PIRA: LNG Tanker Set to Receive Rush of New Supply

PIRA Energy Group reports that LNG tanker is set to receive rush of new supply. In the U.S., regional prices largely tracking benchmark Henry Hub. In Europe, the LNG contract/storage relationship becomes central to European supply outlook.

Specifically, PIRA’s analysis of natural gas market fundamentals has revealed the following:

The tanker market is in the midst of a supply surge ahead of new liquefaction from next year. Until that new supply begins to roll out from 2H14 from Australia and Papua New Guinea, we should expect a much weaker market for spot tankers. But what should happen in LNG shipping often does not. After probably the weakest year in modern LNG shipbuilding history, in which a single vessel was delivered in 2012 (boosting rates to never seen before highs last year, combined with nuclear outages in Japan), some 10 vessels have been delivered through September and 13 more are on the books for 4Q, which should have a mitigating effect on relatively high LNG spot charter day rates.

Regional Prices Largely Tracking Benchmark Henry Hub

The resiliency of prices in general, along with narrow basis differentials at most locations, highlights the increased integration of the U.S. pipeline network. The build-out in storage has also lessened regional dislocations, notwithstanding the struggles to clear supply out of Appalachia. Some other notable exceptions remain, starting with capacity issues surrounding the New England market. Meanwhile, prices in western Canada have also struggled in the wake of a new toll agreement put in place in July.

LNG Contract/Storage Relationship Becomes Central to European Supply Outlook

As the weather turns colder, a core feature of the market will be the relationship between storage levels and LNG supply. As we will discuss more at the PIRA Seminar on Oct. 10 and 11, the storage deficit in Europe and the lack of LNG imports in Europe this year are closely connected and will be in the months ahead. Europe has been importing only about 33% of the LNG it possesses under contract.

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LNG World News Staff, October 10, 2013