LNG demand, shipping will expand through 2010

The dome for Tank No. 1 of Atlantic LNG's Trinidad project was installed late last year as the project moves toward start-up in 1999.

The 1990s, especially the middle years, have witnessed a dramatic turnaround in the growth of liquefied-natural-gas (LNG; Fig. 1 [85,736 bytes]) demand which has tracked equally strong natural-gas demand growth.

Much of this growth has been for power generation in Asia, but even U.S. LNG demand in 1996 made a strong recovery (OGJ, Jan. 12, 1998, p. 33).

This trend was underscored late last year by several annual studies of world LNG demand and shipping.

As 1998 began, however, economic turmoil in Asian financial markets has clouded near-term prospects for LNG in particular and all energy in general. But the extent of damage to energy markets is so far unclear.

Overall, nonetheless, demand growth in power-generation markets for natural gas including LNG appears likely to continue through 2000 if more slowly than was evident early in the 1990s.

A study by U.S.-based Institute of Gas Technology, Des Plaines, Ill., reveals that LNG imports worldwide have climbed nearly 8%/year since 1980 and account for 25% of all natural gas traded internationally. In the mid-1970s, the share was only 5%.

In 1996, the most recent year for which complete data are available, world LNG trade rose 7.7% to a record 92 billion cu m, outpacing the overall consumption for natural gas which increased 4.7% in 1996.

By 2015, says the IGT study, natural-gas use would surpass coal as the world's second most widely used fuel, after petroleum. Much of this growth will occur in the developing countries of Asia where gas use, before the current economic crisis began, was projected to grow 8%/year through 2015.

Similar trends are reflected in another study of LNG trade released at yearend 1997, this from Ocean Shipping Consultants Ltd., Surrey, U.K. The study was done too early, however, to consider the effects of the financial problems roiling Asia.

Global LNG demand will grow significantly through 2010, says Ocean Shipping's study, and result in eventual growth of seaborne shipping capacity.

World trade in LNG will expand to 122.7 billion cu m in 2000 and 155.8 billion cu m in 2005 from 92.5 billion cu m in 1995.

By 2010, LNG trade levels will reach more than 183 billion cu m, equivalent to an expansion of more than 4.5%/year during the 15-year period.

LNG trade expansion will be most dynamic near term, says Ocean Shipping, bolstered by expansion projects in Indonesia and Malaysia, along with new ones in Qatar, Oman, Nigeria, and Australia.

LNG imports, exports

IGT figures for 1996 (Table 1 [60,303 bytes]) show that almost 77% of the world's LNG was delivered to the three Asian countries, Japan, Korea, and Taiwan. Demand in the region rose nearly 9% that year.

Japan retained the title of world's largest LNG importer, with 61% of the total, but its market grew only 5%. Since Korea began importing LNG more than 10 years ago, says IGT's study, its demand has grown 20%/year; in 1996, Korean imports grew 40% to 13 billion cu m.

The shock of currency devaluation and related economic woes in early 1998 will likely slow that growth.

Almost all the remainder of world LNG production went to Europe in 1996, where markets have remained static. That will change for 1997: Italy completed refurbishing its only terminal at Panigaglia and resumed imports from Algeria. Turkey nearly doubled its imports in 1996 and, says IGT, has an enormous appetite currently being fed by spot market purchases.

For exports (Table 2 [50,549 bytes]) , Asia-Oceania accounted for 70% of 1996 LNG production, the world's largest being Indonesia with 35% of total sales. Algeria regained its second-place standing after revamping its plants.

Exports from Malaysia rose 29% in 1996 with completion of the Dua plant. And at start of 1997, Qatar moved into ninth position as exporter and will likely be exporting more than 12 million metric tons/year by 2000.

Oman, Trinidad, and Nigeria will soon join the list of exporting countries, possibly by very late 1998.

Ocean Shipping says Japan will import nearly 80 billion cu m/year by 2010, 36% more than in 1995.

South Korea's commitment to gas use and LNG imports is reflected in a growth of about 314% in trade levels to 29.5 billion cu m/year by 2010.

Taiwan's imports will also see more than a threefold increase during 1995-2010, increasing to 14 billion cu m/year. Japan, South Korea, and Taiwan combined, the study said, will account for 70% of world LNG trade in 2010.

