LNG Shipping
October 2006
Hauke L. Kite-Powell
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
Natural Gas Consumption
2000
1800
Far East & Oceania
1600
Africa
Middle East
million tons/year
1400
1200
Eastern Europe & FSU
1000
800
Western Europe
600
Central & South America
400
North America
200
0
1990
1995
2000
LNG Consumption
about 6% of world natural gas consumption
120
million metric tons
100
Turkey
Belgium
Italy
France
Spain
Taiwan
South Korea
Japan
80
60
40
USA
20
0
1990
1995
2000
LNG Fraction of Natural
Gas Consumption
1-2%
450
pipeline
USA
LNG
400
million tons/year
350
300
250
200
150
92%
100
Asia
100%
27%
86%
4%
49%
Europe
26%
25%
50
0
USA
Japan
South
Korea
Taiwan
Spain
France
Italy
Belgium
Turkey
LNG Supply
120
Trinidad
USA
Australia
Indonesia
Malaysia
Oman
Qatar
Abu Dhabi
Brunei
Nigeria
Libya
Algeria
million metric tons
100
80
60
40
20
0
1990
1995
2000
LNG Shipping Demand:
Established Trade Routes
• Pacific basin:
–Arabian Gulf → Japan,
Korea, Taiwan
(40%)
–Malaysia → Japan, Korea,
Taiwan
–Indonesia → Japan, Korea,
Taiwan
(20%)
–Australia → Japan (10%)
–US (Alaska) → Japan
• Atlantic basin:
–Algeria → Europe, US
–Nigeria → Italy, Spain,
France, Turkey
(15%)
–Libya → Spain
–Trinidad → Spain, US
Map removed due to copyright restrictions.
The LNG Supply Chain
typical capital cost
contribution to cost of
($ billion)
delivered LNG
($/million BTU)
gas production
1-2
0.5 – 1.0
liquefaction plant
2-3
1.7 – 2.4
LNG shipping
1-2
0.5 – 1.6
0.4 - 1
0.5 – 1.0
4-8
3.2 – 6.0
receiving &
regasification terminal
total
20
00
20
01
.2
20
01
.4
20
01
.6
20
01
.8
20
01
.1
0
20
01
.1
2
20
02
.2
20
02
.4
20
02
.6
20
02
.8
20
02
.1
0
20
02
.1
2
20
03
.2
20
03
.4
20
03
.6
20
03
.8
19
98
19
96
19
94
19
92
19
90
US gas price, $nominal/mBTU
US Gas Price and LNG
Cost
7
6
5
4
3
2
LNG cost band (US)
1
0
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
• demand for LNG & import facilities
• LNG supply (liquefaction trains)
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
LNG Demand Growth, 2010
• Asia: 7% annual growth
– India and China – new importers; projections revised upward
– Taiwan and South Korea
– Japan – stated goal of increasing gas fraction
– seasonal demand peaks
• United States: 30% annual growth?
– gas consumption: 450 mt/year; LNG 6 mt (2003)
– import capacity: 20 mt/year (all four facilities open)
• existing terminals plan to expand to 30 mt/year
• proposals for 50 mt/y – only a few of these are likely to be built
• Gulf Coast, Mexico terminals: strong progress
• Europe: 5% annual growth
– import capacity 35 mt/y
– may build to 80 mt/year by 2010
– UK as import hub? progress on terminal plans
LNG Consumption
• 141.7 mt in 2005
300
Americas
250
200
Europe
L N G , m t/y
• about 6% of world
natural gas
consumption
150
100
• growth to 2012:
50
Europe
Asia
Asia
– Asia: 8%
– Europe: 4%
0
2005 imports
2012 imports, base case
– Americas: 20%+
12
North American Import Facility
Projects – USA (1)
Cabrillo Port
Oxnard, CA
6.0 mt/y
BHP Billiton
2008
Calhoun LNG
TX
6.5-7.5 mt/y
Calhoun LNG
FERC pending
2009 startup
Compass Pass
LLC
offshore LA
7.5 mt/y
Conoco Phillips
pending CG
approval
Corpus Christi
TX
19.5 mt/y
Cheniere Energy
Q4 2007
constr. OK
Corpus Christi
Bay
Corpus Christi,
TX
7.5 mt/y
Occidental
FERC approval
2005
Crown Landing
NJ
9.0 mt/y
BP
2008
EIS OK
Freeport
TX
11.5 mt/y
Freeport LNG
under constr.
