LNG Net Back & Logistics FS

2012

[LNG REPORT 2012]

Emmanuel Gamboa, Power & Utilities – Executive Search
strategic@capmanconsulting-hk.com
+639285052983

III.
LNG
Shipping
Fleets
and
Costs

a. LNG
Shipping
Fleet
&
Vessels

i. How
many
ships
for
a
project?

Determine

Annual

Liquefaction
Capacity
LNG

Demand
Plant
Availability

Calculate

No.

Of

Cargoes

Ship
Size

Determine

Ship

Arrival

frequency

Planned
Maintenance

Calculate

No.

Of
Ship
Journey
Times

Destination
Ports
Ships

Offload
port
delays

Trade
Split

Copyright © 2012 Capman Consulting – Strategic Human Resource Management 1

Determining
No.
of
Ships
for
a
Project

EXAMPLE:

DES
project
Nigeria
to
UK

• Liquefaction
train
=
4Mtpa

- Equates
to
max
daily
production
of
12,000
tonnes
over
330
days
annual
operation

• Will
consider
use
of
155,000cbm
standard
vessel
sixe

- A
155,000cbm
vessel
delivers
150,476cbm
cargo

• Round
trip
takes
12.5
days

• How
many
ships

ii. LNG
Shipping

1. Developing
History

• The
ship
ever
classified
as
“liquefied
gas
carrier”
was
Methane
Pioneer
in
1958

• Traditionally,
LNG
gas
carriers
were
funded
and
built
for
single
projects,

balanced
with
20-‐25
years
take-‐or-‐pay
sales
contracts

• Japan
and
Korea
created
their
own
LNG
ship
building
industries
through

imposed
FOB
supply
imported
using
their
own
tankers

 China
has
recently
begun
to
adopt
similar
thinking
in
developing
contracts

 Malaysia
policy
was
to
export
LNG
only
on
ex-‐ship
(CIF)
basis
and
reserved

all
shipping
for
Malay
flagged
vessels

 India
has
recently
done
the
same
for
imports.

• The
LNG
marine
industry
is
growing
and
changing

iii. The
Modern
LNG
Fleet:

1. Growth

o 1998:
it
had
taken
34
years
to
reach
100
vessels
in
service

o 2006:
200
vessels
in
service

o 2008/9:
will
reach
300
vessels
in
service

o Estimated
326
vessels
needed
in
2010

o Potential
dangers
as
all
parties
assume
safety
in
the
“norm”
and
that

relevant
skills
will
be
available.


2. Modern
LNG
Fleet
(by
type)
–
at
27
April
2012

LNG
Carrier
Fleet
By
Type

LNG
CARRIER
FLEET
BY
TYPE

Type
Delivered
On
Order
Conversion
Total

Ship
363
70
0
433

FPSO
0
1
0
1

FSRU
7
6
1
14

RV
7
0
0
7

Total
377
77
1
455

Source:
Platou
LNG

The
fleet
has
grown
rapidly
to
meet
the
increases
in
trade
rising
from
just
under
5
million
TEU
at

the
end
of
2000
to
14.28
million
TEU
at
the
end
of
March
2011.

3. Development
of
World
Container
Fleet
Capacity:
2000
to
2011

(Million
TEU
—
End
of
Period)

Source:
Drewry


4. LNG
Fleet
Age
Profile

Global LNG Fleet by AGE, 2011 (Number of Carriers, % of Total)

iv. World
LNG
Shipping:

1. Sufficient
ship
building
capacity
to
meet
projected
demand?

• Probably
only
about
15
world
shipyards
capable
of
building
LNG
tankers

• Only
about
8
established
shipyards
currently
build
LNG
tankers

- 3
major
yards
in
Japan

- 3
in
Korea

- 2
in
Europe

- 1
now
in
China

Plus:

- 2
new
yards
in
Japan

- 2nd
possibly
in
China

- And,
Russia,
India
&
Poland
soon?


