal even than the high demolition prices available from recycling yards on the Indian subcontinent. Vessels sold for demolition have included the 1997-built 130,405 m3 Teri F and the previously laid-up Baltic Energy, 125,929 m3 , built by Kawasaki in 1983. Both vessels were steam-turbine units and were sold to recyclers on the Indian subcontinent.

LNG projects to underpin further fleet expansion

There are currently 23 liquefaction projects being developed of which the US and Russia have five each, Qatar has four, with other facilities under construction in Canada, Indonesia, Mauritania, Mexico, Mozambique and Nigeria. According to estimates by Clarksons Research, and based on ship capacity of 174,000 m3, 178 ships will be needed to service transport requirements, including 49 for US projects and 42 for Russian developments.

However, the scale of the planned build-up in US capacity is demonstrated by the number of projects currently in the front-end engineering design (FEED) phase and/or with agreements signed. Clarksons lists a total of 49 such projects, only 16 of which are not in the US. Most of the capacity is due to come on stream around the middle of the decade and the US projects will drive demand for an estimated 330 vessels. Other projects at this stage of development are located in Australia (6 ships), Canada (27), Israel (3), Mexico (20), Mozambique (initially 10), Qatar (17) and Russia (10).

A further 57 liquefaction possibilities are currently under discussion, some of which have been on the drawing board for some time. Some of the details may well be undergoing a dusting down in light of the gas price surge and rampant demand. However, there are no short cuts available in the regulatory approvals process and most of these ‘proposed’ projects are scheduled with start-ups in from 2025 onwards. But timelines invariably shift in LNG infrastructure development so the dates could well slip towards the end of the decade or beyond.

Political risk rears its ugly head

Contracts for 17 new LNG tankers required for TotalEnergies Mozambique development, designed as a two-train facility with annual production capacity of 13bn tonnes have had final signings delayed until March 2022. Originally due to be finalised by May 2021, the contracts at Hyundai Samho Heavy Industries and Samsung Heavy Industries, all in South Korea, have been put back following a declaration of ‘force majeure’ by the French energy major earlier this year after an Islamist insurgency in Palma, close to the Cabo Delgado onshore site of the $20bn development.

The gas reserves are located in the Golfinho and Atum fields off the east African country’s coast. Their development could be a transformation for the poor nation. The decision to develop a land-based site, rather than a floating setup, is understood to have been taken by TotalEnergies and its partners, partly to support the country’s economy and specifically to provide work for African personnel in the local community.

Although timing remains uncertain, the project is still expected to go ahead. But the shipping companies which will provide sea transport for the project have been forced to hold back on definitive contracts. K-Line, Maran Gas Maritime, Mitsui OSK Lines, and NYK Line now face sharply higher shipbuilding prices as a result of costlier raw materials such as steel and rising energy costs, but also because of the scramble to order new vessels including LNG tankers.

Newbuild prices are rising quickly across all sectors. Brokers believe that LNG tankers costing around $180m six months ago could now be priced at $210m, and prices continue to rise. There is also a question of berth availability. As the Qataris firm up on newbuilding slots for their unprecedented newbuilding progamme, for example, the availability of building berths will fall and LNG tanker prices are likely to continue their ascent.

The fluid situation could not be updated before press time, but TotalEnergies is understood to have placed the project on hold for at

One of the latest terminals to open was in Croatia

The TotalEnergies Mozambique development

least another six months. Its ‘force majeure’ move and the withdrawal of almost all expatriate personnel prompted the country’s President Filipe Nyusi to tackle the insurgency with Rwandan troops, supported by other military personnel from the Southern African Development Community (SADC). The SADC is understood to have provided support from countries including Angola, Botswana, Lesotho, South Africa, and Tanzania.

