There is an extraordinary amount of enthusiasm revolving around the prospects for shale gas, which has, over a very short time-frame, revolutionised energy prospects for the United States, where a convincing lead has been taken in its technical development. There have been confident predictions of a large scale repatriation of much US manufacturing from the Far East, because of the availability of this cheap energy, while the apprehensions of America’s prospects in a post-fossil fuel world seem to be evaporating.
Given the pace of this change, there seems understandable uncertainty over what such a rapid translation from an energy importer to a major gas exporter is likely to mean for the shipping industry. Good work for specialist engineers turning LNG import terminals into export hubs, less confidence among those carrying energy into the US or hauling all those manufactured goods from the factories of China. A certain amount of introspection in those specialist ocean carriers of LNG, with about 20% of the existing total world LNG fleet – nearly 60 new ships – coming onto the market in the next two years, while all this shake-up of the market is taking place.
LNG has never been a sector for the faint-hearted. Shipping people of a certain age still remember the half dozen big and expensive vessels that arrived onto the market in the late 1970s, with no long-term business and no prospects, resulting in the ships being laid up for decades. Then as now, these are some of the world’s most expensive cargo ships, traditionally ordered against cast-iron, long-term business. There are some who will recall with disbelief the series of ships which failed their acceptance trials on account of their insulating system, and were either converted to coal-carriers or, amazingly, broken up unused. The requirement for courage, capital and capability in a highly demanding trade means that the bar to entry into this business has always remained high.
The number of new ships now taking shape in mainly South Korean builders would indicate that for the first time in the nearly fifty year story of LNG by sea, the owners of a sizeable proportion of the fleet anticipate working in a spot market. It has been suggested that the appearance of these new “state of the art” units, with modern standards of environmental compliance and fuel economy will encourage the retirement of some 20% of the world fleet which is stubbornly trading on into old age. Only US nuclear aircraft carriers, an observer has pointed out, have longer lives than LNG vessels. But this retirement, enforced by technical redundancy and fuel inefficiency, it is hoped, will do much to improve the commercial prospects of the newcomers. There is a great deal of investment linked to this optimistic anticipation.
What has never been in any doubt during this past half-century is the huge commitment to safety and standards attached to the LNG trade, with a record that has been unequalled in any other shipping sector. The restricted number of shipping operators engaged, the perceptions of a potentially hazardous cargo and the commendable pursuit of transport excellence can all be thought responsible for this enviable record. Now, with the size of the sector dramatically increasing, in addition to a change from long term “liner” operations to one where the spot market plays a greater role, the challenge will be to see the continuation of this excellence.
Source: BIMCO