From LNG World Shipping
Among the reverberations felt by the LNG industry in 2017, none echoed more loudly than the healthy build-up in US exports; the start of LNG shipments from the Russian Arctic; the rapid emergence of China as the second-largest LNG importer; the specification of LNG as fuel for nine large CMA CGM container ships; and the rebound in the fortunes of the shipping market, seemingly against the odds.
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US in the fast lane
As year-end approaches, cargo loadings at Cheniere Energy’s Sabine Pass terminal – the first world-scale US LNG export facility and the first in the lower 48 states – are building towards the 250 mark. That equates to about 15M tonnes (mt) of LNG.
Since the first 4.5M tonnes per annum (mta) Sabine Pass liquefaction train was brought into service in February 2016, three more have been commissioned and loadings at the facility’s two jetties are now running at 20-22 per month, or two every three days. Of the 36 LNG import countries worldwide, 25 have received Sabine Pass cargoes.
Over the coming year, LNG shipments from the four Sabine Pass liquefaction units will be boosted by output from the new 5.2 mta Cove Point train, the first of three 4.4 mta Freeport LNG trains and a handful of the five 0.5 mta trains being built at Elba Island in Georgia. By the end of 2018 the US will be challenging Malaysia’s status as the world’s third-largest LNG exporter.
Further trains are under construction at Sabine Pass, Freeport LNG, Cameron LNG and Corpus Christi LNG. These facilities will provide the US with an aggregate LNG export capacity of 65 mta by the end of 2020, more than twice that of Malaysia.
The US has plentiful supplies of shale gas available, and is looking to further expand its LNG sales volumes to overseas buyers in the next decade. Developments in 2017 will help realise these new goals.
In January the US Federal Energy Regulatory Commission (FERC) authorised the export of 15.6 mta from three trains that Golden Pass LNG plans to construct at its existing import terminal near Port Arthur, Texas. ExxonMobil and Qatar Petroleum, the owners of Golden Pass, are targeting a final investment decision (FID) on the project in 2018.
Other project developers with an eye on 2018 FIDs are Tellurian and Delfin LNG. Tellurian applied to FERC in April 2017 for permission to export 26 mta from its planned Driftwood LNG export terminal near Lake Charles, Louisiana. The intention is to start LNG production at the greenfield site in 2022 and bring the five-train plant into full operation by 2025.
Two months later Golar LNG and Delfin Midstream agreed to jointly develop the Delfin LNG scheme 65 km off the coast of Cameron Parish, Louisiana, utilising Golar’s floating LNG (FLNG) production technology. So far the only permitted US floating LNG export project, Delfin LNG would make use of existing offshore platform mooring facilities and as many as four FLNG vessels to produce up to 13 mta of LNG.
These schemes are not the end of US LNG export aspirations, by any means. A further 10-12 project proposals are at various stages of the permitting process, but FIDs on these are unlikely to come before 2019.
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LNG ice age
The transfer of the first Yamal LNG export cargo to the 172,000 m3 Christophe de Margerie on 7 November heralded a new era in LNG transport. The lead ship in a series of 15 Arc7 icebreaking LNGCs built by Daewoo Shipbuilding & Marine Engineering for the 16.5 mta Yamal project, Christophe de Margerie is the largest icebreaking vessel and the most powerful LNGC ever constructed.
The Yamal vessels are built to Aker Arctic’s double-acting ship (DAS) design originally used in 2003 for a pair of 110,000 DWT oil tankers built for Neste Shipping and Baltic Sea Ice Service. The DAS technology enables ice-class vessels to proceed in the conventional bow forward direction in open seas and thin ice but astern in thicker ice and the full icebreaking mode.
Astern icebreaking operations on the Yamal LNGCs is assisted by a heavy-scantling, aft hull structure and a propulsion system that features four 12-cylinder and two 9-cylinder Wärtsilä 50DF dual-fuel engines, with an aggregate output of 64.4 MW per vessel, linked to three ABB Azipod units delivering around 45 MW of power.
