
LNG Carriers Brace for Consolidation Wave as Freight Rates Sink
By Keith Wallis
SINGAPORE, Dec 21 (Reuters) – Shippers who ply the seas to ship liquefied pure gasoline (LNG) in huge tankers are prone to face a wave of consolidation and asset gross sales, with freight charges plunging as a rising fleet clashes with tepid demand.
Companies that handle to climate the shakeout in one of many key sectors within the world delivery trade needs to be in a primary place, nonetheless, to profit from a string of latest LNG initiatives anticipated to start out trickling on-line by the top of subsequent yr.
“I see more mergers and acquisitions, more consolidation and a lot more joint ventures as things get tougher,” mentioned Andrew Bridson, enterprise improvement supervisor at maritime consultancy BMT Asia Pacific.
“That is not a bad thing. Consolidation will force out failing companies and cull a lot of the older tonnage.”
LNG transportation was as soon as thought of a vibrant spot in a worldwide delivery trade that has been in its worst downturn in 30 years. But freight charges have halved since 2014 as urge for food for LNG wavers within the face of stuttering economies in key markets reminiscent of China and South Korea, whereas the worldwide tanker fleet is predicted to develop almost 10 % a yr from 2015 to 2017 as ships ordered earlier are accomplished.
Spot constitution charges for a 160,000 cubic metre LNG provider are at present round $32,000 per day, down from $72,000 in 2014 and over $100,000 in 2013, in accordance with knowledge from British delivery providers agency Clarkson.
LNG tankers have to earn $60,000-$80,000 a day to cowl capital and working prices, delivery specialists mentioned.
To make it via the downturn, analysts and trade officers predict that some shippers will merge, whereas others will look to dump belongings or membership collectively in working ventures.
A handful of smaller operators together with Excelerate Energy, owned by U.S. oil magnate George Kaiser, and Norway’s Awilco have already acquired takeover gives or are promoting older vessels.
Flex LNG, with simply two LNG carriers, mentioned it was in search of different consolidation alternatives after its $2.3 million merger with shipper Exmar was scuppered in September.
Meanwhile, Golar LNG, Dynagas and GasLog Ltd launched the Cool Pool vessel advertising enterprise with 14 gasoline carriers in October to cut back working prices and help spot constitution charges.
“I expect to see another LNG ship owners pool emerge,” mentioned an LNG ship dealer, declining to be recognized as he was not authorised to talk with media.
Elsewhere, the $70 billion acquisition of BG Group by Royal Dutch Shell PLC will create a 70-strong LNG delivery fleet, one of many greatest on the earth, rivaling Japan’s Nippon Yusen Kaisha and Mitsui O.S.Okay. Lines .
AFTER THE STORM
Those shippers left as a part of a leaner trade shall be set to capitalise down the road as new or delayed gasoline export initiatives in Australia, North America and Africa begin working.
These embody the Queensland Curtis LNG plant in Australia and Cheniere Energy’s Sabine Pass export facility within the United States, which is able to obtain its first tanker for loading on Jan. 12.
“That is going to bring out more LNG onto the market and that is going to need more ships,” mentioned Peter Evensen, chief govt at shipper Teekay GP.
Indeed, the long run image appears brighter, with analysts forecasting demand for LNG will develop to 410 million tonnes by 2025 from 249 million tonnes this yr as the worldwide economic system begins to choose up.
The outlook for the gas was additionally boosted by a historic local weather change settlement signed by world leaders in Paris this month, serving to pave the way in which for a serious shift away from coal in the direction of cleaner fuels reminiscent of gasoline.
(Reporting by Keith Wallis in Singapore; Editing by Henning Gloystein and Joseph Radford)
(c) Copyright Thomson Reuters 2015.