Northeast
Gateway
Gloucester, MA
6.0 mt/y
Excelerate
shipboard regas,
2007
Gulf Gateway
offshore LA
3.7 mt/y
Excelerate
shipb. regas,
operating
Cameron LNG
Hackberry, LA
11.0 mt/y
Sempra Energy
under constr.
2007 startup
Broadwater
Long Island
Sound
7.5 mt/y
TransCanada,
Shell
13
North American Import Facility
Projects – USA (2)
Main Pass
offshore LA
18.7 mt/y
Freeport
McMoRan
pending
approvals
Pearl Crossing
offshore LA
?
ExxonMobil
on hold
Pelican Island
Galveston, TX
9.0 mt/y
BP
no firm plans
Sempra Eng.
Port Arthur,TX
11.0 mt/y
Sempra
EIS OK
2009
Port Pelican
offshore LA
?
ChevronTex
on hold
Sabine Pass
LA
20-30 mt/y
Cheniere Energy
final approvals
2008 startup
Golden Pass
Sabine Pass, TX
15.0 mt/y
ExxonMobil,
Qatar Petro
2009
Terminal Island
Long Beach, CA
7.5 mt/y
Mitsubishi,
ConocoPhillips
2008
Ventura
offshore CA
7.5 mt/y
Crystal Energy
Vista del Sol
Corpus Christi,
TX
7.5 mt/y
ExxonMobil
2009
Gulf Landing
W.Cameron, LA
(offshore)
7.5 mt/y
Shell
2008/09
MarAd appr.
14
North American Import Facility
Projects – non-US
Bear Head
Point Tupper,
Nova Scotia
7.5-11.0 mt/y
Anadarko
Petroleum
under constr.;
delayed (07)
Canaport
St. John, New
Brunswick
3.7 mt/y
Irving Oil, Repsol
YPF
2008
under constr.
Gros Cacouna
Quebec
3.7 mt/y
TransCanada,
Petro-Canada
2008
Keltic LNG
Goldboro, Nova
Scotia
3.7-14.0 mt/y
Keltic
Petrochemical
2007-09
Point Tupper
Nova Scotia
3.7 mt/y
Statia Terminals
Calypso & High
Rock
Bahamas
6 mt/y
El Paso, Florida
P&L, Tractebel
2008
Altamira
Tamaulipas, Gulf
Coast
9.7 mt/y
Shell, Total,
Mitsui
nearing
completion
Coronado
Islands
Baja California
5.2-10.5 mt/y
Chevron
2008
approved
Costa Azul
Baja California
7.5 mt/y
Sempra Energy
2007
approved
Manzanillo
Colima, Mex
3.7 mt/y
Mex. state power
co.
2007
15
LNG Supply
300
250
LNG, mt/y
200
Norway & Russia
Americas
150
Arabian Gulf
Africa
Pacific
100
50
0
2004 export capacity
2012 exports, base case
16
New LNG Supply Projects:
Under Construction/Advanced Planning
source
market
plans
Algeria
Europe, US
expansion, online 2006
Angola
Europe, US
1 project, startup 2007
Australia
China, Japan, US
3 projects, startup 2004 to 2006
Egypt
Europe, US
4 projects, startup 2004 through 2006
Equatorial Guinea
US
1 project, startup 2007
Indonesia
Pacific
expansion plus 1 new project, startup 2007
Iran
Asia (India)
3 possible projects (Pars field), startup 2009
Malaysia
India/Japan
3 new projects plus recent expansion
Nigeria
Europe, US
expanding capacity, online 2006/07
Norway
US, Europe
1 project, startup 2005
Oman
Europe, Korea
expansion, online 2005
Qatar
Pacific & Atlantic basins
expansion plus 3 large new projects
Peru
Mexico
1 project, startup 2008
Russia
Japan, Korea
1 large project, startup 2006
Ukraine
?
one LNG plant, startup 2007/08
Venezuela
Atlantic basin
2 projects, startup 2004 and 2008
17
Shipping Demand Projection
• trade route distance increasing
– average 2,300 nm today
– Oman/Qatar to Europe: 4,000-6,000 nm
– Oman/Qatar to N. America: 8,000 nm
• base case growth to 2010: 19%/year
– low case 11%
– high case 25%
– strongest growth 2007/08/09
18
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
LNG Tank Designs:
Spherical Tank (Moss)
Photo removed due to copyright restrictions.
