Changing energy patterns driven primarily by Russia’s invasion of Ukraine, undersea pipeline sabotage, and mounting concern over energy security, are key factors driving rapid fleet growth and pushing new ship prices over $250m with further increases likely, according to Aman Sud, Drewry’s lead analyst on the LNG sector.
The fleet comprised 739 ships by the end of 2022 and, despite new construction yards entering the sector in China, slots are extremely tight until 2026, with discussions now in progress on 2027 and 2028 deliveries.
LNG carrier demand is unlikely to ease any time soon. The second phase of Qatar’s huge contracting programme is imminent and additional capacity will be needed for new projects under development.
About 25 million tonnes per annum (mtpa) of new liquefaction capacity is due on stream this year and next, and more than 20mtpa of liquefaction capacity is due to reach final investment decision (FID) by 2024, according to Drewry.
Particularly rapid growth is expected in the US where sharply higher exports to Europe in 2022 – up 140% – helped to offset the dramatic decline in Russian imports by pipeline. By 2027, the US is likely to be number one in liquefaction capacity, followed by Qatar and Australia, Aman predicted.
Day rates, both in the spot and short-term sectors, have fallen sharply in recent weeks, partly owing to a relatively mild winter in Europe and high stocks, 84% full at the end of 2022. Asian demand was also relatively weak.
But an easing of Covid restrictions in China and a cold snap of winter weather in Europe could easily change the backdrop. Despite softer short-term deals, long-term rates remain robust, Aman noted.
The impact of the IMO’s carbon intensity indicator (CII) will mean that most steam turbine LNG carriers – about 240 ships – will fall into categories D and E by the end of this decade, if not before. This means that they will require significant modification or conversions to continue trading into the 2030s.
Meanwhile, Europe’s dash for LNG imports by sea is spurring demand for floating storage and regasification units. Five new terminals have been commissioned since the beginning of the Russian war and eight more are under construction. Interest is focused on both conversions and newbuildings, Aman said.
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