2. LNG
Orderbook
,
LNG
fleet
development
and
Forecast

3. LNG
Shipping
Process

4.
“Retirement
and
New
Builds

• Due
to
increased
safety
and
environmental
controls
there
about
55
to
62
older

tankers
that
will
be
retired
up
to
2014,
as
they
become
less
commercially

uneconomic

- Some
will
be
converted
into
FSRUs

• We
are
now
seeing
swelling
orderbooks
at
the
South
Korean
shipyards
but
the

current
orderbook
of
56
vessels
will
not
meet
projected
need


• This
is
mostly
driven
by
increasing
Asian
plants
and
demand

- New
Australian
plants
alone
will
need
additional
40
to
45
vessels
to
2015

- New
“special”
vessels
for
Yamal
LNG
also

5. Structure

• Contrary
to
the
trend
in
more
traditional
shipping
markets
(e.g.,
oil
tankers,
bulk

carriers),
the
O&G
majors
and
state
enterprises
tend
to
be
more
directly

involved
in
LNG
shipping

- 44%
of
fleets
is
owned
by
O&G
majors
and
state
enterprises

• Independent
owners
and
international
companies
are
re-‐emerging
as
significant

players

- Among
private
owners,
55%
are
South
Korean
or
Japanese
shipping

corporate

- About
33%
of
new
order
book
is
for
independent
ship-‐owners
with
around

21%
being
Japanese
and
24%
being
Korean.

- Now
we
are
seeing
independent
Greek
and
Scandinavian
companies

entering
LNG
taner
market
with
new
builds.

- O&G
majors
account
for
about
12%

6. Shipowner
process

• Ships
can
be
owned
by
LNG
sellers
(directly
or
by
special
purpose
company),
or

by
buyers
or
independent
third
parties
who
charter
vessels
out
to
LNG
buyers
&

sellers.

• Shipowner
must
consider
several
factor
before
ordering
a
new
build
LNG
tanker

- Financing
(usually
project
financed
via
banks)

- Shipyard
quoted
prices

- Shipyard
“slot”
availability

- Cargo
containment
system
required

- Standard
or
“ice-‐class”

- Etc.

• Shipowner
reviews
all
such
specification
with
the
classification
societies
(Lloyds,

ABS,
etc.),
the
shipyards
and
the
equipment
providers
to
allow
yard
selection,

usually
by
competitive
tender
process.

• Shipowner
generally
has
a
supervision
team
onsite
at
the
shipyard
throughout

the
construction
process
to
ensure
that
vessel
is
being
build
to
agreed

specification.


7. Vessel
Safety

• Today,
LNG
tankers
safely
transport
more
than
220
million
tons
per
year
to

ports
around
the
world

- One
LNG
tanker
enters
Tokyo
Bay
every
20
hours

- One
LNG
cargo
enters
Boston
harbor
every
week

• Outstanding
safety
records,
but
why?

- Continuous
improvement
in
ship
technology
&
maintenance

- Continuous
improvement
in
ship
safety
equipment

- Comprehensive
safety
procedures
and
training

- Effective
government
regulation
and
international
oversight

• SIGGTO
–
Society
of
International
Gas
Tankers
and
Terminal
Operators

8. Vessel
Design
basics

• Double-‐hulled
tankers/
gas
carriers

- From
first
one
unlike
oil
tankers

• Traditionally
driven
by
stem
propulsion

- Use
of
LNG
Boil-‐off
gas

• LNG
cargo
contained
in
protective,
cryogenic
“tanks”
within
inner
hull

- Broadly,
2
types
of
gas
carrier
vessel
based
on
LNG
tank
design

• Enhanced
equipment
to
support
safe
ship
handling

• Sophisticated
leakage
detection
equipment
and
emergency
shutdown
systems

9. Containment
and
Boil-‐off
Gas

• LNG
is
carried

- As
a
boiling
liquid
at
approx
-‐160
centigrade

- In
non-‐pressurized
tanks

• LNG
cargo
is
boiling
therefore
it
continually
produces
vapor
(Boil-‐off
Gas
–
BOG)

- Mostly
used
as
propulsion
fuel

- Can
be
re-‐liquefied


Boil
off
Gas
used
as
Propulsion
Fuel

Source:BrighthubEngineering

Boil
off
Gas
re-‐liquefaction

Source:
CNOOC
Fujian
LNG


10. “Moss”
Containment

 LNG
is
stored
in
a
numbers
of
self-‐supporting,
aluminum
spherical
tanks
fixed

within
the
hull

 LNG
cargo
system
is
separate
such
that
any
contraction/
expansion
is
not
passed

to
the
tanker
hull.

