LNG shippers brace for wave of consolidation as freight rates sink

Dynagas LNG Partners LP

21/12/2015 04:12

* Faltering LNG demand, growing tanker fleet drag on freight 
rates 
    * Seen prompting mergers, joint ventures, asset sales 
    * But rates likely to pick up in 2017 as new LNG projects 
start 
 
    By Keith Wallis 
    SINGAPORE, Dec 21 (Reuters) - Shippers who ply the seas to 
deliver liquefied natural gas (LNG) in massive tankers are 
likely to face a wave of consolidation and asset sales, with 
freight rates plunging as a growing fleet clashes with tepid 
demand. 
    Companies that manage to weather the shakeout in one of the 
key sectors in the global shipping industry should be in a prime 
position, however, to benefit from a string of new LNG projects 
expected to start trickling online by the end of next year. 
    "I see more mergers and acquisitions, more consolidation and 
a lot more joint ventures as things get tougher," said Andrew 
Bridson, business development manager at maritime consultancy 
BMT Asia Pacific. 
    "That is not a bad thing. Consolidation will force out 
failing companies and cull a lot of the older tonnage." 
    LNG transportation was once considered a bright spot in a 
global shipping industry that has been in its worst downturn in 
30 years. But freight rates have halved since 2014 as appetite 
for LNG wavers in the face of stuttering economies in key 
markets such as China and South Korea, while the global tanker 
fleet is expected to grow nearly 10 percent a year from 2015 to 
2017 as ships ordered earlier are completed.  urn:newsml:reuters.com:*:nL3N13J225 
    Spot charter rates for a 160,000 cubic metre LNG carrier are 
currently around $32,000 per day, down from $72,000 in 2014 and 
over $100,000 in 2013, according to data from British shipping 
services firm Clarkson  CKN.L . 
    LNG tankers need to earn $60,000-$80,000 a day to cover 
capital and operating costs, shipping experts said. 
    To make it through the downturn, analysts and industry 
officials predict that some shippers will merge, while others 
will look to offload assets or club together in operating 
ventures. 
    A handful of smaller operators including Excelerate Energy, 
owned by U.S. oil magnate George Kaiser, and Norway's Awilco 
 ALNG.OL  have already received takeover offers or are selling 
older vessels.  urn:newsml:reuters.com:*:nL8N13R4DV 
    Flex LNG  FLNG.OL , with just two LNG carriers, said it was 
looking for other consolidation opportunities after its $2.3 
million merger with shipper Exmar  EXMR.BR  was scuppered in 
September. 
    Meanwhile, Golar LNG  GLNG.O , Dynagas  DLNG.N  and GasLog 
Ltd  GLOG.N  launched the Cool Pool vessel marketing venture 
with 14 gas carriers in October to reduce operating costs and 
support spot charter rates.  urn:newsml:reuters.com:*:nL5N10T1OM 
    "I expect to see another LNG ship owners pool emerge," said 
an LNG ship broker, declining to be identified as he was not 
authorised to speak with media. 
    Elsewhere, the $70 billion acquisition of BG Group  BG.L  by 
Royal Dutch Shell PLC  RDSa.L  will create a 70-strong LNG 
shipping fleet, one of the biggest in the world, rivaling 
Japan's Nippon Yusen Kaisha  9101.T  and Mitsui O.S.K. Lines 
 9104.T .  
     
    AFTER THE STORM 
    Those shippers left as part of a leaner industry will be set 
to capitalise down the line as new or delayed gas export 
projects in Australia, North America and Africa start operating. 
    These include the Queensland Curtis LNG plant in Australia 
and Cheniere Energy's  LNG.A  Sabine Pass export facility in the 
United States, which will receive its first tanker for loading 
on Jan. 12.  urn:newsml:reuters.com:*:nL8N13K1T6  urn:newsml:reuters.com:*:nL1N1342ZQ 
    "That is going to bring out more LNG onto the market and 
that is going to need more ships," said Peter Evensen, chief 
executive at shipper Teekay GP  TGP.N . 
    Indeed, the longer term picture looks brighter, with 
analysts forecasting demand for LNG will grow to 410 million 
tonnes by 2025 from 249 million tonnes this year as the global 
economy starts to pick up. 
    The outlook for the fuel was also boosted by a historic 
climate change agreement signed by world leaders in Paris this 
month, helping pave the way for a major shift away from coal 
towards cleaner fuels such as gas.  urn:newsml:reuters.com:*:nL8N1410F    
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
GRAPHIC on falling LNG tanker rates    http://reut.rs/1QLrx2N 
TAKE A LOOK-Global LNG markets enter era of glut     urn:newsml:reuters.com:*:nL3N13T20Q 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Reporting by Keith Wallis in Singapore; Editing by Henning 
Gloystein and Joseph Radford) 
 ((keith.wallis@thomsonreuters.com)(+65 6870 3803)(Reuters 
Messaging:keith.wallis.thomsonreuters.com@reuters.net)) 
 
Keywords: LNG FREIGHT/RATES