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Annual LNG Shipping Market Review and Forecast 2009
Facing the challenge of over-capacity
LNG is one of the fastest growing sectors in shipping today, but delays to new LNG production plants are causing overcapacity in the carrier fleets.
LNG Annual Report & Forecast 2009 assesses the options open to LNG fleet operators to avoid long term unemployment for vessels. As with all Annual Reports there is comprehensive data and analyses of the sector.
Key topics covered:
Gas markets and patterns of LNG trade
LNG fleet size, structure and diversity
LNG fleet employment - managing overcapacity
Fleet costs and economics
LNG outlook - the future for the sector
The warnings were sounded a year ago... rapid growth in LNG trade has led to major investment in newbuilding. LNG may currently be one of the fastest growing sectors of world shipping with fleet capacity set to grow by almost a third in 2008. Even still, LNG production has not grown as quickly as previously expected. Production and carrying capacity are now out of synch.
On a brighter note, longer-term growth prospects for LNG shipping remain good and the sector will become a more mainstream part of the shipping industry with greater structural diversity in terms of both ship type and employment practice. But first, LNG faces a period of over capacity predicted to last well into the next decade.
LNG in a changing world
Like other shipping sectors, LNG operators face changing trading patterns, shifting demand set against possible global recession. This latest Report provides the most comprehensive analyses to help fleet operators and associated businesses plan for a sustainable future.
Issues that took centre stage in 2008
Shipping demand - managing the supply-side overcapacity and exploring options such as floating storage and regasification.
Responding to global price signals to maximise revenues.
Short term market movements - the main growth regions.
Rising costs causing price pressure and delaying projects.
Manning - the shortage of skilled mariners.
Fall in USA imports has and will have a big impact on trade patterns.
The question is where and when will new LNG supply come from in era of high costs and restricted credit? Will the economies of scale of mega projects give way to the flexibility (and lower cost) of small scale developments? These topics and much more are covered in LNG 2009. Plus, there is a review of the new types of LNG carriers that have recently entered service and future innovations that will further diversify the once homogeneous fleet.
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Main findings
For another year, LNG has been one of the fastest growing sectors of world shipping with fleet capacity set to increase by almost a third in 2008. Unfortunately LNG production has not grown as quickly as previously expected, and LNG shipping faces a prolonged period of over capacity likely to last well into the next decade.
Ship owners without long-term employment for their vessels can expect a difficult period but there are options open to them as Drewrys Report details. Longer-term growth prospects for the sector, however, remain good and LNG will become a more mainstream part of the shipping industry with a much more diverse structure in terms of both ship type and employment practice.
Trade - more price responsive
The patterns of LNG trade are changing with both new sources of supply and demand and more flexible forms of trading. Trade is becoming far more responsive to global price signals with significant volumes now able to switch to where prices are highest. At the same time, new technologies are allowing new markets to develop far faster than previously possible.
Fleet - record deliveries
For the second year running, a record level of LNG carriers were delivered to the fleet with a total of 33 vessels. But even this record is set to be smashed as 55 vessels are due for delivery this year. However, this is where the figure will stay for some time as the order book for new LNG carriers has shrunk to six so far in 2008. But, as well as expanding rapidly, the LNG fleet is becoming more diverse in terms of size, propulsion and use. Some owners have been exploring floating production, storage and regasification as a means to find gainful employment for surplus vessels.
Trading patterns - the rises and falls
The short-term market took 14.6% of the total LNG trade during 2007, in terms of volumes delivered, and grew by 13.8% to 24.2 million tonnes. Japan, India, Mexico and the USA were the main growth areas whilst South Korea and the UK saw lower short-term trades than 2006. If trade patterns for the first eight months of 2008 remain broadly similar to the end of the year there will be a big fall in short-term trades to the USA in 2008, a recovery in Europe and further increases in Asia. Despite a limited number of FIDs on new liquefaction projects in the last couple of years, there have still been plenty of contract negations.
Costs - putting pressure on prices
Cost reductions in the late 1990s and the early 2000s were crucial in helping the LNG industry enter a major expansion phase. No longer; escalating costs are now posing serious problems to the industry. On the project side, a rise in material and equipment costs has combined with a shortage of experienced manpower. On the shipping side, newbuilding prices and operating and voyage costs have all seen upward price pressure.
Outlook - using up the surplus capacity
With the LNG fleet forecast to have considerable surplus capacity well into the next decade owners without long term employment for their vessels will need to be creative in finding work for their vessels. Developments in onboard regasification and the availability of surplus shipping capacity as floating storage have allowed areas without access to existing terminals to access LNG far faster than previously possible.
Argentina and Brazil have both quickly opened themselves up to LNG imports during 2008 by using floating terminals. Vessels can also be employed as temporary floating storage (or slow-steam) to take advantage of seasonal price differences. Longer term solutions could see vessels converted into floating storage and regasification units (Golar LNG having already converted one vessel and plan to convert several others). Scrapping elderly vessels and lay-up are also options. Forecasts of demand growth have been cut back in recent years with EIA estimates of future USA demand in particular being slashed due to delays in liquefaction plants around the world, higher energy prices and better than previously expected US domestic gas production.
The surplus of vessels will help develop the spot market further which could be good for cu.m mile demand. Already 2008 has seen a significant expansion in trade from the Atlantic Basin to the Far East that has helped absorb a proportion of surplus capacity.
