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LNG approaches 500-ship milestone

Tue 21 Feb 2017 by Mike Corkhill

LNG approaches 500-ship milestone

Since the end of last year, nine LNG carrier newbuildings have been delivered and five new floating storage and regasification units (FSRUs) have been ordered.

The fifth contracted FSRU, a mammoth, record-breaking 330,000m³ FSRU for Fox Petroleum at Hyundai Heavy Industries (HHI), is yet to receive a hull number, and the shipyard has yet to confirm it. Fox intends to position the vessel at the port of Karwar on India’s southwestern coast between Mumbai and Kochi.

Of the nine deliveries, six are conventional-size LNG carriers and three are small-scale vessels. Although the latter all have Type C cargo tanks and dual-fuel propulsion, each is unique and heralds its own technological breakthrough for LNG shipping.

The largest, JS Ineos Innovation, is the fifth of eight 27,500m³ multipurpose gas carriers being built for Evergas and chartered to Ineos. All eight will initially transport US ethane to Europe for Ineos but Evergas plans to introduce to the fleet as replacements at least four Ineos Max 32,000m³ ethane carriers from early 2018, allowing half of the 27,500m³ ships to come off charter and enter the small-scale LNG trades.

The middle vessel, size-wise, is the 14,000m³ Hua Xiang 8, built by the Qidong Fengshun yard for Zhejiang Huaxiang. It is the world’s first LNG carrier powered by a two-stroke, dual-fuel engine operating at low pressure, in this case a Wärtsilä 5RT-flex50DF unit developed by Winterthur Gas & Diesel.

Hua Xiang 8 is set for domestic service in China, distributing LNG along the coast and to the new bunkering stations in the country’s major river estuaries. A major player in the Chinese LPG market, Zhejiang Huaxiang aspires to build up a fleet of coastal LNG carriers of various sizes, including for use in South East Asia.

The smallest ship is the 5,000m³ Engie Zeebrugge, the first purpose-built LNG bunkering vessel. The ship was built by Hanjin Heavy Industries & Construction (HHIC) for Engie, Fluxys, Mitsubishi and NYK Line and will be based at the Belgian port of Zeebrugge, where it will load at the Fluxys LNG import terminal.

Engie Zeebrugge is the first of a new breed of LNG vessel, of which several are under construction and nearing completion, that will boost the nascent fleet of gas-powered ships. Ship-to-ship (STS) fuelling with gas tankers of the Engie Zeebrugge type will allow many more vessels to bunker with LNG economically and efficiently than truck-to-ship and shore-to-ship transfers allow.

Engie, Mitsubishi and NYK plan to lead this new ship service sector and have established Gas4Sea to market their joint expertise in the STS transfer of LNG as marine fuel. Gas4Sea plans to build additional LNG bunker tankers for service where need arises.

500 ships in sight

These completions and new orders have increased the in-service fleet of LNG carriers to 493 vessels and the orderbook to 124. This year, 41 additional LNG carriers are set for completion. The in-service fleet looks set to reach the 500-ship mark in April, when five newbuildings are scheduled for completion.

It would be appropriate – given the popularity today of floating LNG-import terminals – if the landmark 500th vessel turned out to be an FSRU. Alas, no FSRUs are scheduled for delivery in April.

However, five FSRUs are due for delivery this year, all for different owners. The Höegh, BW Group and Golar LNG completions will boost these three owners’ existing regas fleets. The Mitsui OSK Line and Gazprom newbuildings mark these two companies’ first foray into FSRUs.

In November, Dynagas LNG Partners reported 19 FSRU-based LNG import projects in operation and 10 more, with an aggregate regasification capacity of 30 million tonnes per annum (mta) of LNG, due to come on stream by 2018. Meanwhile, almost 50 additional FSRU proposals are under discussion.

Last year, LNG imports using FSRUs commenced in Colombia, Abu Dhabi and Turkey and this year Ghana and Puerto Rico will inaugurate regas vessel operations and Pakistan will get a second FSRU. Uruguay, Chile, Bangladesh and Russia are poised to join the FSRU-based importers club next year.

Dynagas forecasts that FSRUs will account for 16.6 per cent of LNG imports worldwide by 2020, up from 8.6 per cent in 2010.

Based on the ordering of the opening weeks of 2017 – Excelerate's seven-FSRU letter of intent with Daewoo Shipbuilding & Marine Engineering (DSME), the three options attached to Hoegh's recent two FSRU orders and the GasLog purchase of a 20  per cent stake in Gastrade's Alexandroupolis FSRU project in Greece – that percentage could well be higher.

Last year, 31 LNG carriers were completed and eight were ordered. Maran Gas was the notable player over the period, having taken delivery of 10 LNG ships and having ordered two since the start of last year. The new contracts include its first FSRU.

Since taking delivery of its first gas tanker, the 145,700m³ Maran Gas Asclepius, in August 2005, Maran Gas has built its LNG fleet up to 26 ships with a further seven on order. The tally places the Angelicoussis Group company among the world’s leading LNGC owners.

Ship orders in 2017

Last February, your consultant editor predicted, in a column similar to this one, that by late 2019/early 2020 the LNG industry would require approximately 35-40 conventional LNGC newbuildings over and above the then current orderbook to meet its shipping needs.

This additional tonnage is needed to transport the full nameplate output of the export terminals under construction. Most of the required vessels will be utilised in lifting cargoes from the US, where five projects aggregating 14 trains and an output capacity of 64.7 mta are due on stream by 2020.

Although a good deal of the tonnage for these projects is already on the orderbooks, not all the ships required to transport the 26.7 mta from the last six US trains to be commissioned, at Freeport, Corpus Christi and Sabine Pass in the US Gulf between 2019 and early 2020, have been contracted yet.

Thirteen new LNG carriers, including seven FSRUs, have been ordered since we published that column. As all but one of the FSRUs are specified against dedicated regasification projects, that leaves a gap of about 30 conventional newbuildings to plug.

The level of new ship orders last year was the lowest since 2009, the year after the collapse of global financial services firm Lehman Brothers and the worldwide economic meltdown. In contrast, more than 200 ships were ordered between 2011 and 2014.

The recent nosedive in LNGC contracting reflects the high number of newbuilding deliveries at a time when the demand for cargo is weak. Although the current slack market has prompted shipowners to delay delivery times for some of their newbuildings, the specialist LNGC yards can complete a ship within 30 months of a contract being signed.

Bearing in mind ship construction lead times and the fact that it takes, on average, six to nine months for a newly commissioned LNG train to build up to full production, most of the 30 additional newbuildings that the Freeport, Corpus Christi and Sabine Pass projects will need will have to be ordered during this year.

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