New markets in Thailand, India, China, and Philippines should boost LNG trade medium to long-term, although their combined share of trade by 2010 will only reach a 10% share-equivalent to 17.5 billion cu m/year.

Ships, routes

In its annual study of LNG shipping, Ocean Shipping found that, when combined with an increasing level of scrapping, worldwide natural-gas-demand projections suggest a steady rise in total newbuilding.

Records set

Near-term (to 2000) average newbuilding need, in terms of the prevailing fleet capacity, will rise to 8.2%/year from 7%/year. Medium to long-term growth rates will moderate, falling to 5-6%/year to 2010.

With Middle East exports of LNG to the Far East set to expand the next 15 years, Ocean Shipping says improved economies of scale are likely with the construction of larger LNG carriers.

Port restrictions will be the main constraint to size expansion, with the construction of 175,000-200,000 cu m vessels considered feasible.

LNG newbuilding prices declined during the early 1990s but recovered by 1996 to within 2% of the peak 1991 level. Additional South Korean yards have entered the LNG market with first delivery in 1994, and competition has intensified.

Yards in France, Japan, and South Korea have begun tendering for new vessels, although the project-based nature of LNG trading still results in the majority of new orders being placed with domestic yards, says Ocean Shipping.

The state of LNG shipping-volumes, vessels, and routes-is published annually by the Society of International Gas Tanker & Terminal Operators Ltd. (Sigtto), London. The most recent issue, LNG Log 22 for 1996, reflects the steady growth of LNG transport by sea.

In 1996, more than 1,750 voyages were completed by 91 vessels (Table 3 [63,335 bytes]). Loaded LNG vessels traveled nearly 4 million nautical miles and delivered more than 160 million cu m of LNG to 27 receiving terminals worldwide.

The number of voyages, nautical miles, and total cargoes for 1996 exceeded records set in 1995. Since 1964, says the Sigtto report, there have been only 2 years (1980 and 1981) when the amount of LNG discharged failed to exceed that of the previous year.

The year 1996 witnessed further concentration of LNG transport to and within the Far East. More than 124 million cu m (76.9% of the year's total volume) were discharged at Asian terminals to which vessels traveled on 1,129 voyages and during which they steamed 3.35 million miles, representing 84.4% of the worldwide total.

The number of vessel entries into Tokyo Bay, said the Sigtto report, increased to 429, equal to an arrival on average every 20.4 hr. In total since the maiden arrival of Polar Alaska at Negishi late in 1969, no fewer than 6,737 LNG carrier arrivals (27.2% of the 24,788 worldwide voyages logged to the end of 1996) have been recorded at the entrance to Tokyo Bay.

The cumulative amount of LNG landed has nearly doubled in the 7 years ending in 1996. Total number of voyages the study projected to have been completed by yearend 1997 was approximately 26,000.

Newbuildings, new routes

Five vessels made their initial cargo-carrying appearances in 1996, says LNG Log 22.

The fourth of five ships built at Chantiers de l'Atlantique for Petronas Tankers Sendirian Berhad, Puteri Zamrud, equipped with four Gaz Transport tanks of 130,568 cu m capacity, completed nine voyages from Bintulu to various terminals in Japan, Korea, and Taiwan.

Another Korean vessel, the Hyundai Greenpia, made her initial appearance late in the year and completed two voyages. She has a capacity of about 130,000 cu m contained in four Kvaerner spherical tanks.

Two new Liberian-flagged carriers for National Gas Shipping Co., Abu Dhabi, began service in 1996.

Mubaraz, the first vessel from the Kvaerner Masa yard in Finland, completed ten voyages from Das Island. Mraweh, the second of four vessels on order, made six deliveries.

Two more ships were delivered in 1997 bringing the National Gas fleet to eight vessels. Four earlier vessels were built in Japanese yards, says LNG Log 22.

Finally in 1996, the 19,474-cu m Surya Aki left the Kawasaki Heavy Industries yard at Sakaide, Japan. This Bahamian-registered ship, owned by MCGC International and managed by P.T. Humpuss Sea Tansport, Indonesia, has three Kvaerner spherical tanks and a 12,000-hp (8,827-kw) steam-turbine propulsion plant. The Surya Aki opened two new routes during the year.

There were seven routes in 1996 over which LNG was carried for the first time. Four were to Japanese destinations, including three newly opened receiving terminals; two others were in Spain; and the last, to the U.S. (Table 4 [11,256 bytes]).

