LNG shipping by numbers

A career spent covering LNG shipping brings a writer into contact with a plethora of numbers. Statistics have a fascinating story to tell but there are challenges to interpreting them. 

The use of different units of gas measurement across the world and the sheer size and variability of the key numbers can make it difficult to convey what these parameters mean in a way that is consistent and brings the LNG industry to life.

This review aims to provide a user-friendly idea of the scale and accomplishments of LNG shipping.

Let’s start with a shipload of LNG. A fully loaded 170,000m³ LNG carrier transports about 72,000 tonnes of LNG, enough to heat 45,000 homes in North America for one year. 

That’s also enough to warm 17 million UK homes, two-thirds of the nation’s total, for a winter’s day.

That shipload of LNGC carries the energy equivalent of 5.96 billion British thermal units (BTUs). A BTU is the amount of energy required to heat one pound of water through one degree Fahrenheit.

An LNG-supplied, gas-fired power plant of 1,000MW requires 1.1 million tonnes per annum (mta) of LNG to function. That’s the equivalent of 15 cargoes for a 170,000m³ LNGC.

Standard size 

The 170,000m³ vessel is the new conventional size LNG carrier. Most newbuilding orders over the past year are of this capacity, deemed most suitable for exports of LNG from the new US Gulf liquefaction terminals through the enlarged Panama Canal and across the Pacific to Asia. 

Such vessels are 300m in length, a far cry from the 103m, 5,500m³ Methane Pioneer and the 243m, 71,500m³ Polar Alaska. 

Converted from a cargoship in 1959, Methane Pioneer was the first vessel to carry a cargo of LNG. Delivered in 1969, with a sistership, the membrane tank Polar Alaska carried the first LNG cargo to Asia.

In turn today’s behemoths, the 216,000m³ Q-flex and 266,000m3 Q-max ships built to carry Qatari LNG exports, put 170,000m³ vessels into the shade. Each of the 14 Q-max LNG carriers in service is 345m in length and able to carry a cargo providing nearly 6 trillion BTUs of energy, enough to heat 70,000 homes in North America for one year or London for a week.

In turn, Q-max ships will be overshadowed by Prelude, the floating LNG production unit that will produce 3.6 mta of LNG, 0.4 mta of LPG and 1.3 mta of condensate. The LNG element alone is enough to meet 117 per cent of Hong Kong’s annual gas demand.

Requiring 260,000 tonnes of steel, Prelude will be the world’s largest floating structure. At 488m long, it will be about two-thirds as big as the Eiffel Tower. However, the deck area will have only quarter the footprint of a shore-based LNG production plant of the same capacity. 

The cost of building an LNG carrier per cubic metre of revenue-earning capability is close to a historic low. In the early 1990s, when a conventional size LNGC newbuilding averaged 135,000m³, shipyards charged US$250-260 million for such a vessel. Increased shipyard competition, improved construction techniques and growth in newbuilding orders put downward pressure on prices, so that a decade ago the Big Three yards in Korea were building LNGCs, usually in series, for less than US$170m per vessel.

The cost of a newbuilding has remained around US$200-210m per ship in recent years, even though today’s conventional size LNGC can carry 25 per cent more cargo than its equivalent of 20 years ago.

Trade

World trade in LNG has languished for the past four years, amid economic recession and stagnating demand. The largest annual volume of LNG shipped by sea is 241.5 million tonnes (mt) in 2011. Following dips the following two years, trade rebounded a meagre 1 per cent in 2014, to 239.2mt. 

The logjam is about to break, however, with the large new tranche of LNG production capacity now underway. Although worldwide trade in LNG will expand in 2015, the increase will again be marginal. 

The growth spurt will come in 2016 when output ramps up from four new worldscale Australian projects and one new US scheme. Global movements of LNG are set to reach 270 mta next year.

The International Gas Union reports that global LNG liquefaction capacity reached 301 mta by the end of 2014 and regasification capacity 724 mta. Thus, liquefaction plants have a utilisation rate, on average, of 79.5 per cent while that for regas plants averages 33 per cent.

The last year’s collapse in energy prices has raised questions about the viability of several proposed LNG projects. In the drive to control capital costs, there is growing emphasis on smaller capacity and floating LNG production (FLNG) plants that use modular construction and avoid high labour and equipment costs in many locations that require liquefaction capacity. 

Many new US export terminals will also enjoy an important cost advantage, built on the sites of LNG import terminals that are idle. These already have storage tanks and marine jetties and just need liquefaction trains.

Liquefaction plant construction costs in the 1980s enabled facilities to be built for US$350 per tonne of annual LNG production capacity. By the early 2000s this dropped to US$200/tonne, thanks to technological advances. Since then, however, prices have risen due to creeping labour and equipment costs. Construction of seven new plants in Australia has created fierce competition for scarce resources and pushed costs for some schemes above US$2,000/tonne. The strong Australian dollar has not helped. 

Looking ahead, FLNG and the new US projects hold the promise of keeping costs well closer to the US$1,000/tonne level.

Fleet

Our LNG carrier fleet statistics show that the in-service fleet stood at 431 ships as of 1 July 2015 and the orderbook totalled 165 LNG vessels. The best year for LNGC deliveries was 2008, when 52, including 20 Q-flex and Q-max vessels, were completed. Most newbuilding orders were placed in 2004 and in 2014, both years adding 68 vessels to the orderbook.

Today’s oversupply of LNG carriers has put spot cargo freight rates under severe pressure, pushing them below the US$30,000 mark for old and modern tonnage during summer 2015. The situation has been exacerbated by the evening out of Asian and European gas prices, cutting arbitrage opportunities to move cargoes over long distances to eastern destinations.

Voyage length

LNG delivery options allow us to consider the longest and shortest voyages in the growing matrix of supply routes between liquefaction and regasfication plants. 

There is no longer delivery route than the 33-day crossing to transport a Trinidad LNG cargo to Japan or South Korea, although the 30-day journey from Sakhalin to Brazil comes close. 

The shortest voyages take place in the Mediterranean – it takes a day to deliver Algerian LNG to southern France and eastern Spain. 

Despite their proximity three days are allowed for the carriage of Sakhalin cargoes to Japan and South Korea.

In 51 years since the first commercial cargo was discharged at Canvey Island, UK in October 1964, LNG carriers have safely delivered more than 80,000 cargoes – with no loss of cargo tank containment and no onboard fatalities directly attributable to the cargo. Today, the LNGC fleet is adding to this service record at the rate of some 4,000 cargo deliveries a year.