: How supply and
demand affected the number of LNG vessels in the last decade
Shipping industry nowadays more
than ever before comply to international regulations. That has a result an
increase to some of the fixed costs of the vessels operation, which leads to a
decrease in the income of a shipping firm. That led firms to find ways to
decrease operational costs, turn to technological “assistance” for help and
alter their chartering policies. Big part of the shipping industry is the LNG
fleet, which its nature (inelastic, fewer buyers) under the above circumstances
make it even more difficult to be as profitable as before.
So, since the LNG fleet continues
to have profit and expand its number of vessels that means the supply and
demand in LNG market is worth investigating and describing the effects of the
supply and demand on that specific and rising market (Tirelli, 2012). Given the
fact, that the supply and demand will be analyzed in the last decade and that
the appropriate data exist in Clarkson’s data base the topic is feasible.
Lng market rises as the upcoming
big market and that is mostly due to the growth of Asia and the need of those
countries for gas. According to BP in the next four years the total LNG trade
will be increased by 30% worldwide including Asia, Australia and USA (bp.com,
By examining the course of the
demand and supply of the LNG market over the pas years we can make also
assumptions about the future of that specific market something that would lead
to very interesting results.
Natural gas involves about a
quarter of global energy demand, of which 9.8% is supplied as LNG. Although LNG
supply previously grew faster than any other natural gas supply source at a
percentage of 6.2% from 2000 to 2015, its share since 2010 remain steady. In
recent years the market has remained as it was without major changes, but the
rising of LNG supply will increase according to international firms and will
exceed the demand (Son and Lee, 2017).
1.1 Research problem
The research problem is to
investigate how supply and demand affected the LNG market the last decade.
Also, to analyze the variables that are the most important ones and affect supply
and demand in the Lng market.
The course of the Lng market in
the shipping industry and the connection with factors that affect demand or
supply is critical to understand the specific market and have a solid hint
about the economic future.
This study is undertaken to give
a closer look to the Lng market, how it altered throughout the last decade, how
this was affected and determined by the supply and demand and which were the
stages that the market passed. Also, the individual factors that affect the
supply and demand will be examined so we can understand how the LNG industry
and market work.
It is important for the future of
the Lng market to make this paper because it will give insights to the
foundation elements that affect the industry and will continue to do so in the
future. Of course, it will be critical also for the assessment of the current
situation of the market, in what economic shipping cycle it is in now and
therefore its specific phase.
1.3 The research objectives
To approach our research problem,
we need to come out with some research objectives, so we can narrow our
research and clarify the purposes of this paper.
So, the below objectives will be
important to our task:
out the LNG market’s supply and demand alterations during the last decade.
and describe the specific factors that affect the supply and demand in the LNG
1.4 The research questions
By formulating the objectives, it
is now time to state the research questions, which will be based on the
research objectives and be the “guide lines” in our task.
LNG market altered during the last decade (according to demand and supply)?
are the individual reasons that affect supply and demand?
In this part of the literature review the course of the LNG
market until nowadays will be presented, as well as the supply-demand
The total LNG fleet consisted of
475 vessels as of January 2018, including conventional vessels and at the same
time ships acting as FSRUs and floating storage units. In 2016, a total of 31
newbuilds (including two FSRUs) were delivered from shipyards, a 7% increase
when compared to 2015. Relative to the previous year, this was a much more
balanced addition relative to liquefaction capacity (which grew by 35 MTPA).
Nevertheless, the accumulation of the tonnage buildout from the previous years
is still being worked through, keeping short-term charter rates at historical
lows. In 2016, two vessels were retired and sold for scrap (Ga?czy?ski et al.,
The total global LNG reached
258.0 million tonnes in 2015, a 14.1 MT increase over 2014 and new record for
global LNG trade. However, this record is poised to be broken repeatedly over
the next years because more liquefaction ways will begin. The annual growth of
14.1 MT marks the highest level since 2011 (ALIZADEH, 2016).
The number of nations and
countries that export LNG in January 2016 returned to 19 from 18 in January
2015 (Sin.clarksons.net, 2018), as Angola and Egypt resumed exports midway
through the year. Political instability in Yemen meant LNG imports were unable
to restart after shutting down in mid-2015. The start of operations at Sabine
Pass LNG marked the start of US GOM LNG exports for the US, although the Kenai
LNG plant in Alaska did not send out any cargoes during the year. Total
re-export activity stayed relatively stable globally, with 4.4 MT re-exported
by 10 countries during the year (10 countries also re-exported LNG in 2015).
Driven by growth in Qatari production,
the Middle East was the world’s largest LNG exporting region from 2010 to 2015.
However, the Asia-Pacific regained this mantle in 2016 due to new production at
several new liquefaction plants, coupled with Yemen LNG remaining offline due
to continued unrest in the country. Asia-Pacific countries represented 38.6% of
total exports, compared to 35.3% for the Middle East in 2016. Qatar continues
to remain the world’s largest LNG exporting country, accounting for around 30%
of global trade by exporting 77.2 MT. Growth in Asia-Pacific supply was 15.4
MT, primarily from Australian project start-ups, including Gorgon LNG T1-2,
GLNG T1-2 and Australia Pacific LNG T1. QCLNG T2 and Donggi-Senoro LNG, both of
which started up in Q4 2015, also added to the growth in annual volumes from
this region. The US shifted from its pattern of exporting only minor volumes
from Kenai LNG and a handful of re-exported cargoes, to exporting 2.9 MT from
the new Sabine Pass project in the US GOM during 2016. Elsewhere in the Atlantic
Basin, Trinidad continued to struggle with feedstock limits, as production at
Atlantic LNG was down substantially for the second consecutive year, falling
2.0 MT year-on-year
(YOY). Nigeria LNG (NLNG)
produced 1.8 MT less in 2016, due to domestic unrest in the Niger Delta region,
as well as a period of extended maintenance during the first half of the year.
Contrasting with difficulties in those countries, the return of Angola and
Egypt to exporting status provided a combined boost of 1.3 MT in 2016 to
Atlantic Basin production. Asia-Pacific and Asia markets (the distinction
between these regions is illustrated in Section 8.3) continued to represent the
most activity in LNG imports, recording a small increase in combined market
share from 71.7% in 2015 to 72.4% in 2016. Given a decline in Japanese demand
and near-flat South Korean demand, this slight growth was due to strong demand growth
from both China and India (+6.9 MT and +4.5 MT YOY, respectively). Continued
moderate growth in smaller markets such as Thailand, Pakistan, and Singapore
helped these regions retain their important role in global trade. The addition
of Jamaica and Colombia brought the number of importing countries to 35,
although the pair registered just 0.1 MT of additional trade.² The four new
markets from 2015, Egypt, Pakistan, Jordan, and Poland, added 7.7 MT in 2016, including
4.3 MT by Egypt alone. This builds on the 6.0 MT of imports those markets
contributed to global trade during 2015. Looking forward, Malta received its
first commissioning cargo in January 2017, and will likely be the only new
importer of LNG in 2017. European LNG imports increased YOY for the second consecutive
year, although strong Pacific Basin prices during the second half of 2016, and
particularly during the last quarter of 2016, kept gains from exceeding 0.6 MT.
The Northwest European markets of the UK, Belgium, and the Netherlands declined
by a combined 3.4 MT YOY as ample pipeline