Optimizing LNG shipping Portfolios Realities, Uncertainties, - - PowerPoint PPT Presentation

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Optimizing LNG shipping Portfolios Realities, Uncertainties, - - PowerPoint PPT Presentation

Nov 19, 2023 154 likes •346 views

Optimizing LNG shipping Portfolios Realities, Uncertainties, Opportunities Author: Manon DUMONTIER Poten & Partners Co-Authors: Doug BROWN, Poten & Partners Amokeye ADEDE, Poten & Partners Owned and presented by Host IGU

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Owned and presented by Host IGU Member Supporting Association

Optimizing LNG shipping Portfolios – Realities, Uncertainties, Opportunities

Author: Manon DUMONTIER – Poten & Partners Co-Authors: Doug BROWN, Poten & Partners Amokeye ADEDE, Poten & Partners

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Owned and presented by Host IGU Member Supporting Association

LNG Fleet Supply-Demand Balance

Poten’s Base Case

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50 100 150 200 250 300 350 400 100 200 300 400 500 600 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 LNG Demand MMt/y Number of Ships On Order (138) Operational Fleet** (408) Global LNG Demand

The LNG fleet is growing more rapidly than the LNG demand

*excludes floating liquefaction and small-scale ships **excludes ships in (semi) lay-up

Source: Poten & Partners

Growth of the LNG Fleet*

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LNG trade has grown more complex, shipping distances have increased

Global LNG Trade Routes and Flows, 2000

Source: Poten & Partners

Global LNG Trade Routes and Flows, 2020

Source: Poten & Partners

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100 200 300 400 500 600 700 100 200 300 400 500 600 700 2010 2015 2020 2025 2030 MMt/y Number of Normalised Ships (160,000m3) Ship Demand LNG Demand

Global LNG shipping demand could double between 2016 and 2030

  • The ship demand is the number of ships required to

serve LNG trade, calculated as follows:

  • The annual ship requirement is calculated for

contracted and uncommitted LNG volumes

  • A 15% ‘trading allowance’ is included
  • LNG ship demand is estimated to rise from ~ 300 ships

in 2015 to ~ 600 by 2030 – a ~ 100% increase, compared to an LNG demand increase of ~ 80% over the same period

  • The faster increase is due to the further increase in

Atlantic Basin to Pacific Basin trade

Total LNG Ship Requirement Forecast for Trading

Source: Poten & Partners Forecast

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Our ship supply projection considers only existing ships and firm orders

  • When assessing ship supply on a year by year basis

into the future, the key following assumptions are applied:

  • Only existing ships and firm orders are considered
  • Ship utilisation rate is 345 days per year
  • Existing LNG ships are assumed withdrawn from

service and scrapped after 40 years in service OR when charter term ends – whichever is later

  • Capacities are normalized to 160,000m3
  • A 15% “trading allowance” is included

100 200 300 400 500 600 700 2010 2015 2020 2025 2030 Number of Normalised Ships (160,000m3) Ship Supply Committed Ships Undedicated Ships

LNG Ship Supply Forecast for Trading

Source: Poten & Partners Forecast

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New ships are required from 2019/ 2020 based on the fleet balance

  • Based on the fleet balance the market does not

require new ships until 2019/2020

  • Longer-term, around 160 additional LNG ships are

required by 2030 to meet rising demand and replace ageing ships

LNG Ship Supply & Demand Forecast

100 200 300 400 500 600 700 2010 2015 2020 2025 2030 Number of Normalised Ships (160,000m3) Ship Demand Ship Supply Committed Ships Undedicated Ships

Forecast Source: Poten & Partners

  • 50

50 100 150 200 2015 2020 2025 2030 No of Ships (160,000m3) Additional LNG Ship Requirement

Source: Poten & Partners

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Owned and presented by Host IGU Member Supporting Association

LNG Fleet Supply-Demand Balance

Uncertainties, opportunities: the effects of disruption and optimization

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Endogenous factors may impact the total shipping balance beyond new project requirements

  • Replacement at a younger (or older) age than 40 years, or conversion
  • Increase in re-exports, currently difficult to predict/forecast
  • Change in the production assumption (unplanned maintenance, production above

nameplate capacity)

  • Mismatch between location of the ship and spot cargo requirements
  • Change in trade route patterns assumptions (eg geographical cargo swaps)
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Panama Canal Straits of Gibraltar Malacca & Singapore Straits Straits of Hormuz Suez Canal Bab El Mandeb South China Sea

Closure of LNG traffic choke points would materially affect the total shipping balance

Source: Poten & Partners

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100 200 300 400 500 600 2010 2012 2014 2016 2018 2020 Number of Normalised Ships (160,000m3) South China Sea Closure Base Case SHIP SUPPLY

Avoiding South China Sea could add an LNG shipping requirement of up to 30 ships by 2020

