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LNG value chain
Exploration and The facility that LNG Shipping Regasification is a Major end-users
production of natural converts natural gas process of are:
gas from into transportable LNG shipping converting liquefied
underground super-cooled liquid market is highly natural gas (LNG) at Gas power
reservoirs. is the liquefaction concentrated 162 C generation;
plant. as more than temperature back to Fertiliser (LNG
half of the fleet is natural gas at acts as feed gas)
being controlled atmospheric Steel plant
by top 15 temperature. CTO and MTO
companies plant
LNG gasification
plants
On-shore
terminal
FSRU
LNG demand
LNG Fleet
Freight outlook
LNG trade outlook (million tonnes) LNG trade to grow at a CAGR of 6% over the next
CAGR: 6%
400 five years. The trade is expected to reach 360
million tonnes by 2021.
350
Fukushima The push to trade will mainly be coming from the
300 disaster supply side as new liquefaction trains come online,
primarily in the US and Australia.
250
Global liquefaction capacity is expected to reach
200 520 million tonnes by 2021 from current 350 million
tonnes.
150
China, India and new LNG importing countries will
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
help absorb this growing supply.
Liquefaction capacity forecast (million tonnes) LNG import forecast (million tonnes)
100 60
80 50
40
60
30
40 20
10
20
0
0 2016 2017 2018 2019 2020 2021
2016 2017 2018 2019 2020 2021
Australia US India China
Source: Drewry Maritime Advisors
Prod: 11.4%;
Production and
200
Heilongjiang
150 Cons: 15.2%
cbm)
100
50
0 Jilin
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Liaoning
Inner Mongolia Beijing
Xinjiang Gansu Tianjin
Hebei
Ningxia Shanxi
Shandong
Qinghai
Henan
Shaanxi Jiangsu
Tibet
Anhui Shanghai
Sichuan Hubei
China has a proven reserve of natural gas of 3.8 tcm Zhejiang
in 2015. The majority of production comes from the Jiangxi The key consumption areas
western and central parts of the country. are alongside China coastal
Hunan regions with high demand for
China was traditionally a net gas exporter until 2007, Guizhou Fujian energy. With growing natural
when it became a net natural gas importer for the first
gas demand has boost the
time. Since then, gas imports have increased Yunan Guangdong
dramatically in tandem with rapidly developing Guangxi infrastructure development of
LNG terminals, providing
pipeline and natural gas processing infrastructure.
more opportunities from
imported LNG.
Source: National Bureau of Statistics, Drewry Maritime Advisors
5 Drewry Maritime Research Hainan www.drewry.co.uk
China Consumption of Natural Gas
Chinas consumption of natural gas increased by eightfold from 24 billion cbm in 2000 to 206 billion cbm in 2016.
Industry accounts for more than half of total domestic consumption.
200 100%
150 80%
100 60%
40%
50
20%
0
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2011 2012 2013 2014 2015 2016 (P)
Natural gas is the Natural gas became a China has a gas-powered Natural gas plays a minor
feedstock for metal dominate source of cooking vehicles registered at 4.6 role in Chinas energy mix
industry, methanol and in urban areas since 2005. million by the end of 2014. with 5% of total production.
fertiliser production. Ministry of Transport Chinese government has
To cope with air pollution planned to increase LNG- targeted to boost share of
and excessive metal powered vessel in river natural gas in total
production capacity in shipping from 2% in 2015 electricity generation to at
North China, consumption to 10% in 2020. least 23% by 2020,
of industry is expected to according to its 13th Five-
ease gradually in next few year Plan.
years.
Source: National Bureau of Statistics, Drewry Maritime Advisors
Gas production and consumption (bcm) Production in the country has not kept pace with the
70 growing gas demand, resulting in higher LNG
60 imports.
50 Considering the price sensitive nature of LNG
40 buyers in the country, fall in global LNG prices has
30 also come as boon for LNG importers.
20 Expanding import infrastructure and government aim
10 to increase gas share in the energy mix to 20% by
0 2025 from current 6.5 % will keep LNG demand
2009 2010 2011 2012 2013 2014 2015 2016 healthy in the country though pipeline constraint will
(P) keep demand from surging.
Production Consumption
20 60
18 50
16 40
14 30
12 20
10 10
8 0
2009 2010 2011 2012 2013 2014 2015 2016 Current 2017 2018 2019 2020 2021
LNG fleet development LNG fleet has grown at a CAGR of 5% over the last
five years on account strong ordering seen during
500 70000 2011-14.
450 65000
Fukushima disaster, shale gas boom in the US and
400 60000 growing liquefaction infrastructure supported new
ordering
350 55000
70 50% 240
60 Period of high
40%
50 ordering 220
30%
40 $ million 200
30 20%
20 180
10%
10
0 0% 160
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
2009 2010 2011 2012 2013 2014 2015 2016
Number of orders
Source: Drewry Maritime Advisors
80000 6%
60000 4% The cash-break even cost for an LNG vessel is around
40000 $35,000-$40,000 per day.
2%
20000
0 0%
2010 2011 2012 2013 2014 2015 2016
$ million
50,000
$ per day
140
40,000
120
30,000 100
Mar-15
May-15
Jul-15
Mar-16
May-16
Jul-16
Mar-17
Jan-15
Sep-15
Nov-15
Jan-16
Sep-16
Nov-16
Jan-17
20,000
Jan 15
Jan 16
Jan 17
Jul 15
Jul 16
Apr 15
Oct 15
Apr 16
Oct 16
4
Growing preference for FSRU conversion is also
3
keeping demolitions low.
2
0
2009 2010 2011 2012 2013 2014 2015 2016
No. of vessels
200-220,000 cbm 7.8
15
150-200,000 cbm 3.4
125-150,000 cbm 15.6 10
75-125,000 cbm 28.4
50-75,000 cbm 15.7 5
Based on our primary survey Lead time for FSRU conversion past examples
Shipyard cost: About $30-$40 million depending the 1.6 1.4
vessel specifications.
(years)
0.8 0.7
0.6
The lead time for converting an LNG vessel varies depending 0.4
upon the vessel specification and shipyard experience. (See the 0.2
table on right for reference). An new build FSRU takes almost 0.0
2.5-3.5 years to be built and is currently costing around $250- Golar Spirit Golar Winter Nusantara
300 million. Regas/Khannur
LNG conversion age Difference between Converted and New build FSRU
40 Conversion age of each vessel
Average conversion age Newbuilt LNG Converted
LNG Conversion age
30
20
Cost HIGH LOW
(Year)
10
0 Lead
LONG SHORT
Time
Freeze
Golar
Winter
Toscana
Nusantara
Tenaga
Tenaga
Spirit
Golar
Empat
Golar
FSRU
Satu
Regas
Satu
600 95000
100000
550
85000
000 cbm
80000
500
75000 60000
450
Freight rate forecast LNG fleet will grow at an average of 11% for the next
two years, surpassing the trade growth.
70000
60000 Therefore the pressure on rates will remain for the next
two years.
$ per day
50000
20000
2016 2017 2018 2019 2020 2021
DFDE vessels
Source: Drewry Maritime Advisors
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