Floating LNG: lack of vessels could stymie a good option for Europe
Getting hold of niche vessels would be tricky, and supply of the ships will not improve right away
US president Joe Biden’s promise to deliver more liquefied natural gas to Europe will be welcomed in continental capitals. But getting the gas into energy short Germany could be tricky thanks to a dearth of floating terminals to turn that LNG back into gas.
America can offer a virtual gas pipeline to Europe, using specialist LNG tankers. Its export capacity is fairly full but Biden still promised to find 15bn cubic metres for its European allies. Some of that will be diverted from Asian spot cargo routes already offering record-high prices. Though that only replaces less than a tenth of Russia’s supply, everything helps.
Germany, which has no regasification terminals open yet, wants to use floating terminals to receive LNG offshore, turn the fuel into gas and transfer it on to onshore networks. Floating storage and regasification units (FSRU) can be set up in under a year, if you can find them.
France, on Monday, also announced plans for floating terminals. For good reason. Building a regasification terminal can take four years, points out Rystad Energy, never mind any Nimbyism.
Each FSRU has about a quarter of the capacity of bigger onshore plants taking in perhaps 20mn tonnes (27bn cubic metres) of LNG. But the time advantage makes renting these for probably $140,000 daily worthwhile over a few years.
Getting hold of these FSRUs is another story. Only 33 of these vessels exist worldwide, according to VesselsValue, most of them built since 2014. Worse, with no new orders currently recorded, supply will not improve soon.
That means certain Asian shipyards, and current FSRU owners, could do well in the next couple of years. Korean shipbuilders — Hyundai, Samsung and Daewoo — dominate construction of FSRUs which cost up to $350mn to build from scratch over two plus years.
Among owners, Norway’s BW Gas, Hoegh LNG and New Fortress Energy control over half the fleet, almost all of which are already chartered. US listed shares of the related Hoegh LNG Partners and New Fortress Energy have recently surged. Another, Excelerate Energy, plans to hold an initial public offering.
Just finding new sources of natural gas for Europe looks hard enough. But getting the molecules where they are most needed could require a lot more of these niche floating LNG vessels.