LNG Tank Designs:
Prismatic Membrane Tank
Photo removed due to copyright restrictions.
LNG Fleet, Q2 2006
• 200 ships
• 23.9 million m3 cargo capacity
• vessel classes:
–
–
–
–
–
Med-max: 75,000 m3
Conventional: 135-160,000 m3
“Atlantic-max”: 175,000 m3
Q-flex: 215,000 m3 (20+ on order)
Q-max: 260,000+ m3 (first orders just placed)
• well maintained (only 4 large LNG vessels scrapped
to date), but retirements coming
22
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
$million, 125-150,000 m3 LNG ship
Newbuilding Price
(Conventional LNGC)
500
450
400
350
2005$
300
250
200
nominal
150
100
50
0
23
20
00
.1
20
01
.1
20
02
.1
20
03
.1
20
04
.1
20
05
.1
20
06
.1
20
07
.1
20
08
.1
20
09
.1
20
10
.1
99
.1
98
.1
97
.1
96
.1
95
.1
94
.1
93
.1
92
.1
91
.1
90
.1
$ million (nominal)
Newbuilding Price Projection
150,000 m3 LNGC
Newbuilding Price Forecast
150,000 cbm LNG Vessel
300
250
200
150
100
high
low
base
24
Orderbook (as of late May 06)
remaining 2006
deliveries
2007 deliveries
2008 deliveries
2009-10 deliveries
Daewoo, Korea
5
8
14
9
Hyundai, Korea
--
10
8
6
Samsung, Korea
4
9
11
11
Kawasaki, Japan
3
2
3
1
Mitsubishi, Japan
1
3
4
1
Mitsui, Japan
--
--
1
--
Universal, Japan
--
1
--
1
Koyo Dock, Japan
--
1
1
1
Hudong, China
--
1
2
2
Izar, Spain
--
1
--
--
Chantiers de l’Atlantique,
France
3
--
--
--
Yard
25
2009Q4
2009Q3
2009Q2
2009Q1
2008Q4
2008Q3
2008Q2
2008Q1
2007Q4
2007Q3
2007Q2
2007Q1
2006Q4
2006Q3
2006Q2
2006Q1
2005Q4
2005Q3
2005Q2
2005Q1
2004Q4
2004Q3
2004Q2
2004Q1
million m3
capacity
Fleet Growth Projection
2.5
2.0
1.5
1.0
0.5
0.0
26
age
38
36
34
32
30
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
million cubic meter LNG capacity
LNG Shipping Supply:
Fleet Age Profile
2.5
2
1.5
1
0.5
0
LNG Fleet: Major Owners (2003)
Owner
Fleet
Orderbook
Mitsui OSK Lines (MOL)
5 outright; interests in 38
interests in 15, firm
Malaysia International Shipping Corp. (MISC)
11; interests in 16
5 firm
Qatar Liquefied Gas (MOL, NYK, K Line)
10
3 firm
Shell Group
9
1 firm
National Gas Shipping Co. (Abu Dhabi)
8
Nigeria LNG
8
ProNav Schiffahrtskontor (Germany; MOL affiliate)
8
Australia LNG Ship Operating (Shell, BP)
6
1 firm, 2 options
Golar LNG
6
4 firm, 2 options
Hyundai Merchant Marine
6
SNTM-HYPROC (Algeria)
6
4 firm
LNG Fleet: Major Charterers (2003)
Pertamina
27 ships
Indonesia’s state oil&gas co.
RasGas
19 ships
Ras Laffan, Qatar (63% Qatar Petroleum, 25% ExxonMobil, 4% Itochu, 3%
Nissho Iwai, 5% Korea Gas Corp.)
Petronas
15 ships
Malaysia’s national petroleum corp.
