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Analysis: the live LNG fleet and a new landmark

Fri 09 Jun 2017 by Mike Corkhill

Analysis: the live LNG fleet and a new landmark

The 174,000m³ Cesi Beihai, completed by the Hudong Zhonghua yard in China on 2 June, is the 500th vessel in the live LNG carrier fleet.

The landmark vessel joins the fleet at a time of rapid industry expansion. Cesi Beihai is the 20th LNG carrier completed worldwide so far in 2017.

Gauging from the scheduled delivery dates in the 125-ship orderbook database that LNG World Shipping maintains, the 600th ship will enter service in summer 2019. The exact date will depend on the extent to which older LNGCs are scrapped and newbuilding completions are delayed to tie in with postponed start-ups to new LNG projects.

Cesi Beihai is the third in a series of six LNGCs that Hudong is building for an 80/20 ownership deal between China Energy Shipping Investment (CESI) and Mitsui OSK Lines (MOL). CESI itself is a joint venture company 51 per cent controlled by China Shipping LNG and 49 per cent by Sinopec.

Sinopec is taking the ships on 20-year time charters to load cargoes at the Australia-Pacific LNG (APLNG) export terminal in the Australian port of Gladstone on a free-on-board (FOB) basis for delivery to its receiving terminals in China. MOL is responsible for management of the fleet.

Sinopec has taken the 162,000m³ pair BW Pavilion Leeara and BW Pavilion Vanda on medium-term charters, until 2019, as back-up coverage until the full six-ship Hudong series enters service.

Quickening fleet growth

As with other shipping segments, the development of the LNG carrier fleet reflects the vagaries of global politics and economics – and, occasionally, natural phenomena – despite attempts to align it with commissioning of new export projects.

Fleet growth has been influenced by unplanned events such as the 2008 global financial meltdown, the 2011 tsunami in Japan and the 2014 collapse in energy prices.

Such misalignments have caused periodic bouts of fleet under-tonnaging and, more frequently, over-tonnaging. However, LNGC owners exposed to the spot market have usually not had to endure for long the depressed freight rates that come with an oversupplied fleet, as gas demand has rebounded or delayed liquefaction plants have been completed.

So far, nothing has derailed the inexorable rise of the world LNGC fleet. It took 34 years from starting commercial LNG shipments for the in-service fleet of LNG carriers to reach 100 vessels, in 1998.

Within a scant eight years, the fleet broke through the 200-vessel barrier. It reached the 300-ship mark just over 30 months later, in January 2009, our statistics show.

The 400th ship in the in-service fleet was Höegh LNG’s 170,000m³ PGN FSRU Lampung floating storage and regasification unit (FSRU), delivered in April 2014.

Fleet diversification

The conventional-size LNG carrier, which today stands at the Cesi Beihai benchmark capacity of 174,000m³, remains the workhorse of the LNG shipping industry.

But although this size dominates the in-service portfolio of vessels and the current orderbook, the fleet is gradually diversifying. Today, the live LNG fleet  includes 26 FSRUs and 33 small-scale ships of 30,000m³ or smaller. Two of the FSRUs and six of the small-scale ships have been completed this year.

Amongst the recently delivered small ships are the world’s first purpose-built LNG bunker vessel and the first LNGC to be powered by a two-stroke, dual-fuel engine working at low pressure. The latter ship, of 14,000m³, distributes LNG along China’s coast and river estuaries. 

The other four small-scale vessels handed over this year are 27,500m³ multigas carriers that can transport petrochemical gases and LPG as well as LNG. There are 14 multigas ships in service and, although most serve the petrochemical gas trades, these specialist vessels will increasingly support regional distribution of LNG.

LNG is characterised by growing use of natural gas in small volumes by customers in remote regions and not linked to the pipeline grid places – which is where the oil trades were 60 years ago.

Small-scale LNG infrastructure is spreading to bring gas to these new customers and, as with oil all those decades ago, the use of gas as marine fuel is a key driver for this increasingly diversified market segment.

Shipbuilder input

Cesi Beihai is the 13th LNGC to be built by Hudong Zhonghua since the Chinese yard entered the gas carrier arena with the delivery of Dapeng Sun in April 2008. Although several shipbuilders in China have won orders for small-scale LNG carriers, including multigas vessels, Hudong remains the country’s only yard to have built conventional-size LNGCs.

Several Chinese yards aspire to build a strong presence in building conventional-size LNGCs in the years ahead. However, they have a way to go to catch up with their South Korean rivals.

Samsung Heavy Industries (SHI) and Daewoo Shipbuilding and Marine Engineering (DSME) are neck-and-neck in the top LNGC builder race. Of the 500 ships in service, SHI built 108 and DSME 107.

DSME has only ever built ships to the GTT No 96 membrane design, whereas the SHI vessels incorporate GTT Mark III membrane tanks. The two yards’ achievements in LNGC construction have reinforced the status of membranes as the leading choice of cargo containment system.

By containment system, the existing LNGC fleet comprises:

  • 187 Mark III membrane vessels
  • 171 with No 96 membranes
  • three with CS1 membranes
  • 111 with Moss spheres
  • two with IHI self-supporting, prismatic IMO Type B (SPB) independent tanks
  • 26 with IMO Type C pressure vessels tanks.

Cesi Beihai is propelled by dual-fuel, diesel-electric (DFDE) four-stroke engines, an LNGC propulsion system choice that dominated newbuilding orders between 2002, when the 74,000m³ Gaz de France Energy, the first such ship to be so propelled, was contracted, and 2012.

Gaz de France Energy, now Global Energy, broke the monopoly that steam turbines enjoyed in the LNG sector for 38 years.

In December 2012 Teekay ordered the first LNG carrier to be powered by a two-stroke dual-fuel engine operating with a high-pressure fuel gas supply system. Since that date these units, supplied by MAN and known as ME-GI engines, have been the most popular propulsion system for LNGC newbuilding orders as they offer improved efficiencies.

More recently, the two-stroke, dual-fuel engine working at low pressure has also started to gain favour amongst shipowners for new vessels. These units offer propulsion system efficiencies marginally below the two-stroke high-pressure engines but do not require such sophisticated fuel gas supply systems.

They also comply with IMO Tier III emission restrictions without the need for additional exhaust treatment.

By propulsion system, the 500-ship LNGC fleet comprises:

  • 269 vessels powered by steam turbines
  • 163 with DFDE engines
  • 60 with two-stroke oil-fired diesels
  • seven with high-pressure ME-GI dual-fuel units
  • one with a low-pressure, two-stroke, dual-fuel engine.           

Video exclusive: watch Mike Corkhill discuss the 500-ship LNG carrier landmark