In Japan, the three new terminals were the following:

• At Hatsukaichi, west of Hiroshima, the site of an installation of Hiroshima Gas Co. Ltd. and at which LNG from Bontang will be discharged. The Surya Aki completed five voyages over the Bontang-Hatsukaichi route in 1996.
• At Kogoshima, at the extreme southern end of the island of Kyushu, the terminal owned by Nippon Gas Co. Ltd.
• At Sodeshi, near Shizuoka, approximately midway between Tokyo and Nagoya, the terminal owned by Shizuoka Gas Co. Ltd.

In Europe, Spain's Enag s added two new port pairs to its network with routes between Marsa-el-Brega and Huelva and Das Island and Huelva.

Finally, Das Island was source of one cargo in 1996 for Everett, Mass., for Cabot; another followed in 1997.

LNG Log 22 says the first of these voyages, made by Khannur under charter to Cabot, marks the first call at a U.S. terminal since the Golar Freeze under charter to El Paso, arrived at Cove Point, Md., in March 1980.

Future vessels

Set to join the world's LNG fleet in 1997 were several vessels to serve Far Eastern receiving terminals.

Among these were the first of ten vessels to carry Qatar LNG from Ras Laffan to a new Japanese terminal at Kawagoe. Chubu Electric Corp., buyer of the gas, also has terminals at Chita and Yokkaichi in the Chubu region around Nagoya.

The first two of these vessels, actually handed over by the building yard before yearend 1996, are Al Zubarah and Al Knor, 135,000 cu m ships built by Mitsui and Mitsubishi, respectively, and to be operated by Mitsui OSK Lines and NYK.

Equipped with five Kvaerner spherical tanks, both are owned by a consortium consisting of Mitsui OSK, NYK, Kawasaki Kisen, Showa Line, and Iino Kaiun.

These were followed in 1997 by Al Rayan, from Kawasaki Heavy Industries, and Al Wajbah, from Mitsubishi. Later, six more vessels now being built will join the Qatar fleets. LNG Log 22 says that still more would undoubtedly serve the Ras Laffan plant in the future.

The last two vessels for Abu Dhabi's National Gas Shipping Co., Alhamra and Umm Al Ashtan, will be delivered by the Kvaerner Masa yard in Finland.

NKK Corp.'s Tsu, Japan, shipyard in mid-1997 launched Aman Sendai (OGJ, Oct. 20, 1997, p. 52), the second LNG carrier NKK has launched that uses the membrane-tank system. The 18,800-cu m Aman Sendai was built for Asia LNG Transport Sdn. Bhd. (ALT), Malaysia.

ALT is a shipping joint venture between Japan's Nippon Yusen K.K. and Malaysia's PNSL Bhd. The first and sister vessel, the 18,800-cu m Aman Bintulu, was also built at NKK's Tsu works and delivered to ALT in October 1993.

The Aman Sendai was to be chartered by Malaysia LNG Sdn. Bhd. (MLNG) to transport LNG from Malaysia's Sarawak gas fields to Gas Bureau of Sendai, Miyagi Prefecture, on the Pacific Coast about 350 km north of Tokyo, according to NKK.

The city concluded a 20-year agreement with MLNG to purchase 150,000 metric tons (more than 7.3 bcf) of LNG annually from June 1997 and built a new LNG receiving terminal at its port.

Sendai's Gas Bureau is Japan's third medium-sized regional city gas utility to supply natural gas by directly importing LNG. Japan's three largest gas companies, in Tokyo, Osaka, and Nagoya, have already switched to LNG from LPG/naphtha.

In addition, NKK said in late 1997 that it had received a third order from ALT for another LNG carrier. The vessel, also to transport LNG for Saibu Gas, is under construction at NKK's Tsu shipyards and expected to be completed in September 1998.

LNG Log 22 reports that the last of the five "princesses" for Petronas Marine Sendirian Berhad was to be delivered in 1997 by Chantiers de l'Atlantique, of St. Nazaire. She is to be named Puteri Firuz.

In the future, Korea Gas Corp. has six ships on order for 1999 delivery, split among Hyundai, Samsung, Daewoo, and Hanjin. Moreover, seven additional vessels to be built by the same shipyards will follow in 2000 and later.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.