11. “Membrane”
Containment

• Standard
tanker
consists
of
4
separate
LNG
“holds”

• Insulating
material
is
applied
to
the
ships
inner
hull

• Membrane
applied
to
ensure
liquid
tightness

Source:
epd.gov.hk


12. Containment
Design
–
Advantages
&
Disadvantages

Key
selection
issues

• Capacity/
filling
limits

• Weight

• Complexity
of
manufacture

• Cost

• Size/
terminal
compatibility

Self-‐Supporting
Tanks

• Tank:
Heavy
rigid
metallic.

• High
material
and
Fabrication
cost.

• Tank
capacity:
125,000
m³

• Ship
tank
material
weight:
4,000
tons

• Insulation:
Non-‐load
bearing.
Relatively
cheap.

Membrane
Tanks

• Tank:
Specialized

light
construction

• High
material
and
fabrication
cost

• Tank
capacity:
125,000
m³

• Ship
tank
material
weight:
400
tons

• Insulation:
Rigid
load
bearing
over
whole
surface.
Relatively
expensive.

Source:
Shell
Global
Solutions


13. Current
Fleet
by
Containment
Design
Type


14. What
is
Storage
Tanker
Roll-‐over?

Natural
convection
causes
circulation
of
the
LNG
within
the
storage
tank,
maintaining
a
uniform

liquid
composition.
The
addition
of
new
liquid,
however,
can
result
in
the
formation
of
strata
of
slightly

different
temperature
and
density
within
the
LNG
storage
tank.
"Rollover"
refers
to
the
rapid
release
of

LNG
vapors
from
a
storage
tank
caused
by
stratification.
The
potential
for
rollover
arise
when
two

separated
layers
of
different
densities
(due
to
different
LNG
compositions)
exist
in
a
storage
tank.

Source:
www.igu.org

Note:
ship
tanks
only
fill
from
bottom


v. LNG
Fleet

1. Tank
Roll-‐over?

• It
has
been
generally
considered
that
“rollover”
in
cargo
tanks
was
not
a
major

issue,
although
cargoes
with
high
nitrogen
content
are
more
prone

• However,
an
incident
has
been
reported
when
a
vessel
with
substantial
LNG

heel
(~5400m³)
consolidated
into
only
2
tanks
loaded
a
higher
density
LNG

below
the
heel

- Original
cargo
(&
heel)
was
of
lean
LNG
from
an
Atlantic
Basin
terminal

- New
cargo
loaded
was
rich
LNG
reloaded
from
an
SE
Asian
terminal

- Important
to
remember
that
ship
tanks
only
fill
from
bottom

• The
first
tank
roll-‐over
occurred
5
days
after
loading
and
second
tank
rolled
a

day
later

- Whilst
there
was
reported
rollover
in
both
ship
tanks
causing
a
noticeable

rise
in
tank
pressure
there
was
no
uncontrolled
BOG
release

2. “IHI
SPB”
Containment

 Special
design
prevents
sloshing
damage
which
can
occur
in
membrane
tanks

 Most
expensive
containment
system

 Main
potential
is
for
Floating
LNG
Production
and
FSRU
applications


3. LNG
Tankers
of
various
Types
and
Sizes

Moss
Type

• 4
Tanks

• 5
Tanks

• 6
Tanks


Membrane

• Large

• Small

• 3
Tank
Moss


Other
Types

• Pressurized

• Prismatic

• Conch


4. Standard
Ship
Size

1970-‐2002

• 130-‐140,000m³

• Limitations

- Japanese
maximum
displacement,
105,000
dwt

- US
maximum
draft,
11.3
m.

