Teekay Marine Market – Gas Updates
Find out more about the LNG with Nicholas Schneider in this quarter’s LNG Market Update.
Global LNG exports increased by approximately 20 million tonnes (or 8%) in 2016. This was the first year of meaningful growth in global exports since 2011. Between 2012 and 2015, only a few new LNG exports projects started production, which was almost entirely offset by production losses at older projects. In contrast, four new export projects came online last year: Gorgon and AP LNG in Australia, Sabine Pass in the US, and the world’s first floating LNG production vessel for Petronas in Malaysia. In addition, three projects expanded production last year, including the restart of Angola LNG. This past year we saw the start of a global LNG supply increase that will continue out to 2020 as export projects currently in construction in Australia, the US, Russia, and elsewhere start producing.
LNG imports kept pace with the increase in exports last year, with Asia and the Middle East and North Africa region absorbing most of the net increase in imports. Last year, LNG imports in India increased by 30%, imports in China increased by 40%, and imports in the Middle East and North Africa region almost doubled year-over-year.
Much of the import growth in 2016 was driven by countries that were not even importing LNG a few years ago. Through the use of Floating Storage and Regasification Units (FSRU), which are often quicker and cheaper to deploy than onshore import terminals, new countries are quickly becoming demand regions for LNG imports. For example, four new FSRUs have started in Egypt, Jordan, and Pakistan since 2015, and two more FSRUs are scheduled to start in Pakistan in 2017 and 2018.
LNG Charter Rates
While LNG trade increased strongly in 2016, the LNG fleet increased by almost as much. As a result, average spot charter rates in 2016 were similar to 2015. In addition, actual time charter equivalent earnings for LNG vessels trading on the spot market remain lower than reported rates due to low vessel utilization. However, fleet utilization and charter rates have been increasing since the second half of 2016, and are expected to continue increasing in 2017 now that LNG trade is increasing faster than fleet supply. In 2017, we expect LNG trade to increase by approximately 13% compared to a fleet supply increase of approximately 10%, leading to an increase in fleet utilization and charter rates.
In the longer-term to 2020, we continue to see the growth of LNG trade outstripping the current supply of LNG vessels. Twelve new LNG export projects are currently in construction, with more than 120 million tonnes per year of total export capacity. In total, we estimate LNG trade will increase by approximately 36% from current levels by 2020, whereas fleet supply from the current orderbook will increase by 27%. In our estimate, this creates demand for 20 – 30 additional newbuild orders for delivery by 2020.
Forward Looking Statements
This video contains forward-looking statements which reflect the company’s current views with respect to certain future events and performance, including statements regarding: LNG market fundamentals, including the balance of supply and demand in the LNG market, and spot LNG charter rates. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in production of LNG or LPG, either generally or in particular regions; development of LNG and LPG projects; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; and other factors discussed in Teekay LNG Partners’ filings from time to time with the SEC, including its Report on Form 20-F/A for the fiscal year ended December 31, 2016. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.