LNG mist clouds route to maritime decarbonisationLNG mist clouds route to maritime decarbonisation
A newbuild overhang and potential drop in demand could spell trouble for LNG shipping, warns climate group.

Key projections for LNG energy use show declining demand, according to the Seoul-based climate group Solutions For Our Climate (SFOC) and Climate Analytics (CA), in Berlin, who argue that at the current rate of expansion, the LNG fleet will have a capacity overhang of 40% by 2030.
In a report called “Still Adrift: Updated assessment of the global energy transition’s impact on the LNG shipbuilding industry”, published October 14, SFOC and CA argue that there is a growing over-capacity of gas carriers, driven by concerns about pipeline security after the Nord Stream explosions in 2022.
Dongjae Oh, head of gas at SFOC argues that decreasing demand will further increase the shipping over capacity as traditional markets for LNG decline at a faster rate than originally expected.
“Korea and Japan, the previous main demand sources for LNG, their demand is decreasing. Southeast Asia and South Asia, they are revising their policies from gas to renewable energy because of the high prices for last few years and the projects,” explained Oh.
He added: “The projects with which the gas industry is trying to cultivate the demand in Southeast Asia, those finance decisions have been delayed quite a lot and some of the projects are also being shelved.”
Athens-based shipbroker Allied said its data showed 707 LNG carriers were currently operational, with a further 384 ships on order, a substantial 54% of the existing fleet.
Allied shipbroker researcher Chara Georgousi explained that demand is expected to increase due to the building of new liquefaction capacity in both the US and Qatar.
“The current fleet’s composition includes a notable number of vessels, with an average age of 11 years. However, with 41% of the fleet over 15 years of age, many vessels will likely need replacement in the coming years,” said Georgousi.
Lower than expected demand has seen charter rates softening, according to Allied, as the fleet has expanded by 8% this year and fewer liquefaction projects than expected have come on stream.
However, Georgousi added that while “LNG tonnage owners should be mindful of potential overcapacity risks, looking beyond 2025-2026, demand is anticipated to strengthen as new LNG projects are expected to come into operation, which may help rebalance the market and support charter rates.”
However, the SFOC’s report, which primarily looks at the mid-term outlook for the LNG shipping industry, uses the International Energy Agency (IEA)’s latest figures to project future demand, and the climate NGO claims the gas industry is over-estimating demand.
As a result of that over-estimation of demand, LNG carrier companies are facing a catastrophic fall in demand from 2025 and into 2026 following a flood of newbuilding orders as a result of Russia’s invasion of Ukraine in February 2022, it was a “knee-jerk response,” according to SFOC’s lead on the energy supply chain Rachel Eunbi Shin.
Shin argues that many of these orders were made speculatively and are not linked to an underlying charter contract.
“A significant number of orders were made speculatively by finance background ship owners and the private equity funded LNG ship owners,” said Shin, “They are betting on continued demand for LNG carriers, so they took their risk and ordered LNG carriers. And I think this tonnage will flood the market ultimately bringing down the charter rates and affecting the value of the LNG carriers too.”
Moreover, Thomas Houlie, climate and energy policy analyst at CA and one of the authors of the SFOC report, believes that the recording of methane emissions from shipping is inaccurate and that new measuring methods could increase the carbon costs of vessels operating and transporting LNG.
Houlie said that methane emission ratio that the transport industry uses is lower than the actual methane emissions.
“There is a lot of research going on in that sector and these new findings will push the price of LNG as a marine fuel up,” said Houlie, who pointed to research by Climate Trace that compared the actual LNG tanker methane emissions with the satellite images.
"They are trying to capture the actual emissions rather than relying on the emission factors proposed by the engine manufacturers because it seems like the actual methane emissions are much higher.”
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