• Conservative
designs

2002-‐2006

• 140-‐153,000m³

• Limitations

- Japanese
maximum
displacement,
105,000
dwt

- US
maximum
draft,
11.3
m.

• Optimized
designs

- Larger
ships,
same
constraints

5. Vessel
Size
has
increased

2007

• A
new
generation
of
LNG
tankers
arrived
to
transport
the
output
of
the

large
Middle
East
“mega-‐train”
projects
to
long
haul
markets
in
USA
and

Asia

1. To
extend
the
reach
of
existing
commercial
ventures
in
other
distant

supply
centers

2. Fewer
transits
with
reduced
fuel
costs

• Vessel
Size
for
its
economies
of
scale
are
critical
for
this
new
strategy
to

achieve
equivalent
or
lower
delivered
cost

- Increase
from
138,000
to
220,000m³
vessel
size
can
reduce
cargo

delivery
costs
by
up
to
45%

• 54
Q-‐flex
and
Q-‐max
vessels
now
operating
equaling
~20%
of
global
fleet


Growth in Capacity of LNG Carriers

Source:
Short
History
of
Shipping,
Peter
G.
Noble

125,000m³

145,000m³

200,000m³

250,000m³

(MOSS)

(MEMBRANE)

(MEMBRANE)

(MEMBRANE)

LNG
Cargo
Tanks
4
4
5
5

Length
(overall)
m
285
289
313
345

Beam
(m)
44
43.4
50
54

Loaded
Draft
(m)
11
11.4
12
12

Ballast
Draft
(m)
10
9.7
9.9
10.3

Deadweight
tonnes
69,000
72,000
100,000
120,000

Displacement
(loaded)
tonnes
97,800
103,000
140,000
174,000

Boil-‐off
Rate
%
per
day
0.15
0.15
0.14
0.13

Max.
Loading
Rate
(m³/hr)
11,000
13,000
16,000+
16,000+

Manifold
dia
inches
16
16
20
20

Propulsion
Power
MW
26
MW
27
31
34


Against
Bigger
ships

• Draft
and
its
relationship
with
LOA
&
Beam
size
is
the
issue
for
Moss
tankers

- Must
have
loaded
draft
of
12
meters
or
less

- Suez
canal

- Limited
terminal
access

• Terminal
loading
and
unloading
lines
and
arms
limited
typically
to
10,500m³/hr

• Commercial
contracts
require
a
turnaround
of
24
hours
so
a
138,000-‐155,000
m³

LNG
ship
unloads
in
12
hours

• A
216,000m³
ship
takes
21
hours
to
unload

Increasing
size
=
increased
design
problems

• Regarding
“sloshing”,
particularly
for
Membrane
tankers.

• Possibility
to
put
in
5th
tank
per
vessel
but
then
cost
goes
up
due
to
associated

equipment

• The
sloshing
phenomena
occur
when
the
ship
motions
coincide
with
the
natural

frequency
of
the
liquid
motion
in
the
tanks.
The
build-‐up
of
violent
motion
is
due
t

frequency,
not
amplitude.

Increasing
size
=
new
propulsion
systems

• Increasing
size
is
driving
consideration
of
new
more
complex
and
efficient

propulsion
methods
(away
from
single
screw,
steam
turbines)

- Single
screw
slow
speed
diesel

- Twin
screw,
lean
burn
diesel
electric

- Twin
screw,
diesel
electric
coupled
with
re-‐liquefaction
units
to
limit
boil-‐off

- 4
stroke
diesels
using
boil-‐off
gas
as
a
dual
fuel

- Gas
turbines

• Choice
of
propulsion
system
is
highly
correlated
to

- Commercial
drivers
(fuel
saving
vs.
maintenance)

- Type
of
trade
(point-‐to-‐point,
short
voyage,
long
distance
voyage
or
merchant)

- Experience
of
shipping
company

6. Changing
propulsion
trends:

Environmental
pressures
on
LNG
carriers

FUEL
NOx
SOx
CO2

Steam
Turbine
HFO
+
LNG
200
2,400
180,000

Low
Speed
Diesel
+
re-‐liquefaction
HFO
3,950
1,800
120,000

Dual
fuel
electric
LNG
only
240
0
100,000

Gas
turbines
and
COGES
LNG
only
850
0
108,000

Note:
Emissions
shown
in
tones/
year/
ship

Source:
ALSTOM


• In
2003,
with
exception
of
3
very
small
vessels,
ALL
were
steam
turbine

driven,
burning
combinations
of
BOG
and
Heavy
Fuel
Oil
(HFO).

