GECF explores trends on LNG carriers global market

The Gas Exporting Countries Forum (GECF) has published an expert commentary showcasing the key factors that will influence the LNG shipping market.

A reduction in the global gas demand in 2020, caused by the pandemic, resulted in a slowdown of the global LNG trade and lower demand for LNG carriers.

GECF reports those developments, along with the commissioning of a large number of new carriers, led to the oversupply of LNG carriers in the shipping market.

LNG demand, however, recovered in early 2021 which raised a question of the LNG shipping market direction and whether there will be enough LNG carriers on the market to transport LNG in the short and medium term.

Commissioning of LNG carriers hit a record high in the last three years, with 134 LNG carriers coming on line. As a result, at the beginning of 2021, there were over 600 LNG carriers operating in the global market.

The upcoming commissioning of new LNG carriers is expected to balance out the global LNG shipping market in the short and medium-term. At least 142 recently ordered LNG carriers are to come on line between 2021 and 2025. Out of this, 46 LNG carriers are to be commissioned in 2021, followed by 38 carriers in 2022.

South Korean shipbuilders account for the majority of LNG carriers. Hyundai, Samsung and Daewoo are going to build 110 carriers, while the Russian firm Zvezda has orders for 15 carriers and China’s Hudong for 11 carriers.

The ratio of global LNG exports to the number of LNG carriers gives an indication of the average volume of LNG transported by one LNG carrier throughout a specific year. From 2011 to 2020, the ratio fell from 0.73 to 0.59, which implies that in 2020 one LNG carrier transported on average 0.59 million tonnes per annum (mtpa).

The global LNG carrier fleet is renewed on a regular basis. The construction of LNG carriers has always been associated with the commissioning of new LNG liquefaction capacity. The building of LNG carriers in the mid-2000s was largely driven by the completion of LNG plants in Qatar, while in the late 2010s it was driven by the completion of LNG plants in Australia, U.S., and Russia.

Currently, at least four carriers in operation today were commissioned in the 1970s, ten carriers in the 1980s, 54 carriers in the 1990s, 244 carriers in the 2000s, and 294 carriers commissioned in the 2010s.

The combined capacity of LNG carriers has also increased consistently. Over the last decade, capacity more than doubled – to 43 mtpa in 2020 – driven by the commissioning of a large number of LNG carriers and a higher capacity of new LNG carriers.

There are different types of LNG carriers depending on their capacity. The largest group of LNG carriers is the one with capacity ranging from 166,000 million cubic metres (cbm) to 182,000 cbm, which comprises 219 carriers. The average capacity of LNG carriers reached 71.2 kilotonnes (158,200 cbm) in 2020 compared to 54.4 kilotonnes (120,900 cbm) in 2000. In conclusion, the rising capacity of new LNG carriers leads to lower demand for new LNG carriers.

Various types of LNG carriers also exist depending on the propulsion systems. Steam turbine LNG carriers remain the most popular ones. However, their dominance has been broken over the last decade, driven by the emergence of alternative, more efficient propulsion systems.

Key factors that will influence the LNG shipping market include the anticipated increase in global liquefaction capacity, LNG trade, and the number of LNG shipments.

The planned expansion of LNG liquefaction capacity in some GECF member countries, mainly in Qatar and Russia, will have a huge impact on the LNG shipping market in the medium-term, the analysis shows.

Qatar’s Nakilat is seen as today’s leader of the global LNG transport market with its 69 LNG carriers, with a combined capacity exceeding four million tonnes. Qatar plans to expand its LNG liquefaction capacity by 49 mtpa to 126 mtpa by 2027. This will require new LNG carrier fleet to transport LNG to the global markets. In 2020, Qatar entered into agreements with global shipbuilders, mainly from South Korea, for over 100 new LNG carriers. The country secured around 60 per cent of the global LNG ship construction capacity through 2027. That could lead to the tightening of the LNG shipbuilding market, which should be taken into account by other shipping companies planning to order new LNG carriers.

Also planning on expanding its LNG liquefaction capacity is Russia, which will require an additional LNG carrier fleet. The Russian shipping company Sovcomflot has ordered 15 icebreaking LNG carriers for the Arctic LNG 2 project from the Zvezda Shipbuilding, with the South Korean Samsung Heavy Industries being a technology partner. These LNG carriers will be delivered between 2023 and 2025. Sovcomflot will own one vessel individually and 14 others jointly with Novatek. These carriers will enable the delivery of LNG to buyers in Asia in 15 days through the Northern Sea Route, reducing transportation costs and transit time by half. This instance will be the first time a Russian shipbuilding company will construct LNG carriers.