The last two-and-a-half years have seen a massive surge in interest in the previously conservative LNG business with unprecedented levels of ordering activity for new vessels, much increased interest in new supply projects and new/expanded, terminals, according to a review conducted by Drewry Shipping Consultants.
With a growing fleet and more trading opportunities, the traditional structure of shipping could gradually be broken down to be replaced by more flexible arrangements, with more spot and short-term contracts encouraging speculative ventures and new entrants, said Drewry in its annual LNG shipping market review and forecast.
It said new technologies were helping to bring costs down and make previously uneconomic projects viable. In ship design new propulsion systems aimed to replace the traditional steam turbine engines with smaller, more efficient units that would not only reduce fuel costs but also increase cargo carrying capacity.
"Several new ships have been ordered with on board regasification facilities that will open up many new areas to the possibility of LNG imports," it said, adding they would help overcome various objections including environmental ones.
It observed that in LNG shipbuilding the South Koreans had clearly stolen a march on their traditional Japanese and European rivals in the recent new orders boom but that they might be about to face a low-cost challenge with China poised to join the ranks of LNG shipbuilders, the report said.
"Orders for ships have flooded in as the industry looks forward to trade that is widely predicted to grow at between 7 to 8 per cent per year for the next decade," said Drewry.
It forecast that the current orderbook would see the fleet expand to 193 vessels by 2006. This might create some short-term problems mid-decade with new shipping capacity coming on to the market faster than LNG liquefaction or regasification capacity.
"However by 2010 approximately 250 vessels will be needed to accommodate the forecast trade and another 50 to 60 vessels will have to be ordered in the next few years," the Drewry report went on to say.
