GIIGNL: LNG newbuild orders hit 6-year low

The global fleet of liquefied natural gas (LNG) tankers welcomed 31 new additions in 2016 – in a year where only 10 new orders were placed, GIIGNL, the International Group of LNG Importers said Monday in its latest annual report.

The new orders – the lowest number since 2010 – included one floating storage and regasification unit (FSRU) and 3 bunkering vessels. Compared to the year before, 23 less new orders were placed in 2016, the report shows.

At the end of 2016, the global orderbook comprised of 137 vessels, 121 of which were above 50,000 cubic meters. According to GIIGNL, 64 vessels were scheduled for delivery in 2017.

The report also shows that the global LNG tanker fleet consisted of 478 vessels at the end of 2016, including 24 FSRUs and 30 vessels of less than 50,000 cubic meters.

In 2016, the average spot charter rate for a 160,000-cbm LNG carrier stood at $33,528/day, compared to an average $36,038/day in 2015, it said.

LNG trade up 7.5 percent

Global LNG trade recorded a growth rate of around 7.5% compared to 2015, returning to a robust pace experienced before 2011, according to GIIGNL’s report.

In 2016, global LNG imports increased by 18 million mt year-on-year to 263.6 million mt. Most of the supply was absorbed by increased demand in China, India and the Middle East.

In contrast, demand in mature importing markets such as Japan, South Korea and Europe remained sluggish.

Japan’s LNG imports declined for the second year in a row to 83.3 million mt due to the restart of several nuclear units, to energy conservation efforts and to the uptake in renewable power generation.

“Against expectations, Europe did not function as a sink for the production increase in 2016,” the report noted, adding that the UK recorded the largest decline in imports year-on-year or by 26 percent due to higher supply of pipeline gas and domestic production. Belgium and the Netherlands also recorded declines of respectively 58 percent and 42 percent.

“Primarily driven by new Australian volumes, additional supply was not as abundant as expected due to production delays, slower ramp-ups and lower exports from historical suppliers,” GIIGNL’s head Jean-Marie Dauger said in the report.

“As a result, the expected “wave” of LNG has not materialized yet, and some signs of market tightness have even been observed towards year-end due to colder weather than usual in Europe and North East Asia,” he added.

Looking forward, with Australian projects ramping-up and new trains from the United States progressively coming online, Dauger said that the global LNG market could become oversupplied until the mid 2020’s.

“Nevertheless, surplus capacity could be progressively absorbed by additional imports and/ or by shut-ins, both as a consequence of low price levels, resulting in a market rebalancing in the first
part of the decade.”

“Given the scarce number of FIDs taken in recent months (only 1 in Indonesia and 1 in the US) a tightening of supplies in the long run can be expected, perhaps slowing down the emergence
of a more flexible and liquid traded LNG market,” Dauger added.

Spot LNG trading on the rise

The share of “pure” spot trades – defined by GIIGNL as trades whereby cargoes are delivered within 3 months from the transaction date – were estimated for 2016 at about 18 percent of the total LNG volumes.

Spot trade volumes were estimated at around 47 million mt last year, up from a share of 15 percent or 37 million mt in 2015.

Main drivers of this growth were China, India and Egypt, accounting together for 30 percent of the spot LNG volumes imported last year, GIIGNL said.

LNG World News Staff