TotalEnergies has a 26.5% stake in the project which it bought from Andarko in 2019. Other partners are Mozambique’s state hydrocarbon company, ENH Rovana Área Um (15%), Mitsui (20%), Beas Rovuma Energy Mozambique (10%), Barat PetroResources Limited (10%), Indian state company Oil and Natural Gas Corporation Limited (10%), and Thailand’s PTT Exploration and Production Public Company Limited (8.5%).

Container lines lead deep-sea take-up of LNG for fuel

Major liner companies are amongst those pioneering the take-up of LNG propulsion. French carrier, CMA CGM, which has declared its commitment to carbon neutrality by 2020, was one of the first off the mark when it placed contracts for nine LNG-powered 23,000 teu vessels at Chine State Shipbuilding Corporation’s Jiangnan Shipyard in November 2017. The first of these, the CMA CGM Jacques Saade, delivered in September 2020, was installed with the largest-ever LNGfuelled engine and fuel supply system. The two-stroke WinGD X92DF engine delivers 63,940 kW of power.

However, despite the almost complete eradication of sulphur and

CMA CGM’s CMA CGM Jacques Saade

nitrogen oxide emissions, low-pressure two-stroke engines capable of burning fuel oil and LNG do tend to have higher emissions of methane, a far more damaging gas than carbon dioxide from a climate point of view. But WinGD has introduced a new combustion setup – X-DF2.0 Technology – and new system called Intelligent Control by Exhaust Recycling (iCER), which is now integral to its second generation dual-fuel engine range.

WinGD’s iCER system uses inert gas to improve combustion control, resulting in a halving of methane emissions and improved fuel consumption in both gas and diesel operation. The engine company has estimated fuel savings at 3% in gas mode and 5% when running on diesel. Methane slip has been reduced to “very low levels”, the company said, leading to a greenhouse gas reduction of almost 20% over conventional diesel engines.

Since the ordering of the nine-ship series, Rodolphe Saadé, Chairman and CEO of the company, revealed that six dual-fuelled vessels of 15,000 teu, also built at CSSC yards, were to be dedicated to US trades. The first of these was due for delivery thing month and all six are scheduled to be operational by the end of 2022. By that time, the French company will be operating 32 dual-fuel LNG containerships of various sizes.

While many container lines are still opting for conventional fuels for new ships, CMA CGM is not alone. Leading carriers are only too aware that major shipper groups are now demanding more visibility on environmental issues and lines that are deemed not to have adopted rigorous sustainability policies are likely to lose out. The most proactive carriers are therefore taking the fuel issue very seriously. They include some independents such as Seaspan and Hartmann Reederei.

Maersk Line recently bucked the trend by announcing an order for eight 16,000 teu containerships capable of running on carbon free methanol, MSC and Hapag-Lloyd have both followed the LNG route. Geneva-based MSC has hedged its bets to some extent by entering into long-term charters for LNG-fuelled vessels, rather than ordering new ships itself. Although the company plays its cards closely, deals concluded so far are thought to include eleven dual-fuelled 15,300 teu containerships with Singapore-based Eastern Pacific Shipping and four ships from Zodiac Maritime.

Meanwhile, Hamburg-based Hapag-Lloyd has doubled its sixship order, placed at South Korea’s Daewoo Shipbuilding & Marine Engineering at the end of 2020, with another six vessels in June of this year. The 23,500 teu ships are designed to operate on LNG but will have sufficient fuel tank capacity to run on conventional fuel if required. The vessels will have high-pressure dual-fuel engines in which the combustion process minimises methane slip.

In a statement, the German company noted that fossil LNG is currently the most promising fuel on the path towards zero emissions, but that its medium-term goal is to operate ships that can provide carbon-neutral transport by using synthetic gas. Hapag-Lloyd also revealed that the second series of six ships had been financed with a $852m syndicated green loan with ten participating banks, backed by the Korea Trade Insurance Corporation.

Stronger shipper sentiment

SORJ

Hapag-Lloyd has doubled its six-ship order at DSME with another six 23,500 teu vessels in June of this year