LNG shipbuilders have never known a year like it, with newbuilding deliveries and new contracts neck-and-neck and both running at a brisk pace
This year has been unprecedented for LNG newbuilding activity. The LNG carrier (LNGC) orderbook at 1 November 2018 stood at virtually the same level as it did on 1 January, as the large number of ships delivered during the year has been matched, and a little more, by a wave of newbuilding orders.
The LNGC orderbook as of 1 November stood at 123 vessels, comprising 97 conventional-size carriers, 11 floating storage and regasification units (FSRUs), 11 small-scale tankers and four mid-size ships. All the small-scale ships will be able to carry out LNG bunkering operations.
South Korea in the driving seat
Over the first 10 months of 2018, 47 LNGCs have been delivered and 52 new ships ordered. The new additions to the orderbook comprise 42 conventional-size LNGCs, seven small-scale tankers, two mid-size ships and one FSRU.
While China may now be outperforming rival South Korea as the world’s top shipbuilding nation for all vessel types, in the LNGC sector South Korean yards are still the favoured option for owners placing newbuilding contracts.
For the year to date, South Korean builders have won all 42 of the orders placed for conventional-size LNGCs and clinched the FSRU deal. Chinese yards have secured the orders for six of the seven small-scale tankers and both mid-size ships, while Japan has only won one LNGC order so far this year, for a small-scale LNG bunker vessel.
Daewoo Shipbuilding and Marine Engineering (DSME) and Samsung share the honours for the most LNGC contracts for the year to date, both booking 12 ships. Hyundai Heavy Industries (HHI) and affiliate Hyundai Samho Heavy Industries (HSHI) are not far behind, each winning nine vessels. HHI also secured the FSRU booking.
Of the 123-ship orderbook, South Korea will build 88, China 19 and Japan 16. Of the South Korean yards, DSME possesses the largest LNGC orderbook, with 35 ships, while SHI and HHI have 21 each and HSHI 11.
Independent Greek shipowners continue to be well represented among the contractors of new LNG tonnage. Greeks are responsible for 24 of the 42 conventional-size LNGCs booked so far in 2018.
TMS Cardiff Gas has been the most active member of this community this year, with orders for six newbuildings, while GasLog, Alpha Tankers, Maran Gas and Thenamaris have all opted to contract between two and four new ships to augment their existing gas fleets.
The Greek LNGC-owning club has been joined by two new shipping company members this year: Evangelos Marinakis established a new venture, Capital Gas Carrier Corp, in July to order four ships at HHI while the Andreos Martinos-led Minerva Maritime has taken the LNG plunge with orders for two vessels at DSME and one at SHI.
One notable trend evident on surveying LNGC deliveries and orders in 2018 is the emergence of Winterthur Gas & Diesel’s Generation X Dual-Fuel (X-DF) engines as an attractive propulsion system option.
Two-stroke dual-fuel engines have become the propulsion system of choice for modern, conventional LNGCs. Their superior fuel efficiency over the earlier steam turbine and medium-speed dual-fuel diesel-electric (DFDE) systems accords well with the improved cargo tank insulation performance and lower cargo boil-off gas (BOG) rates characteristic of today’s newbuildings.
Owners of LNGCs and other gas-powered ships have two candidates to choose from when specifying a two-stroke dual-fuel propulsion system. Besides the X-DF engine, there is MAN Energy Solutions’ M-type, electronically controlled, gas-injection (ME-GI) unit.
MAN’s ME-GI engines, in which natural gas is supplied to the combustion chamber at high pressure, made the early running, following an inaugural order for the propulsion system for two of its ships by Teekay in December 2012. However, the X-DF option, which relies on a much lower gas supply pressure, quickly gained ground on entering the market.
The extent to which the ME-GI option established an early market lead can be seen in a breakdown of the propulsion systems of the ships delivered so far in 2018. Of the 25 LNGCs with two-stroke propulsion systems entering service, 19 have ME-GI units and only six X-DF engines.
However, the new orders logged in 2018 reveal a different picture. A total of 43 of the 52 ships contracted so far this year will be propelled by two-stroke dual-fuel engines; the complement comprises 29 X-DF and 14 ME-GI ships.
The leading South Korean LNGC shipyards are aligning themselves with either one or the other of the two systems. DSME, which designed its own fuel gas supply system (FGSS) and partial reliquefaction plant to be compatible with the performance of the ME-GI units, is supporting the MAN option. All 12 newbuilding orders secured by DSME this year will have ME-GI engines.
The X-DF engines of Winterthur Gas & Diesel (WinGD), in turn, have the backing of SHI, HHI and HSHI. Of the 29 X-DF ships contracted in 2018, SHI will build 12, HSHI nine and HHI eight.
The DFDE propulsion system is well represented among the 2018 completions; the system is driving 15 of the 47 vessels that have been handed over to date. DFDE, which utilises medium-speed four-stroke diesels, is the system of choice for FSRUs, small-scale LNGCs and the icebreaking LNGCs being built to serve the Yamal LNG project in the Russian High Arctic. An aggregate of seven vessels falling into these categories has been completed so far in 2018.
The DFDE system, however, is no longer favoured for the propulsion of conventional LNGCs, as evidenced by the specification of two-stroke engines for 43 of the 52 ships ordered so far this year. It appears, from early reports, that even the sole FSRU contracted in 2018 will be provided with two-stroke engines.
The bunker vessel buzz
Activity in the small-scale LNGC sector has been notable this year. Although only one carrier of this type has been delivered so far in 2018, 7,500-m3 Kairos, seven such ships have been ordered, building the small-scale LNGC orderbook to 11 vessels.
All 11 small-scale ships are being built as LNG bunker vessels (LNGBVs). Interest in LNGBVs is being prompted by the large LNG-powered container ships, tankers and cruise vessels currently under construction.
The arrival of this new breed of dual-fuel ships over the next few years will require the ship-to-ship (STS) transfer of large volumes of bunker fuel safely, efficiently and quickly to ensure the commercial viability of their operation.
LNGBVs come in all shapes and sizes, reflecting the bespoke nature of both the growing fleets of LNG-fuelled ships and inland waterway vessels and their operating environments.
At the smaller end of the LNGBV scale, for example, Spain has put two new vessels into service this year, one, Oizmendi, a conversion and the other, Bunker Breeze, a newbuilding. Both are multi-fuel bunker vessels, their underdeck oil fuel tanks being augmented by deck-mounted cylindrical tanks to also give them an LNG-fuelling capability.
Also completed this year was Clean Jacksonville, a 2,200-m3 non-propelled LNG barge that will be employed fuelling vessels in the US port of Jacksonville, Florida.
LNG World Shipping does not include these small specialist port-oriented bunker vessels in its LNGC listings. Rather, our LNGBV focus is on seagoing vessels of 3,000 m3 and above which can handle STS transfers outside port waters and also function as coastal LNG distribution carriers as the need arises. In addition to the 11 such LNGBVs on order, with the recent delivery of Kairos, there are now five in service.