Related Articles
Forward article link
Share PDF with colleagues

LNG shipowners seek profit in niches

The 2018-19 production surge fails to excite shipping

Bulk LNG shipping would appear to be in a rosy position—global trade volumes have never been higher. Yet shippers are relatively glum about the short-term prospects for large-scale LNG transport, and much more enthused about the prospect of LNG bunkering and floating storage and/or regasification units (FSRUs/FSUs/FRUs). Why?

Admittedly, longer-term, shippers are more positive. Future mega-projects are being approved almost on a monthly basis, on the back of bullish forecasts of gas as, at the very least, a bridge fuel in the energy transition. As a result, the order book for new ships to serve this projected volume growth is bulging.

But the current low LNG price environment is a major issue, Mike Rowley, senior advisor, LNG and offshore at ship operator Mitsui OSK Lines (MOL), told the London LNG Shipping conference. It has meant increased competition between players and shorter contract terms—leading to larger LNG projects becoming "more complex and capital intensive" and to "difficult commercial terms for shipowners", says Rowley.

"Global downside and economic uncertainty will continue to overshadow growth in the LNG business sector for the foreseeable future," he says, citing issues such as the US-China tariff dispute, as well as Brexit, which "might have some impact".

As a result, "small-scale bunker vessels are the new direction in which we are heading," says Rowley. MOL currently has two bunker vessels under order, one contracted with Total with a capacity of 18,600m³, due to be delivered in Q1 2020, and one of 12,000m³ capacity due to be delivered in Q1 2021.

In addition, MOL is "well into the space" for FRSUs and FSUs, with the conversion of older LNG tankers into floating units.

Even floating units, with their potential to swiftly bring gas to new regions, particularly to "emerging and frontier markets" in the developing world, face challenges, warns Suryan Wirya Simunovic, executive vice president at Golar Management, the ship management arm of Norway's Golar.

"Global downside and economic uncertainty will continue to overshadow growth in the LNG business sector for the foreseeable future," Mike Rowley

"What we are seeing increasingly is the huge challenge in developing import solutions," he says. "Technically there are many solutions but getting these projects over the line is the hurdle.

"The immense frustration I face is that you take these projects almost down to the finish line, and then it does not happen for whatever reason—whether it is this minister or that CEO… And that is the challenge."

Golar's fleet includes eight FSRUs, of which four are converted LNG vessels, and three floating liquefaction vessels (FLNGVs), as well as 16 conventional LNG tankers.

"We are focusing on medium scale and on developing floating regas solutions," says Jostein Ueland, co-founder of Oslo-based start-up Dreifa Energy. The firm aims to provide FSU and FRU solutions on short contract durations to meet immediate demand but with optionality for future requirements, helping to "develop new markets and build new demand" for LNG.

"This is where the shipping market is going" says Ueland, adding that there is a "significant number of vessels that are 20-30-40 years old, that are not good for transportation but are fantastic storage vessels, low cost and can be brought in for a gas plant or industrial users around the world".

Also in this section
PE Live: Mexico’s downstream dilemma
27 November 2020
Offshore production may be steadily climbing but lack of infrastructure and unclear offtake legislation threatens further growth
European gas faces more winter price weakness
26 November 2020
The impact of further pandemic lockdowns is compounding an already bearish outlook
Mozambique’s ambitious northern gas plans head south
26 November 2020
Natural gas was supposed to help industrialise the northern provinces, but after a string of project cancellations it will be transported to the more prosperous south