• Now,
around
40%
of
new
vessels
on
order
are
for
diesel
(Diesel
Fuel
Diesel

Electric)
driven
ships

- DFDE
vessels
cannot
burn
BOG/
HFO
fuel
combination

- New
Q-‐flex
and
Q-‐max
vessels
now
use
slow
speed
engines
burning
HFO

only

• Gas
turbine
units
have
fuel
efficiency
of
38-‐40%
compared
with
28%
for

steam
turbines

- Plus,
would
use
“light”
gas
instead
of
“heavy”
bunker
oil
as
fuel.

• Qatar’s
Nakilat
is
reported
to
be
considering
changing
all
its
45
tankers

(including
Q-‐flex
and
Q-‐max)
to
run
only
on
LNG
gas
fuel

• Should
they
decide
to
go
ahead
with
this
plan
the
tankers
will
be
converted

during
2012
to
2015

• Shipping
brokers
and
analysts
say
the
refit
programs
and
consequent
idling

of
Qatari
tonnage
will
push
day-‐rates
on
LNG
carriers
even
higher
as
they

will
have
to
charter
in
other
tankers
to
cover
during
refit
period.

Other
design
development

• New
advanced
containment
designs
for
both
Moss
and
Membrane
tank

carriers

• On-‐board
re-‐liquefaction
facilities
for
cargo
retention
on
new
Qatari
vessels

7. Vessel
size
has
also
decreased

Coral
Methane

• The
first
Polish
built
LNG
carrier
was
launched
on
may
7,
2008,
at
Gdansk

based
Stoczina
Polnocna
SA
(Northern
Shipyard),
member
of
REMONTOWA

Group

- Diesel/
gas
electric
driven

- Can
carry
a
variety
of
gas
cargoes;
liquefied
natural
gas
(LNG),
liquefied

petroleum
gases
(LPG)
or
ethylene

- Ice
class
1B

- Cargo
capacity
7,500m³

- Length
over
all
117.80m;
breadth
18.60
m;
draught
7.15
m

8. Technological
Change

“Cold
Weather”
needs


• More
severe
weather
conditions
–
ice

and
waves

- Sakhalin
–
“winter-‐ising”
the
vessels

- Snohvit/Shtokman/
Barents
Sea
–
“artic-‐ising”
the
vessels

• Requires
greater
thickness
(ice)
and
more
cryogenic
steels
for
hulls

• Requires
strengthened
propellers,
and
protection

Ice-‐class

• Sovcomflot

- Energy
shipping
company

- One
of
most
modern
and
youngest
world
fleet

- Specialist
in
ice-‐class
vessel
and
extreme
cold
operations

- Took
delivery
of
2
tankers
at
end
of
2007
ex
Japan
for
Sakhalin
2
project

to
travel
to
Japan
&
elsewhere
on
20
year
charter

 145,000m³

 Moss
containment

 Ice-‐class

• Russia

- Reported
that
Russia
will
require
30
LNG
tankers
by
2020
to
transport

~25Mtpa
from
existing
and
new
export
plants

 Shtokman
LNG
will
need
12
new
vessels

 Yamal
LNG
will
need
12
new
vessels;
new
design
for
large-‐scale,

year
around
Arctic
export
……..
Very
large,
ice-‐class
with
Moss

tanks

 Others
will
need
~6
new
vessels

- Many,
if
not
all,
of
these
vessels
to
be
built
by
Russian
United

Shipbuilding
Yards
–
agreements
with
Korean
shipyard
and
with
French

Technip
for
technology
transfer


9. LNG
Transfer
at
Sea

 Two
vessels
moored
together

 LNG
transferred
using
flexible
hoses
(6,000
m³/h)

 Benign
conditions
required

 Allows
maximization
of
Exelerate

Energy,
Energy
Bridge
vessels

 Ataris
testing
transfer
from
their
Q-‐flex
&
Q-‐max
vessels
to
smaller
tankers

• Maximization
of
Exelerate
Energy
business
model

• The
Problem….