Adgas
8 ships
Abu Dhabi Gas Liquefaction Limited (Das Island, Abu Dhabi), part of Abu
Dhabi National Oil Company (ADNOC) Group
NWSSS
8 ships
Northwest Shelf, Australia (Woodside Energy, Shell Development, BHP
Petroleum, BP Developments, Chevron Australia, Japan Australia LNG)
Brunei LNG
7 ships
Bruneian government and Royal Dutch Shell
Gaz de France
6 ships
Semi-public French gas company
Nigeria LNG
6 ships
Finima, Bonny Island, Nigeria (Nigerian National Petroleum Corp., Shell Gas,
Elf, Agip)
LNG Fleet: Major Operators (2003)
Shell Tankers
13 ships
Golar
13 ships
Nippon Yusen Kaisha (NYK) Line
10 ships
Mitsui OSK Lines (MOL)
8 ships
ProNav Schiffahrtskontor (MOL affiliate)
8 ships
Hyundai Merchant Marine
6 ships
SNTM-HYPROC (Algeria)
6 ships
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
Fleet Utilization Projection
80
LNG fleet theoretical utilization (%)
75
70
65
60
55
50
45
40
2000-2002
2003
2004
2005
2006
projected
2007
projected
2008
projected
2009
projected
2010
projected
2011
projected
2012
projected
32
Conventional LNGC
Short Term Charter Rate
Projection
short term charter $1,000/day
80
high
70
60
base
50
40
low
30
20
2006
2007
2008
2009
2010
2011
2012
33
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
Trend: Shorter Contracts
• traditional contracts: 20-25 years, bareboat
• today: typically shorter (10 years and less) time
charters, more flexible (that is, more risk – and
opportunity – for owners)
• no commodity market (yet)
– each potential fixture negotiation involves a select, small
number of possible vessels
– rates based largely on delivered energy content cost
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
“Spot” Market Growing
• excess supply capacity
• underutilized fleet
• demand fluctuations and import terminal
capacity
– Atlantic market (US)
– Pacific market (Korea, Japan, India)
• “compartmentalized”
LNG Spot Market
LNG trades of 2 years or less duration (estimated)
12
million tons/year
10
8
Asia
6
Europe
4
2
0
1992
US
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
“Spot” Trade Participation
• 75% of short term fixtures have been vessels
within their own contract trades (particularly
on Pacific routes)
• most “spot” voyages to date on Atlantic
routes, “Atlantic” owners
– Africa, Arabia to Europe, US
– Trinidad to US, Europe
• Asian routes & vessels becoming more
engaged (MISC)
short term charter rate, 1,000$/day
Fleet Utilization and Short Term
Charter Rates
140
120
100
historical
forecast
80
60
40
20
0
60
65
70
fleet utilization rate %
75
80
Outline
• LNG shipping in context
• shipping demand and supply
– trade projections
– fleet development
– implications for fleet utilization
• trends and risks
– charter terms
– short term (“spot”) trades
– structural changes
Changing Shipping Field
• Traditional Asian players (Japan, Malaysia)
positioning for Atlantic market, spot trade role
• Acquisitions
– Teekay (Tapias)
– Golar (stake in K Line)
• New players – Greek owners
–
–
–
–
Anangel
Tsakos Energy Navigation
Dynacom
others
LNG Shipping Trends
• More choices in power plants
– Dual fuel diesel-electric
– Traditional slow-speed diesel w/reliquefaction
– Gas turbine?
• Greater range of vessel capacity and regas options
• More flexible/efficient fleet utilization
Delivered Cost of LNG
delivered cost of gas
3.50
LNGC 150
LNGC 250
LNG-RV
CNGC
2.50
2.00
1,
00
0
2,
00
0
3,
00
0
4,
00
0
5,
00
0
6,
00
0
7,
00
0
8,
00
0
9,
00
0
10
,0
00
1.50
50
0
$/mmBtu
3.00
trade route distance, nm
Summary:
LNG Shipping Prospects
Opportunities:
Risks:
• for the long run, trade is set
to grow; ships are needed
• spot market growth – has
been lucrative
• fleet utilization has been
high
• newbuilding prices are low
• catastrophic accident could
derail (US) terminal plans
• project delays can slow
trade growth
• strong fleet growth -utilization rates headed
down short-term
• risk shifting to owners
(contract patterns)
• technological change
Summary
• LNG trade volume to grow by 80-130% to 2010
– import facilities?
• LNG “spot” market has softened; rebound not likely
until 2006/07
• ordering is accelerating; 2008 slots filling fast;
newbuild prices firming up
• new entrants: acquisitions, speculative ordering
• shift in time charters and growing spot market are
pushing LNG toward the “standard” bulk shipping
market model – within limits