The propulsion system and hull strength will enable the ships to sail continuously through ice up to 2.1 m thick and eastbound from Yamal’s Sabetta terminal, high in the Russian Arctic, to Asia for five summer months without the need for an icebreaker escort. At all other times the ships will sail westbound from Sabetta, to northwest Europe for the transhipment of cargoes to conventional LNGCs and onward delivery.
Experience will have been gained by the Arc7 fleet when Novatek, the Yamal LNG project operator, is ready to order the shipping required for its next scheme, the proposed 16.5 mta Arctic LNG II terminal. Its second endeavour is planned for the remote Gydan Peninsula in Ob Bay, just to the east of Sabetta.
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China in overtaking mode
LNG World Shipping calculates that over the first 11 months of 2017 China imported 33.6 mt of LNG while Korea has purchased 33.4 mt. Given that China’s monthly LNG imports this winter are running at least 25% above those of its near neighbour, it is safe to say that China will emerge at the end of the year as the world’s second largest buyer of LNG.
A measure of how LNG demand in China has grown recently is given by last year’s import figures. In 2016 shipments discharged at Korean terminals reached 33.4 mt, only 2.3% above the previous year’s total. In contrast, Chinese facilities welcomed 26.1 mt, a 32.6% jump on the 2015 figure.
China has been the fastest growing major market for LNG over the past two years and it’s strengthening appetite for the clean-burning fuel shows no signs of abating. The country is well on the way to achieving its goal of having natural gas meet 10% of its energy needs by 2020, up from 5.9% in 2015.
To combat air pollution the government has introduced policy directives which support coal-to-gas switching in both the industrial and residential sectors. Residential demand, in particular, is being buoyed by the large-scale replacement of coal-fired heating with gas-fired boilers in domestic households.
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Box ship breakthrough
In November 2017 the French liner service operator CMA CGM specified dual-fuel engines for nine new 22,000 TEU container ships. They will be not only the largest vessels of this type ever ordered but also the largest ships that are not LNG carriers to be powered by LNG.
Each of the breakthrough ships will be propelled by a pair of the largest gas-burning engines ever built and boast an 18,600 m3 LNG bunker tank of the membrane type. This tank is five times larger than any specified for a previously contracted LNG-powered ship and marks the first use of a non-Type C containment system in LNG bunkering.
Total will provide the 0.3 mta of LNG that will be required to fuel the nine vessels. It is estimated that this volume is equal to that consumed by the entire existing fleet of 120 gas-powered ships.
The entry into service of the new CMA CGM fleet will spur major developments in the provision of LNG fuelling infrastructure worldwide, including the largest ever gas bunkering vessel. LNG as marine fuel is about to enter a new era.
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Shipowner delight
In January 2017 LNGC owners were despondent. An over-abundance of ships reinforced by a busy schedule of newbuilding deliveries as well as a gas demand unable to catch up with fast-growing LNG supplies had conspired to keep freight rates for spot cargoes down well below breakeven levels.
Over the first nine months of the year spot rates for modern ships serving the Asian market averaged just over US$30,000/day. Forecasters were predicting that it would be 2019, or even 2020, before a fleet supply/demand balance was achieved and healthy returns were once again the order of the day.
But better times have surfaced sooner than anyone expected. A few weeks ago, Golar LNG declared that shipping demand had exceeded supply growth for the first time since 2013. The effective time charter rates for Q4 this year are double what they were in Q3.
The growing demand for tonnage has been buoyed by new production capacity; the rising demand for LNG in many countries, not least China and India; and the additional tonne-miles that come with longer voyages, such as those from the US to Asia.
Counting the soon-to-be-operational Cove Point facility, seven liquefaction trains with an aggregate nameplate capacity of 33 mta have come onstream in 2017. Shipowners, on hand to carry these growing volumes with their growing fleets, are looking forward to 2018 with relish.