- Tugs:
Much
smaller
than
LNG
carriers.
Work
beam
on
to
waves

10. Tandem
Unloading

• LNG
(un)loading
at
wave
heights
up
to
5.5
m
(18ft)

• Considerable
design
work
performed
by
individual
companies
and
through
JIPs

- Model
testing
completed

- Products
“commercially
available”

- Needs
a
project
to
develop
further

• LNG
tankers
would
need
modification
so
would
have
to
be
dedicated
to
a

specific
trade


11. Hoses

• Considerable
work
being
done
in
the
industry
to
develop
and
commercialize

large
diameter
cryogenic
LNG
hoses
for
(un)loading

- Designs
focusing
on
(un)loading
in
wave
heights
of
4.5-‐5.5
m

- Floating
and
sub-‐surface
versions
being
developed
from
aerial
hoses

12. LNG
Shipping
Experienced
personnel
–
a
serious
challenge

Number
of
officer
on
a
LNG
carrier

• Deck
officers
=
5
(including
Cargo)

• Engineering=
5
(including
Cargo)

• Total
Officers
=
10

Estimate
of
new
required
officers
to
meet
shipbuild

• 143
x
10
x
2.5
=
3,575

• Senior
officers
=
2,145
(60%)

• Junior
Officers
=
1,430


b. LNG
Shipping
Logistics
&
Costs

i. Basic
Commercial
Models

• Free
on
Board
(FOB)

- Title
to
the
LNG
cargo
transfer
to
buyer
at
loading
and
buyer
has
responsibility
for

shipping

• Cargo,
Insurance
&
Freight
(CIF)

- Title
of
LNG
cargo
can
transfer
during
the
voyage
(high
seas)
or
delivery
and
the

seller
is
responsible
for
shipping;
complex
liabilities
as
buyer
is
responsible
for
cargo

but
seller
responsible
for
shipping.

• Delivered
Ex-‐ship
(DES)

- Title
transfers
on
unloading
and
seller
has
responsibility
for
shipping

ii. Control
of
Shipping

• For
LNG
sellers,
control
of
LNG
shipping
is
a
core
“value
chain”
issue
to
ensure
loading

schedules
are
tuned
to
production
activities

- Shutting
in
or
slowing
LNG
liquefaction
needs
to
be
avoided.

• Control
of
shipping
does
not
necessarily
require
ownership
or
operation
–
both
short

and
long
term
charters
provide
sufficient
controls

- Having
the
ability
to
“tune”
an
FOB
ship
loading
schedule
and
the
“heel”

management
of
vessels
provides
sufficient
control
in
most
cases

- This
“tuning”
facility
does
however
require
some
contractual
changes
to
the

apportionment
o
shipping
&
commercial
liabilities.

iii. Long
Term
LNG
Charter
Contracts

Traditionally:

• Newbuild
vessels
constructed
to
meet
the
requirements
of
a
specific
project

• Long
duration
charter
period
(typically
15-‐25
years)

• Fixed
or
relatively
fixed
hire

iv. Risks
to
Owner
and
Charterer

• Owner

- Technical/
Operating
Risk

- Non-‐performance
by
the
charterer


• Charterer

- Technical/
Operating
Risk

- Non-‐performance
by
the
owner

- Market
risk

v. LNG
Charter
Terms

• The
owner
is
responsible
for
the
operation,
maintenance
and
performance
of
the
vessel

