Saturday 9 May 2009

Hope for LNG

Friday 8 May 2009

THE liquefied natural gas industry continues to develop at a rapid pace but the process is not without its growing pains. New trades are opening up at an impressive rate as the industry matures, although the spot and short-term market last year shrank for the first time since the turn of the century. In its latest report, the International Group of Liquefied Natural Gas Importers says 17 new country-to-country trades were established last year, bringing the total to 93.

This trend appears to be continuing into this year with, for example, Qatar’s RasGas recently sending a first cargo to Turkey. Worryingly for shipowners with idle LNG carriers, however, the report indicates that the spot and short-term imports (based on contracts with a duration of four years or less) declined in absolute terms and also as percentage of the global trade with 506 cargoes against 568 cargoes in 2007. Undoubtedly, charterers are becoming spoilt for choice as the mismatch between supply and demand in LNG shipping increases at a time of an economic recession and falling energy consumption in some key markets. Essentially, the short-term market is being squeezed by a combination of shipyard efficiency and the inability of project sponsors to start production on schedule.

Last year, a record number of newbuilding LNG carriers — 48 — joined the fleet, many for projects that are suffering delays. It is now generally estimated that about 40 LNG carriers are idle. There will be little respite for the rest of the year as the flow of newbuilding will continue at a historically high level. Although vessels may be idle, it does not necessarily follow that they are a drain on cash-flow for their owners. LNG carriers without employment because the projects for which they were built are delayed should still be earning: project charter payments normally commence on delivery from the yard or arrival at a specified loading destination. Many long-term LNG charters are not thought to be particularly favourable to owners, but compared to some of the problems being experienced in the container and bulk trades they are a form of security which some owners in other sectors may now envy. Read more

Source: Lloyd's list

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