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World needs 250 new LNG tankers, report says Consultant says $29 billion investment required in LNG tankers Larry Persily Petroleum News Government Affairs Editor
The global fleet of liquefied natural gas tankers will need to add an average 15 new ships each year through 2020 to carry the growing demand for LNG in East Asia, Europe and the United States, says an international shipping consultant.
The capital investment for the new tankers is estimated at more than $29 billion, said the report by U.K.-based Ocean Shipping Consultants Ltd.
And along with all those new tankers will come new technology, too. Demand is expected to spur development of LNG tankers that can regasify their cargo onboard the ship, piping gas directly into offshore terminals and eliminating the need for often controversial shore-based regas facilities.
If Atlantic and Pacific market projections are correct, the worldwide LNG fleet could total more than 410 ships by 2020, triple the almost 140 vessels that traveled around the globe in 2002, according to the consulting firm’s report.
Almost two dozen tankers have been added in the past two years, with the need for 250 additional tankers over the next 16 years based on Ocean Shipping’s forecast that worldwide LNG demand will grow from almost 5.6 trillion cubic feet this year to 9.5 tcf in 2010 and more than 15 tcf by 2020.
“Currently there are 59 vessels on order, but to match the expected development of trade volumes an additional 33 vessels are required through to 2010, 76 vessels in the period 2010-2015, and 83 vessels up to 2020,” Ocean Shipping said in its 163-page April 19 report, “World LNG to 2020: Prospects for Trade & Shipping.” Market demand close to CERA estimate The consultant’s 9.5 tcf estimate for 2010 is just a bit higher than the low-growth estimate of 9 tcf offered a year ago by Cambridge Energy Research Associates, an international oil and gas consulting firm. Cambridge Energy also warned of a possible shortage of LNG tankers by 2010.
Just in the week since Ocean Shipping released its report, U.K.-based natural gas producer BG Group Plc has ordered four more LNG tankers, adding to the four it already had on order, and Belgium-based shipping company Exmar added another regasification tanker to the two it already had on order.
The regas tankers are known as LNG regasification vessels, or LNGRV.
“While the LNGRV market may be on the margins of the massive LNG expansion, it is clear that LNG carrier orders will be the real prizes for the large yards able to build them,” reported Singapore-based Shipping Times.
“In principle, that could mean a significant re-entry of the big European yards into the sector,” Shipping Times reported April 22. Only a single yard in France and one in Spain have won orders to build LNG tankers, but the news service reported other European shipbuilders may soon share in the work.
It’s been almost 25 years since a U.S. shipyard built an LNG tanker, and the last ships were built with the help of a federal subsidy. All of those vessels were later reflagged to operate as foreign vessels and do not serve the U.S. trade. South Korea, Japan lead in shipbuilding South Korea leads the world in building LNG tankers, with Hyundai Heavy Industries Co. Ltd. the largest builder, followed by Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering Co. Japan is in second place, with Mitsui Engineering & Shipbuilding Co., Mitsubishi Heavy Industries Ltd. and Kawasaki Heavy Industries Ltd.
East Asian and European nations will continue their lead roles as the world’s largest consumers of LNG, Ocean Shipping said, with each to need about 6.4 tcf a year by 2020 — combining for more than three-quarters of the global market.
Gas supply will continue building from Southeast Asia, Australia and West Africa nations, with new supplies coming from the Middle East, Norway, Russia, Central and South America, the report said. Indonesia and Malaysia are expected to lead the way in Southeast Asia, supplying much of the 3.4 tcf per year estimated from the region in 2020. The Middle East will feed 3 tcf into the market by 2020, with Australia adding almost 1.5 tcf, the report said.
In addition to market demand, falling construction costs are helping to attract orders for new LNG tankers. Higher demand brings more shipyards into the business, with competition driving down prices, said a December 2003 federal Energy Department report. “Building costs for LNG tankers have decreased from about $280 million (nominal) in the mid-1980s to about $155 million in late 2003,” the report said.
India, China and Poland are looking to join Japan, South Korea and Europe in the LNG shipbuilding business, the U.S. report said. BG Group orders four more tankers The largest recent order came from BG Group for four tankers from Samsung Heavy Industries in South Korea. The company, which said it will use the ships to carry gas to the United States and England, reported the order at $620 million, an average $155 million per ship.
The ships will be delivered in 2007 and 2008, BG Group said. Each will carry 145,000 cubic meters of LNG, or about 3 billion cubic feet of gas.
“These four new ships will be used to meet BG’s fast-growing Atlantic Basin LNG business,” said Martin Houston, a vice president for North America. The company is involved in expanding LNG production in Trinidad and Tobago, Egypt and Iran.
BG Group holds 100 percent of the capacity rights at the Lake Charles, La., LNG receiving terminal, and much of the capacity at the terminal at Elba Island near Savannah, Ga. The company is scheduled to triple the capacity of its Lake Charles plant to 1.8 bcf per day by 2008.
This month’s orders for four new ships is in addition to one LNG tanker the company is scheduled to receive the middle of this year and three more in the second half of 2006. Exmar orders regas tankers South Korea’s Daewoo Shipbuilding will construct three LNG regasification vessels for international gas shipper Exmar, with the first ship due for delivery in November and the next two in April 2005 and late 2006.
Exmar said at least two of the ships will be used to carry LNG to a proposed offshore unloading terminal in the Gulf of Mexico. The company has taken delivery of three new ships in the past two years, and is active in the Algerian LNG trade.
Incorporating regasification capabilities onboard the newest tankers will allow Exmar to serve the growing interest in offshore receiving terminals, designed to avoid community opposition to onshore facilities.
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