CS LNG News Update: 7th December 2018
By CS LNG, Dec 10 2018 09:15AM
1. THE WORLD CROWNED NEW LNG EXPORT AND IMPORT CHAMPS IN NOVEMBER
The reigns of Qatar as the world’s biggest seller of liquefied natural gas and Japan as the biggest buyer have come to an end. Well, for one month at least. In November, Australia was the biggest exporter and China the biggest importer, according to Kpler, an energy research firm that focuses on ship-tracking data. Australia shipped out 6.55 million tons during the month, compared to 6.27 million for Qatar. The start-up of new Australian projects like Inpex Corp.’s Ichthys LNG have boosted the country’s production capacity this year as it nears the end of a $200 billion construction boom. China took in 6.56 million tons in November, a 43 percent jump from October, while Japan imported 6.39 million tons, Kpler said in an emailed report. China’s LNG imports have surged in the past two years amid government efforts to clear urban smog by replacing coal boilers with natural gas burners. Chinese buyers also wanted to build up stockpiles of the fuel ahead of winter heating season to avoid a repeat of last year’s gas shortages. The changes underscore the shifting dynamics in the LNG industry. Among producers, Qatar is undertaking a major expansion project as it competes with growing output from Australia, North America and Russia. Global import growth is expected to be dominated by China and new, smaller markets such as Pakistan and Thailand as traditional buyers like Japan see their needs plateau. [Source: Bloomberg 06/12/2018]
CS LNG comment: Bloomberg has to be American as only Americans can relate to the “world” as US centric! Just look at the baseball World Series where only US teams compete! LNG has finally gone global, but does it really matter who is the biggest LNG producer? The article should be focused on who is the cheapest producer.
2. KAWASAKI TARGETS ASIA WITH FLOATING POWER PLANTS USING LNG AS FUEL AND COSTING $175M Kawasaki Heavy Industries of Japan has completed the development of a floating, gas-fired power plant to operate with LNG deliveries and aimed at Southeast Asia with its many islands and isolated communities unable to receive pipeline gas supplies. Kawasaki is aiming to sell the ships to customers such as power companies in the fast-growing Asia economies where infrastructure remains underdeveloped and at a time when LNG supplies are plentiful in the region. “The vessel is the first of its kind able to generate 100,000 kilowatts of electricity,” stated Kawasaki. The power plant is designed to accept LNG supplies and is on a barge measuring about 100 metres in length. “The barge is equipped with generators, fuel tanks to store the liquefied natural gas that fires them, and power distribution equipment,” said Kawasaki. The vessel will be assembled at a shipyard, towed to where it is needed and anchored to the sea floor. “By putting the ship near where consumers are, power transmission distances can be shortened,” the company pointed out. Equipped with a high-efficiency gas turbine, the ship can generate between 30,000 kW and 160,000 kW of electricity, enough to supply power to between 100,000 and 160,000 homes. “It will sell for around 20 billion yen ($175 million). Kawasaki Heavy's system will include a small fueling vessel, taking advantage of the company's skills in building LNG tankers,” said Kawasaki. “The gas-fired, floating power plant is 10 percent more efficient than a comparably sized coal-powered or oil-fired plant,” it added. Kawasaki said the plants required about four years each to build, though they can go online more quickly than land-based facilities because it requires almost no civil engineering. “This will allow utilities to recoup their costs more quickly,” the company added. [Source: LNG Journal 06/12/2018]
CS LNG comment: The future of LNG? For sure: we have gone from discharging liquid from conventional ships to discharging gas from FSRU so why not electricity to markets that only want power not gas.
3. NEWBUILDS DRIVE DOWN SPOT RATES FOR LNG CARRIERS
Charter rates for LNG tankers are beginning to fall from 2018 highs that reached as much as US$195,000 a day, as more vessels come down the slipway and expand the global fleet. In a sharp drop, rates had declined at the end of November to around US$160,000 a day, according to Reuters. One shipbroker said the spot rate in early December for a newbuild vessel was as low as US$140,000 a day because more vessels were becoming available on the charter market. And it’s possible the rate could fall further, industry sources said, with up to 10 LNG carriers coming on the spot charter market during December as floating cargoes are unloaded. Rates are also volatile, with big troughs between the highs and lows. In June, for example, they ran at around US$90,000 a day in the Atlantic basin and at US$70,000 a day in the Pacific, according to energy consultant Wood Mackenzie. LNG charter rates closely reflect the spot LNG trade, usually following the price of the super-cooled gas. As Reuters explained, “[the price] has fallen since September due to sluggish demand from Asian buyers.” There is also a close relationship between charter rates and tanker movements. Reuters added “Due to inflated shipping rates, not many spot Atlantic cargoes travelled east in recent months. Some companies had to arrange cargo swaps in order to reduce costs.” And explaining the fewer movements lately between the Atlantic and the Pacific basin, one LNG trader told Reuters “Shipping rates are very high [so] there is not much room for work at the moment.” However, it is expected that most of the demand for LNG shipments in early 2019 will come out of Asia Pacific where ExxonMobil, BHP and Australia Pacific LNG will be chartering vessels to load up from Australia-based plants and sail for gas-hungry Asian markets, in particular China which has become the world’s biggest buyer of LNG. Although charter rates have been falling, they are still well above those applying in 2017. In Q1 2017 they averaged below US$100,000 a day. Meantime the global fleet of LNG carriers will continue to grow. At last count, in mid-September, no less than 33 new vessels had been ordered in 2018 so far, according to Wood Mackenzie’s principal analyst for LNG shipping and trade, Andrew Buckland. That compares with 19 in 2017 and just six in 2016. New vessels are hitting the water faster than ever before. At the end of Q3 2018, 36 tankers had been added to the global fleet of LNG carriers, with three being scrapped. Another 22 are due for delivery before the end of 2018. Sounding a cautionary note, Mr Buckland said “Owners need to be careful they don’t over-order. There is still a huge number of ships ordered in the 2011-2014 LNG newbuilding boom to be delivered to the fleet. And there is a long history of new ships arriving before new supply.” On the bright side, he added that there is a new wave of LNG supply projects coming on stream between now and 2020, most of which will require the gas to be shipped. Also, terminals are opening at a rapid rate, for instance in China, which will facilitate deliveries. The steady stream of orders for new LNG carriers is largely attributable to falling construction prices. “In real terms newbuilding prices have never been lower [and they] look even more attractive when you consider how much more you get for your money with the latest ship designs,” Mr Buckland pointed out. “The temptation for owners is to order sooner rather than later while the newbuilding price remains low.” The newbuilds are so much more advanced in terms of design and technology that they are making ships ordered even three or four years ago outdated, Mr Buckland explained. That is especially true of propulsion. The new generation of gas-injection, slow-speed engines now offers fuel savings of over 20 tonnes a day compared with even the latest dual-fuel diesel and tri-fuel diesel-electric engines. The savings over the older steam-powered ships are even bigger – up to 75 tonnes a day. [Source: LNG World Shipping 06/12/2018]
CS LNG comment: What goes up has to come down and that has always been the case for shipping rates. And do we need inane comments from WoodMac that the stellar rates have fallen. Those rates were unsustainable and anyone with any LNG experience knew that. A more sensible comment from WoodMac should have been that new builds drive down values of older tonnage.