  • Key route affected by unrest in South

China Sea would be Qatar to Far East

  • Alternative using Lombok and Makassar

Straits adds ~ 1,000 nm each way, or ~ 2.5 extra days each way

  • E.g. ~ 6,500 nm from Qatar to Tokyo via

South China Sea vs ~ 7,500 nm via Lombok and Makassar Straits

Forecast

LNG Fleet Balance

Source: Poten & Partners

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100 200 300 400 500 600 2010 2012 2014 2016 2018 2020 Number of Normalised Ships (160,000m3) Panama Canal Closure Base Case SHIP SUPPLY

Closure of Panama Canal could add an LNG shipping requirement of up to 40 ships by 2020

  • Panama Canal expansion due to open in June

this year

  • Key route affected by Panama Canal closure

would be US Gulf to Asia, hence the impact is more visible towards the end of the decade

  • Alternative via Suez Canal – significant increase

in distance

  • E.g. ~ 9,300 nm from US Gulf to Japan via

Panama vs ~ 15,200 nm via Suez (avoiding High Risk Area), or ~ 15 extra days each way

LNG Fleet Balance

Forecast Source: Poten & Partners

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100 200 300 400 500 600 2010 2012 2014 2016 2018 2020 Number of Normalised Ships (160,000m3) Suez Canal Closure Base Case SHIP SUPPLY

Closure of Suez Canal could add an LNG shipping requirement of up to 60 ships by 2020

  • Key route affected by Suez Canal closure in

the future would be Qatar to Europe

  • Alternative via Cape of Good Hope –

significant increase in distance e.g. ~ 6,500 nm from Qatar to NW Europe via Suez vs ~ 12,500 nm via Cape of Good Hope (avoiding HRA), or ~ 15 extra days each way

  • Had Suez Canal been closed in the

immediate aftermath of Fukushima, impact would have been by requirement for ~ 70 additional ships, due to a large number of intra-basins diversions

Forecast

LNG Fleet Balance

Source: Poten & Partners

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Even when choke points can be transited, cost of shipping can be a major diseconomy of LNG

  • Poten has looked specifically at South-East

Asia, an obvious candidate for shipping

  • ptimization through cargo swaps
  • Historically a major exporter of LNG
  • In recent years, has also imported

growing amounts of LNG to support its robust economic growth and associated power generation requirements

  • Despite continuing large LNG production

within the region, LNG imports come from as far away as Trinidad

Selected 2014 shipping costs to Southeast Asian countries

Source: Poten & Partners

2.29 2.1 1.6 1.48 0.75 0.71 0.44 0.2 0.5 1 1.5 2 2.5

Shipping cost ($/MMBtu)

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50 100 150 200 250 300 350 400 2014 approximate shipping cost Notional ASEAN only trades $m

The size of the prize is overwhelming

  • Southeast Asia would have gained

in ̴US$200 million just in 2014 - almost the

cost of a new LNG ship - had it maximized

  • pportunities for cargo swaps within region
  • Devil is in the details and swaps initiative

have been very limited to date by implementation issues

  • Concerning liabilities for non-delivery or
  • ff-spec supply and negotiations over the

calculation of the gains from optimization and the split of the same between counterparties have blocked the way to ‘yes.’

Estimated potential savings from intra-regional LNG trade in Southeast Asia

* Calculated for Thailand, Malaysia, Singapore and Indonesia LNG imports

*

This $200 MM prize will

  • nly grow

Source: Poten & Partners

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A growing need, plenty of work still to be done

  • Long-haul LNG trade is growing, largely as a result of US exports under construction
  • LNG ship demand is projected to increase around 20% faster than LNG trade itself
  • Long-haul trade is particularly exposed to disruption at shipping choke points

–

If choke points are closed, “normal” industry trading reserves of shipping capacity, around 15% of total, may be insufficient

  • Even without choke point concerns, the high shipping cost for long-haul trade argues for
  • ptimization, e.g., through cargo swaps

–

Seizing the prize will require a new focus for the LNG industry, which has generally developed conservatively, from the individual venture up

–

Current industry conditions, reflecting severe drop in oil prices, may mean the time is ripe for change

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NATURAL GAS & LNG CONSULTI NG CONTACTS: AMERI CAS (NEW YORK) Contact: Jim Briggs Email: jbriggs@poten.com Tel: + 1 212 230 2000 EUROPE, M. EAST, AFRI CA Contact: Graham Hartnell Email: ghartnell@poten.com Tel: + 44 20 3747 4820 ASI A PACI FI C Contact: Stephen Thompson Email: sthompson@poten.com Tel: + 61 8 6468 7942 AMERI CAS (HOUSTON) Contact: Doug Brown Email: dbrown@poten.com Tel: + 1 713 344 2378