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Increasing gas production has changed how LNG is shipped
Surging global demand for liquefied natural gas (LNG) is now creating greatly increased demand for LNG tanker capacity, according to Robert Wright, Shipping and Logistics Correspondent for the Financial Times, and this is leading to a very significant increase in tanker charter rates.
Demand for tanker capacity had fallen off in recent years following the discovery of enormous shale gas reserves in the US, transforming that country from a significant net importer of gas to being virtually self-sufficient in that resource.
Stena Bulk calculates that only about 70% of the global tanker fleet was utilised in 2009 when charter rates averaged around $30,000 / day, and that rate had risen to only c. $40,000 / day in 2010.
Since then, however, development of expanded Qatari export facilities and a huge increase in demand from Japan following the March 2011 earthquake, and from other countries in Asia such as China and India due to post-recession growth has pushed tanker utilisation up to c, 95% according to Stena Bulk.
Accordingly, tanker charter rates have surged through the $100,000 / day mark, and have even reached $125,000 / day on occasions.
According to Norwegian LNG tanker operator Höegh LNG, supply of tanker capacity demand is expected to remain “very tight” until at least 2013 or 2014, and with the US’s first gas liquefaction terminal expected to be completed in 2015, and with further LNG export facilities planned elsewhere, demand looks set to continue to increase.
This is a significant cause for concern for the UK, which is increasingly reliant on LNG imports to make up for falling domestic gas production, and which is disproportionately dependent on gas in its power mix compared with the rest of Europe.
LNG imports accounted for 20% of total gas demand in 2009/10, and the figure is steadily increasing.
With gas trading in the Far East at a premium of 60 – 70% higher than UK wholesale prices, and with UK gas and electricity prices still among the lowest in Europe, increased competition for limited tanker capacity seems certain to result in upward pressure on domestic gas and power prices.
