There was no mistaking the sense of excitement as this year’s Gastech opened its doors at London’s Excel this week. New technology has transformed the outlook for the LNG sector – providing unprecedented possibilities for large-scale and expanding ocean shipments, as well as small-scale seaborne projects tailored to meet the energy demands of communities including those on islands and remote areas outside existing grid networks. The potential for shipping is dramatic, a welcome change to the widespread gloom and doom attaching to oversupplied markets in most other key sectors.

BG Chief Executive, Sir Frank Chapman, setting the scene at the opening ceremony, described the industry as undergoing a rapid and irreversible revolution, noting that unconventional gas development in the US is heralding the dawn of a new era of low-cost energy which is changing the energy dynamics of the world’s largest economy. “At current production rates,” he declared, “America has over a century’s supply of gas.”

Meanwhile, rapid gas sector developments in Australia mean that the country is set to become the world’s largest LNG exporter, thereby driving continued growth in the global LNG market. “An incredible 60m tonnes per annum of projects are under construction there,” he said, “with first unconventional gas-supplied LNG due in 2014.” Unconventional gas is usually sourced from coal, gas sands, shales and gas hydrates, and its main component is methane. However, various other constituents must be removed to produce sales-grade natural gas, the cleanest burning fossil fuel for which world demand is rising steadily.

Energy analysts forecast that LNG will play an increasingly important role in the planet’s future energy mix. Sir Frank predicted that LNG’s contribution to total natural gas demand could rise from 10% in 2010 to 14% by 2025. This would mean an absolute increase from 240m tonnes a year to at least 450m tonnes. Other predictions, meanwhile, suggest that world gas demand will grow at a compound rate of 2.5% from now until 2020 and beyond.

Global gas reserves are rising significantly as new technology and rising energy prices render hitherto stranded gas economically attractive. Higher stocks are leading to a growing price differential with oil but a range of other factors, besides price, are important catalysts in the global drive to harness more energy from gas. These include the anti-nuclear swing in various countries including Japan and Germany, following the Fukushima disaster, as well as the fact that gas is clean and almost completely free of particulates and SOx. Carbon dioxide and NOx emissions are also significantly lower than those resulting from the oil combustion process.

The attractions of gas, rising US reserves and a growing differential between the US, Europe and Asia are underpinning a sharp increase in the demand for gas shipping. This, in turn, has led to dramatic ordering of new tonnage, including a range of floating gas handling vessels, which has seen the orderbook grow from virtually zero at the beginning of 2011 to more than 80 units today. Industry statistics reveal that 56 LNG vessels were ordered in 2011, with a further 22 contracted so far this year.

To be fair, the fact that a number of these have been ordered on spec is causing concern in some quarters. However, others point out that the demand for floating LNG facilities – including Floating Storage Regasification Units (FSRUs) and Floating Storage Units (FSUs) – could well lead to the conversion of a number of older vessels no longer capable of competing effectively with modern fuel-efficient tonnage. A number of conversions have already been completed and others are planned, they point out.

The views of the Publishers do not necessarily correspond to the views of Lambos Maritime Services Ltd.
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