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LNG World Shipping

LNG World Shipping

Review: LNG supply, demand and orderbook

Thu 22 Nov 2018 by Jamey Bergman

Review: LNG supply, demand and orderbook
CS LNG's Keith Bainbridge: "I don’t think anybody out there knows if we have enough ships"

LNG shipping analysis and consulting firm CS LNG's founder and managing director Keith Bainbridge took an in-depth look into the state of the LNG market in 2018 and said short-term spot charter rates may have peaked.

Speaking at the LNG World Shipping ship-shore interface conference in London, Mr Bainbridge said that he "doesn't like headline rates" but that rates of US$220,000 could be as high as the market is likely to go.

"The charter rate at the moment ... God knows where it's going to end up. I think it's probably peaked at the US$200-220k, but we'll see," he said.

“Some shipowners are enjoying their time, but what they don’t tell you is how many days they sit idle, waiting," he said. "GOLA's time charter equivalent last year was US$19,000 a day, so that puts it into some perspective as to what the real earnings are.”

The spot market is busy, he said, particularly in China. 

Overall, the LNG sector is stable, with demand keeping pace with growing supply.

Generally, LNG trade is up, growing 7% year-over-year through 2018, and Mr Bainbridge cited that 210 million tonnes (mt) had been traded through the end of August 2018. 

"The trade doesn't really change from year-to-year," he said. "It's very much seasonal, and all you're seeing is more of it."

For October 2018, Qatar and Australia are the leading exporters, drastically outpacing the US and Malaysia in joint third place. 

"The US is definitely the new kid on the block," he said, "with big changes taking place."

The top importer of LNG globally is Japan, which imports nearly half again as much as China, with South Korea coming third.

"Pakistan is fast coming up with the FSRU operations, and Europe is not doing so much," Mr Bainbridge said.

The largest shipping export has gone to Mexico, followed by South Korea, China and Japan.



For deliveries into FSRUs in October, Mr Bainbridge said Kuwait and Pakistan had managed to take seven each, with Brazil following with five and Indonesia with four.

"The other thing with some of these FRSUs is that they're there but they're hardly being used, so that makes them super expensive," he said. "So if you only put four in a month, it's hardly big time."



Turning to Russia's Yamal LNG project, which Mr Bainbridge called "the strange one on the block", he said his initial doubts about the projects ability to get underway had been proven wrong.

"It's working really, really well, but the thing with Yamal is," he said, "I think the gas is actually free, effectively, which allows the cargoes to be making profits."

The cargoes are largely transshipped to Europe -- with a few, embarassingly, going into the US this year, which has sanctions against Russia.



Moving on to the market's biggest players, Mr Bainbridge said Shell is the obvious giant. 

"Their acquisition of BG I think has been paid back tenfold already," he said. 

Among the top LNG traders, Shell is doing more than triple the business of its nearest competitor, Total. 


Future growth for LNG

One of the "big problems" for the growth of LNG is investment, according to Mr Bainbridge.

"There are about another 30 projects being talked about for the US," he said, "but I don't think we'll see that. Once Qatar does Golden Pass, that will shut down an awful lot of the other US export projects."

Argentina will be exporting with an FLNG instead of importing, Indonesia will be importing instead of exporting, Australia has various projects for new liquefaction.

"It's a question of how you're going to finance these projects," he said. "Those are our biggest hopes for 2019 and then Russia's expansion."

Canada is going to "join the game", too, he said. 

"The Canadian exports from the West Coast will seriously impact the ability for the Gulf Coast projects to have their FIDs, taken" he said.


Floating liquefaction

"It's not the be all and end all it was piped about 10 years ago," Mr Bainbridge said, but "it still has its play."

"You only go offshore if you can't go onshore."



About 27% of the global volumes were supplied by Qatar, and "if Qatar signs up for another 35 or 40 mt, guess what, they're back in control of the game," he said. 

"I think the low gas prices are here to stay," he said, "but let's wait and see. I'm quite often wrong."



The current LNG fleet sits at 513 ships, according to Mr Bainbridge, and the orderbook holds 99 vessels. 

There have been more than 40 newbuild orders placed in 2018, with nearly 40 vessels arriving in the fleet in 2019 and 2020, according to his numbers.

“There's a lot of hype from owners around [the question]: 'Do I have enough ships?'

"I haven't got a clue," he said. "I don’t think anybody out there has any idea if we have enough ships because the tonne-miles are so unpredictable.”






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