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LNG World Shipping

LNG World Shipping

LNGC owners hit pause – new deliveries delayed

Fri 20 Oct 2017 by Mike Corkhill

LNGC owners hit pause – new deliveries delayed

Since LNG World Shipping last published its latest fleet statistics on 16 August, shipowners and shipyards have agreed to delay the scheduled delivery dates for 25 vessels – or 20% of the 124-ship orderbook.

The new completion dates fall between one and 11 months after the earlier agreed handovers. The delays include 11 vessels to be delivered in 2018 instead of in 2017. Some 58 LNG carriers are now due to be commissioned in 2018.

One of the vessels rescheduled for 2018 is Elcano’s 174,000 m3 Castillo de Merida. Although the ship, Hull No 8177 at Imabari in Japan, has completed sea trials, it was not handed over in October, as originally intended, but in January. The handover of its sistership Castillo de Caldedas is delayed six months, to March 2018.
The delayed completions, many of them relatively modest, will benefit owners, builders and charterers alike. Deferred deliveries align vessel availability with the shipping requirements of delayed new liquefaction projects.

Postponements also help the specialist LNG shipyards to cope with unprecedented newbuilding activity. Although the 150 LNG carriers ordered between 2012 and 2014 were a boon for the yards, building the vessels required a major commitment in labour and productivity gains.

Delayed deliveries also assist shipowners at a time of fleet overtonnaging. Although the recent spate of completions helped to drive spot market freight rates down towards the low US$30,000s/day earlier this year, the number of vessels available for immediate work is now tightening.

Improved cargo tank insulation, partial reliquefaction plants and efficient propulsion units on modern LNG carriers enable them to minimise cargo boil-off gas losses and to sail at lower, more economical service speeds, often on longer deepsea routes, to avoid expensive canal tolls.

The combination of delayed deliveries, slow steaming, new production volumes coming on stream and arbitrage opportunities opening between the Atlantic Basin and Asia supports a freight-rate rebound. Some recent spot cargoes have been fixed at the high US$40,000s/day, as tonnage becomes scarcer.

Records

As befits a dynamic industry, with a growing fleet and surging global trade volumes, records continue for LNG shipments. China’s imports up to September reached 26.7 million tonnes (mt), against 26.8 mt for the whole of 2016. 

China could well emerge as the second-largest buyer of LNG in 2017, overtaking South Korea. Although South Korea’s LNG purchases in the period January-September reached 27.3 mt, Chinese import volumes are currently growing at a faster rate.  

Operators of established LNG import terminals at Dahej in India, Sines in Portugal and Barcelona inSpain confirm record monthly receipts of LNG in August, of 1.4 mt, 0.46 mt and 0.53 mt, respectively.

Australia has been consolidating its status as the world’s second LNG exporter in recent months. It shipped 5.7 mt from its seven operating liquefaction terminals in July 2017, a volume 50% greater than that of the same month in 2016.

One series of ships to escape the delays is the four 165,000 m3 vessels that the Japan Marine United (JMU) Tsu yard is building for charter to Tokyo Gas. The carriers are still down for their targeted handovers in November of this year, March 2018, and February and April of 2019.

The vessels will join a select fleet boasting IHI’s self-supporting, prismatic-shape IMO Type B (SPB) containment system. So far, only two LNGCs have been built with this independent tank system, an 89,000 m3 pair completed in 1993.

Key advantages of the robust SPB system are the shape of the tanks and their ability to cope with all cargo sloshing loads, irrespective of the filling level. SPB tanks also meet the criteria of “leak before failure”. 

Fracture mechanics has helped crack-propagation analysis to show that if a crack develops in an SPB tank, its growth will not be rapid enough to allow excessive leakage into the cargo hold. This allows the use of only a partial secondary barrier, consisting of a spray shield and drip pans, for example, with independent IMO Type B tanks.

Each of the four JMU ships has four SPB cargo tanks of unprecedented size. The construction of these pioneering units presented challenges for IHI, creating earlier tank-delivery delays. When the series was ordered in 2014, on the back of the Tokyo Gas charter to lift Cove Point export cargoes on the US east coast, two ships were contracted for 2017 delivery and two for 2018.

The first of the four JMU ships was named Energy Liberty at a yard ceremony on 16 October. The LNGC, with SPB tanks in place, will now undergo final preparations for service alongside Tsu’s fitting-out jetty.

Whether Energy Liberty will be delivered on its appointed November handover date is open to question. Earlier this month Tokyo Gas president Michiaki Hirose stated that the first cargoes from the Cove Point liquefaction plant, now virtually complete, will reach Japan “early in 2018”. 

FSRU focus

Just three ships have been delivered and two ordered since LNG World Shipping published its fleet statistics in August. Both orders and one of the deliveries are floating storage and regasification units (FSRUs).

The new regas vessel contracts comprise one unit for India and another for Indonesia. Swan Energy is having a 180,000 m3 FSRU constructed at Hyundai Heavy Industries to enable Jafrabad in India’s northwestern Gujarat state to start LNG imports in 2019.

Mitsui OSK Lines (MOL), which is also to operate Energy Liberty, will participate in the Swan scheme. The Japanese owner will provide an LNGC for use as a floating storage unit (FSU) at Jafrabad and will operate both the FSRU and FSU vessels.

The second FSRU was ordered for a shipowning consortium led by Japanese traders Marubeni and Sojitz, who have booked a 170,000 m3 FSRU at Samsung Heavy Industries. This will supply a power plant that Marubeni is building at Cilacap in Central Java for 2020 completion.

MOL is also behind the latest FSRU delivery, as full owner of the Daewoo Shipbuilding & Marine Engineering-built MOL FSRU Challenger. At 263,000 m3, it has the largest cargo-carrying capacity of any FSRU, able to regasify almost 11,000 tonnes of LNG per day.

MOL FSRU Challenger was originally contracted as an import terminal for Gas Sayago at an offshore jetty close to the Uruguayan capital Montevideo. That planned 20-year project has stalled and MOL is negotiating with Shell, among others, to see whether the FSRU could instead supply a larger South American market.

For now, MOL has secured alternative employment for MOL FSRU Challenger of shorter duration. The regas vessel is to go on charter for three years to Botaş, in Turkey, to import LNG for the southern part of that country's Marmara region.