1. Executive summary
2. The gas market and LNG trade
The gas market and LNG trade
The gas markets
Natural gas
Liquefied natural gas (LNG)
Applications
World primary energy consumption
Natural gas consumption trends
Natural gas production trends
International natural gas reserves
The international natural gas trade
History of LNG
LNG exporters
LNG importers
LNG prices
Seaborne trade
LNG trade outlook
3. The LNG fleet
LNG fleet profile and development
Development of the LNG fleet 1964-2008
Deliveries
New orders
Orderbook
Age profile of the LNG fleet
Demolition
Types of LNG carrier
Yards building LNG carriers
Ownership of the LNG fleet
Future LNG fleet
4. LNG fleet employment and markets
Contracts, existing, planned and potential
The Freight Market
Vessel tracking analysis
5. LNG costs and economics
An introduction to ship costs
Capital costs
Operating costs
Voyage costs
Allocation of LNG shipping costs
LNG shipping revenues
Indicative fully built-up transport costs
Transport costs and overall project economics
Safety and security
Appendices
Natural gas conversion factors
Natural gas consumption
Natural gas production
Natural gas reserves
Gas trade movements 2007 by pipeline
LNG trade
LNG shipping
LNG liquefaction plants: existing
LNG liquefaction plants: under construction
LNG liquefaction plants: planned and proposed
Current LNG receiving terminals
LNG receiving terminals under construction
Planned and proposed LNG receiving terminals
LNG fleet listing
LNG orderbook
LNG carrier design 138,000 cbm LNG carrier; membrane type
LNG carrier design 144,000 cbm LNG carrier; Moss type
Current LNG contracts by importing country
Future LNG contracts by importing country
LNG fleet employment in 2007
LNG charter fixtures
LNG vessels employed in the spot/short term market during 2007
Tables
LNG fleet and orderbook
LNG trade
LNG imports and exports
LNG fleet development
LNG orderbook and delivery schedule
LNG orderbook by shipyard
Recent LNG contracts
Market activity
Costs
LNG liquefaction capacity
LNG regasification capacity
Delivery schedule
Top 10 LNG exporters
Top 10 LNG importers
Top 10 owners current fleet
Top 10 owners orderbook
Top 10 yards No. of LNG ships built
Top 10 yards Orders since 2000
Composition and properties of natural gas
World primary energy and gas consumption
Forecast natural gas consumption
Natural gas production
International trade in natural gas, 1970-2007
World LNG trade by exporting countries
LNG liquefaction plants
LNG imports
Existing regasification plants
Regasification plants under construction and under consideration
USA LNG imports
Spanish LNG imports
Japanese LNG imports
South Korean LNG imports
LNG prices
Gas prices
LNG seaborne trade 1990-2007
LNG trade matrix, 2007
LNG seaborne trade matrix, 2007
Forecast LNG production capacity
LNG production capacity
LNG regasification capacity
LNG fleet development summary
LNG fleet development by size
LNG fleet deliveries
LNG fleet orders
LNG fleet orderbook
LNG fleet size and age profile
LNG fleet deletions
LNG demolition scenarios
Shipyard summary
Delivery schedule of confirmed orders by yard, 2007-2011
Available yard slots, 2010-2012
LNG fleet ownership summary
LNG future fleet development
LNG future fleet demand
Spot movements by importing region 2006 and 2007
Spot market by export country
LNG vessels loading, 2007
LNG vessels discharging, 2007
LNG carrier secondhand sales
Vessels available for employment as of 31 August 2008
LNG carrier newbuilding prices 125-155,000 cbm
LNG operating costs, 2002-11
Suez Canal transit dues LNG carrier, 2008
Suez Canal LNG traffic
Historical and forecast bunker prices
Indicative annual voyage costs
Allocation of LNG shipping costs
LNG time charter rates
Indicative fully built-up transport costs per annum
Indicative fully built-up transport costs per annum
Indicative fully built-up transport costs per annum by route
145,000 cbm vessel size
Indicative fully built-up transport costs per annum by route
215,000 cbm vessel size
Indicative new LNG project costs
LNG carrier shipping incidents
Figures
LNG trade development
LNG fleet development
LNG exports
Japanese LNG imports
South Korean LNG imports
USA LNG imports
Spanish LNG imports
LNG prices
Forecast USA net gas imports
Deliveries & deletions
Orderbook
Age profile
LNG spot trades
LNG movements and LNG delivered
Newbuilding orders and price
Freight rates
LNG trade and fleet forecast
Natural gas and LNG demand, 1970-2007
Energy consumption by fuel type
Forecast energy demand by type
Forecast natural gas demand
Global distribution of gas reserves, 2007
Natural gas production, consumption and world trade
LNG exporters
LNG importers
USA LNG imports
LNG terminals: North America
LNG terminals: Europe
European LNG imports
LNG terminals: Japan and South Korea
South Korean LNG imports
Gas prices
LNG trade
World LNG exports, 2007
Shipping demand by exporting countries, 2007
World LNG imports, 2007
Shipping demand by importing countries, 2007
Forecasts of USA net LNG imports
USA net LNG import scenarios
LNG fleet development
LNG fleet by size
LNG deliveries
LNG new orders
LNG orderbook orderbook and orderbook as % of fleet
LNG orders by containment system and propulsion type
LNG fleet age profile
LNG fleet age profile
LNG fleet by containment system
LNG fleet by propulsion system
LNG fleet by place of build
LNG fleet by shipyard
LNG orderbook by shipyard
LNG fleet by owner
LNG orderbook by owner
Fleet by flag and class
Forecast LNG fleet
Spot vs. contract, 2007
Freight rates
Spot movements
Growth of short-term trade
Number of spot movements East and West, 2006 and 2007
Top 25 vessels undertaking multiple short-term cargo
movements
Spot export movements, 2006 and 2007
Spot import movements, 2006 and 2007
LNG movements and LNG delivered
LNG carrier newbuilding prices: 125-155,000 cbm
Quarterly LNG newbuilding prices and orders
Evolution of total operating costs
Operating costs
Bunker prices
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