• The
technical
operating/
“breakdown”
risk
is
shared
between
owner
and
operator

- Of
hire
and
exceptions
provisions
typically
excuse
charterer
from
paying
hire
but

owner
not
obliged
to
provide
alternative
vessel
or
pay
damage

- If
repeated/
serious
failure
to
perform
owner’s
obligations,
charterer
may
have
right

to
replace
vessel
operator
or
take
vessel
under
a
bare-‐boat
charter

vi. Allocation
of
Costs
or
Who
Pays
for
What

Type
of
Charter

Shipowner
Ship
Charterer

Spot
or
single
voyage
Capital,
operating,
voyage
None

Consecutive
voyage
Capital,
operating,
voyage
None

Contract
of
affreightment

Capital,
operating,
voyage
None

Period
of
Time
Charter
Capital,
operating
Voyage

Demise
or
bareboat
Capital
Operating,
voyage

Source:
Drewry
Maritime
Research

• Allocation
of
costs
depends
on
the
nature
of
the
shipping
contract

• The
shipowner
aims
for
a
minimum
charter
hire
rate,
at
which
costs
(including
an
allowance
for

a
target
%age
rate
of
return
on
investment
capital)
will
equate
to
revenues.

- This
minimum
rate
differs
according
to
the
type
of
charter
contract
employed,
because
the

owner’s
costs
differ
according
to
the
type
of
charter
contract
employed

vii. Basic
Economics

Breakdown
as:

• Capital
Costs
(fixed
costs):
purchase
of
vessel
consist
of
ship
owner
equity
plus
bank

financing
interest

• Operating
Costs
(variable
non-‐trading):
vessel
costs
unrelated
to
trading
consist
of

crew,
insurance,
repair
&
maintenance,
stores,
spares,
lubes,
etc.

• Voyage
Costs
(variable
trading):
directly
related
to
trade
consist
of
bunker
fuel,
port

&
canal
costs.


viii. New
Build
Capital
Costs

• LNG
tankers
are
the
world’s
second
most
costly
merchant
vessels
after
very
large

cruise
liners

- Similar
degrees
of
sophistication
to
build
process

• LNG
tankers
are
by
far
the
most
expensive
type
of
cargo
vessel,
costing
two
to
thre

times
the
price
of
an
oil
tanker
of
similar
tonnage.

• New
LNG
tanker
average
capital
cost
is
~$200-‐300million
for
Q-‐flex
and
Q-‐max

vessels
and
~$180-‐190
million
for
155,000m³

- Steel
costs
have
risen
rapidly
over
recent
years

- New
technologies

- New
propulsion
systems

ix. ECONOMICS

1.
Newbuild
Prices

Newbuilding Price (Conventional LNGC)


Note:
More
than
x2
cost
of
equivalent
sized
Oil
tanker
which
carries
4
to
5
times
as
much
energy.

2.
Operating
Costs

• LNG
shipping
costs
are
largely
determined
by
daily
charter
rate

• There
are
no
set
rates
for
LNG
tankers
as
there
are
for
Oil
tankers

- Charter
rates
vary
widely
from
~$27,000-‐$150,000
per
day

• Average
long-‐term
charter
rate
is
seen
as
$55,000-‐$65,000
per
day

• Short-‐term
(spot)
charter
rates
vary
with
market

Conventional LNGC Short Term Charter Rate Projection

Spot
&
short-‐term
charter
rates
(2006-‐Present)

• Ship
trading
costs
vary
widely
and
are
largely
depend
on
voyage
distance

- Voyage
length
is
often
is
of
key
importance
because
the
main
voyage
cost
item,

beside
port
dues
and
canal
tolls,
is
fuel
or
boil
off
(using
part
of
the
LNG
cargo)

to
propel
the
ship.

• New
ship
technologies
are
helping
to
bring
costs
down
and
make
previously

uneconomical
projects
viable


3.
Fleet
Utilization

Utilization of LNG Fleet

Source:
ConocoPhilips

• LNG
tanker
market
is
currently
very
tight
with
many
players
searching
the
world
for

tankers
for
short-‐term
charter

-‐Many
spot
tankers
now
being
used
for
Japan

-‐
Qatar
looking
for
tanker
over
next
years?

