If variety is the spice of life, current LNG carrier newbuilding activity is indeed a tasty dish, writes Mike Corkhill.
In addition to the workhorse conventional-size carriers, LNG vessels delivered and ordered in the year to date feature LNG bunkering tankers, multigas ships, coastal distribution carriers and floating storage and regasification units (FSRUs). Two floating LNG production (FLNG) vessels have also been completed.
As of 21 August, 27 LNG vessels have been delivered so far in 2017 and 14 newbuildings contracted. An additional 28 ships are scheduled to be handed over to their owners before 31 December, putting this year on course to be the busiest ever for LNGC completions.
The complement of vessels delivered in the year to date comprises 18 conventional-size LNGCs, one FSRU, two FLNGs and seven small-scale LNG tankers. All but one of the conventional ships were built in South Korea, the odd one out coming from the Hudong-Zhonghua yard in China.
Daewoo Shipbuilding & Marine Engineering (DSME) has been the busiest yard, with seven conventional-size completions. The Hyundai Ulsan and Hyundai Samho facilities between them turned out five, as did Samsung.
One of the Ulsan completions, the Sonatrach-chartered 170,000m³ Ougarta, enjoyed a notable service baptism. Its two inaugural cargoes were the first shipments of Algerian LNG to Jordan and Kuwait.
The small-scale additions to the fleet so far this year comprise four 27,500m³ LNG/ethane multigas carriers and three LNG bunkering tankers. The latter are the first purpose-built vessels of this type.
The multigas ships are the last in a series of eight Evergas-owned, Dragon-class tankers completed for charter to Ineos and the carriage of US ethane to European petrochemical plants for use as feedstock.
Notwithstanding this early employment, at least four of the Dragon-class ships are earmarked for the LNG trades, once their replacements are in place – four slightly larger Ineos Max ethane carriers now under construction for Evergas.
Like the first two dedicated LNG bunker vessels – the 5,100m³ Engie Zeebrugge and the 6,500m³ Cardissa – the recently completed 5,800m³ Coralius has also been built for ship-to-ship fuelling in the North and Baltic Sea emission control areas (ECAs).
Contracted by a Sirius/Veder joint venture for a long-term Skangas charter, Coralius also follows Engie Zeebrugge and Cardissa in sporting duel-fuel diesel-electric propulsion and IMO Type C cargo tanks.
TGE Marine Gas Engineering designed and supplied the cargo-handling plant, the LNG fuel gas systems and the cargo tanks for all three LNG bunker vessels. Each carrier sports two Type C tanks, while those of Engie Zeebrugge and Cardissa are cylindrical and the Coralius units have a bilobe configuration.
The cargo tanks on the three ships are of 9 per cent nickel steel, a material that exhibits relatively low shrinkage and expansion due to thermal cycling. Type C tanks provide a high degree of bunker vessel operating flexibility, as they do not need a secondary containment system barrier and no restrictions on filling levels.
This year’s orders
Since LNG World Shipping published its half-year 2017 newbuilding review, the orderbook has swelled to include four 174,000m3 vessels that Mitsui OSK Lines (MOL) has ordered at Hudong-Zhonghua in China for charter to Yamal LNG. The ships are due for delivery in 2019 and 2020.
Supplementing its 15-strong core fleet of 172,000m³ icebreaking LNG carriers, Russia’s 16.5 million tonnes per annum (mta) Yamal LNG project also requires up to 10 conventional LNGCs to shuttle to final customers the cargoes that the gas-carrying icebreakers lift from Sabetta in the Arctic. The MOL ships will form part of this conventional Yamal transhipment fleet, which is set to commence operations in 2019.
Dynagas and Teekay are helping to establish Yamal’s pool of conventional vessels. In addition to providing five of the 15 Arc7 ice-class icebreaking LNGCs, Dynagas has agreed to charter four of its Arc4 LNGCs to Yamal for 15 years.
Teekay, which is also supplying Yamal Arc7 LNGCs, will make available one of its 173,400m³ LNGCs under construction at DSME, again under a long-term charter.
The MOL quartet has boosted Hudong’s orderbook to 12 LNGCs. The yard is China’s leading builder of such vessels, having delivered 13 conventional-size ships to date.
This year is on course to set a record in LNG carrier deliveries, with 55 possible ship completions. This makes it more likely that the desultory freight revenues will continue well into next year. The fleet is oversupplied and growing rapidly, although new liquefaction capacity coming on stream, and the ensuing expansion in global trade, is helping to soak up tonnage.
Last year, global trade in LNG expanded by some 20 million tonnes, or 8 per cent. The conventional-size LNGC fleet grew at a marginally lower rate and the second half of the year saw a marginal strengthening of freight rates and fleet utilisation in the spot market.
At first, the positive trend continued into this year. But in late spring, with inventories in the Asian import nations topped up, spot rates for ships operating east of Suez slipped down by as much as 20 per cent, towards US$30,000 per day.
This year, worldwide movements of LNG are set to rise by 13 per cent but the conventional LNG-carrier fleet will expand by only 10 per cent, despite the record number of newbuilding completions.
That disparity will support increasing freight returns for shipowners active in the spot market later in the year and into next year. Analysts predict a 25 per cent jump in spot rates by mid-2018.
The trade versus fleet growth pattern will be replicated next year, with worldwide movements of LNG set to expand by 10 per cent and the fleet 8 per cent. Rising US exports, with their need for long-haul transpacific delivery voyages to Asia will further strengthen freight rates and fleet utilisation next year.
The evolving LNG market and the technical capabilities of modern LNGCs also boost fleet utilisation. New ships have more efficient engines and improved cargo-containment systems, with lower boil-off gas (BOG) rates, and charterers have more flexibility regarding discharge terminal options.
Today, there is less need to travel at speed to a dedicated destination to minimise BOG losses. Vessels are enabled to sail more slowly or via indirect routes, raising the fleet’s tonne-mile figure.
Delivery of the current orderbook will boost LNGC numbers by 6 per cent in 2019 and 2 per cent in 2020. There is a consensus that the LNG industry will require additional newbuilding completions by the end of the decade.
At a conservative estimate, new orders for 30 LNGCs will be required over the next 12 months to provide a well-balanced fleet by December 2020.