• Market
is
forecast
to
remain
tight
for
the
next
few
years

–
Where
are
we

• Estimates
are
about
14%
of
fleet
(maximum)
is
available
at
any
time
for
Spot

Market
activity
up
to
1
year

• Spot
charter
rates
differ
between
Atlantic
and
Asia

• Current
spot
charter
rate
increasing
with
rates
doubling
in
second
half
of
2010

reaching
~$60,000/day
in
winter
2010
period
and
now
to
~$125,000/
day
in
late

2011


LNG Spot Charter Rates

Source:
Teekay
Corporation

4.
Voyage
Costs

• Voyage
Cost
Circulation
from:

- Market
rates

- Operating
costs
of
ship

- Voyage
days

- Waiting
days

- Port
days

- Mileage

- Fuel
prices

- Speed
&
consumption
of
fuel

- Canal,
port
and
terminal
fees

• To
get:

- Total
cost
of
voyage

- LNG
shipping
rate

5.
Main
Engine
Bunker
Fuel
Prices

• Volatility
of
this
main
fuel
price
leads
to
necessity
for
contractual
coverage
(price

hedging)
of
this.

• Market
price
vary
with
geography
and
are
quoted
monthly
at
Rotterdam,
Houston,

Middle
East
and
Singapore


6.
Additional
Voyage
Charges

Port
Charges
($
000)
[for
loading
and
discharging]

• Trinidad/
Lake
Charles

100

• Ras
Laffan/
Japan

200

• Algeria

82
–
102

• Port
Fontin

46

• Spain

91
–
110

• Lake
Charles

31

• Bonny
Island

291

• Oman
Qalhat

~80

Canal
Charges
–
About
10%
of
LNG
trade
transits
though
canals,
nearly
all
via
Suez
at

present

• Suez

- Conisderable
number
of
Middle
East
cargoes
coming
to
Atlantic
Basic

- Charge
can
be
up
to
20cents/MMBtu

- Canal
Authority
offers
35%
rebate
+
“cargo
incentive”
up
to
15%
for
volumes

over
2Mtpa
to
encourage
LNG
vessels?

• Panama

- Can
only
take
LNG
tankers
that
are
100,000m³
or
smaller

- This
<17
takers
of
the
entire
fleet

- LNG
transit
.
.
.
.
.
.
.
.
NOT
A
LOT
YET,
but
.
.
.
.
.
.

x. Panama
Canal
Update

1. Current
Development

• $5.2
billion
development
to
be
completed
by
2014

- Will
build
2
new
large
three-‐chamber
locks
at
both
the
Atlantic
and
the
Pacific

ends
of
the
Canal


• This
will
allow
LNG
tankers
up
to
170,000m³
passage

- Potential
to
open
up
new
routes
linking
Atlantic
and
Pacific
and
possibility
a

further
10%
of
LNG
trade

2. Shipping
Rates

•LNG
tankers
ply
their
trade
around
the
world
but
there
are
commercial
limits

- The
voyage
costs
are
critical

• The
LNG
“shipping
rate”
is
a
major
variable
cost
in
the
LNG
chain
which
can
make

supply
routes
either
profitable
or
commercially
impossible.

Shipping
Rates
vary
with
journey
mileage:

Estimated LNG Shipping Costs Alaska – Asia Pacific


Estimated LNG Charter Rates and New Build Orders

Note:
Rates
must
be
based
on
a
particular
size
of
tanker
at
a
specific
charter
rate
in
$000
per
day

3. Netback
Pricing

• Simple
method
(from
oil
markets)
to
track
and
compare
the
return
&
profitability
of

a
particular
trade

• Netting
off
the
price
back
to
the
supply
source
value

- Deducing
regas
costs
and
shipping
costs
from
the
market
sale
price
gives
a
FOB

netback

- Further
deducting
the
liquefaction
cost
and
feed-‐gas
price
gives
an
upstream

netback
value
to
the
producer
(often
involves
JVs
at
this
upstream
level)


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