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Chapter 1 : LNG Shipping Fleets and costs
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Chapter 1 : LNG Shipping Fleets and costs


LNG Report 2012, Chapter 1, Part3 ; covers: LNG Shipping Fleets and cost, operations and logistics.

LNG Report 2012, Chapter 1, Part3 ; covers: LNG Shipping Fleets and cost, operations and logistics.

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  • 1. 2012 [LNG REPORT 2012]
  • 2. 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 Ship Size Cargoes 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
  • 3. Determining No. of Ships for a ProjectEXAMPLE: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. Copyright © 2012 Capman Consulting – Strategic Human Resource Management 2
  • 4. 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 atthe 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 3
  • 5. 4. LNG Fleet Age ProfileGlobal 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? Copyright © 2012 Capman Consulting – Strategic Human Resource Management 4
  • 6. 2. LNG Orderbook , LNG fleet development and Forecast3. LNG Shipping Process4. “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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 5
  • 7. • 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 also5. 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. Copyright © 2012 Capman Consulting – Strategic Human Resource Management 6
  • 8. 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 Operators8. 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 systems9. 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 7
  • 9. Boil off Gas used as Propulsion Fuel Source:BrighthubEngineering Boil off Gas re-liquefaction Source: CNOOC Fujian LNGCopyright © 2012 Capman Consulting – Strategic Human Resource Management 8
  • 10. 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: Copyright © 2012 Capman Consulting – Strategic Human Resource Management 9
  • 11. 12. Containment Design – Advantages & Disadvantages Key selection issues • Capacity/ filling limits • Weight • Complexity of manufacture • Cost • Size/ terminal compatibilitySelf-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 SolutionsCopyright © 2012 Capman Consulting – Strategic Human Resource Management 10
  • 12. 13. Current Fleet by Containment Design TypeCopyright © 2012 Capman Consulting – Strategic Human Resource Management 11
  • 13. 14. What is Storage Tanker Roll-over? Natural convection causes circulation of the LNG within the storage tank, maintaining a uniformliquid composition. The addition of new liquid, however, can result in the formation of strata of slightlydifferent temperature and density within the LNG storage tank. "Rollover" refers to the rapid release ofLNG vapors from a storage tank caused by stratification. The potential for rollover arise when twoseparated layers of different densities (due to different LNG compositions) exist in a storage tank. Source: www.igu.orgNote: ship tanks only fill from bottom Copyright © 2012 Capman Consulting – Strategic Human Resource Management 12
  • 14. 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 13
  • 15. 3. LNG Tankers of various Types and SizesMoss Type • 4 Tanks • 5 Tanks • 6 Tanks Copyright © 2012 Capman Consulting – Strategic Human Resource Management 14
  • 16. Membrane • Large • Small • 3 Tank Moss Copyright © 2012 Capman Consulting – Strategic Human Resource Management 15
  • 17. Other Types • Pressurized • Prismatic • Conch Copyright © 2012 Capman Consulting – Strategic Human Resource Management 16
  • 18. 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 constraints5. 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 fleetCopyright © 2012 Capman Consulting – Strategic Human Resource Management 17
  • 19. 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 5Length (overall) m 285 289 313 345Beam (m) 44 43.4 50 54Loaded Draft (m) 11 11.4 12 12Ballast Draft (m) 10 9.7 9.9 10.3Deadweight tonnes 69,000 72,000 100,000 120,000Displacement (loaded) tonnes 97,800 103,000 140,000 174,000Boil-off Rate % per day 0.15 0.15 0.14 0.13Max. Loading Rate (m³/hr) 11,000 13,000 16,000+ 16,000+Manifold dia inches 16 16 20 20Propulsion Power MW 26 MW 27 31 34 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 18
  • 20. 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 0 108,000Note: Emissions shown in tones/ year/ ship Source: ALSTOM Copyright © 2012 Capman Consulting – Strategic Human Resource Management 19
  • 21. • 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 vessels7. 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 m8. Technological Change “Cold Weather” needsCopyright © 2012 Capman Consulting – Strategic Human Resource Management 20
  • 22. • 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 transferCopyright © 2012 Capman Consulting – Strategic Human Resource Management 21
  • 23. 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 waves10. 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 tradeCopyright © 2012 Capman Consulting – Strategic Human Resource Management 22
  • 24. 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 hoses12. 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 = 1,430Copyright © 2012 Capman Consulting – Strategic Human Resource Management 23
  • 25. b. LNG Shipping Logistics & Costsi. 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 shippingii. 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 hireiv. Risks to Owner and Charterer • Owner - Technical/ Operating Risk - Non-performance by the charterer Copyright © 2012 Capman Consulting – Strategic Human Resource Management 24
  • 26. • 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, voyageSource: 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. Copyright © 2012 Capman Consulting – Strategic Human Resource Management 25
  • 27. 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 systemsix. ECONOMICS 1. Newbuild Prices Newbuilding Price (Conventional LNGC) Copyright © 2012 Capman Consulting – Strategic Human Resource Management 26
  • 28. 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 27
  • 29. 3. Fleet Utilization Utilization of LNG FleetSource: 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 ~$125,000/ day in late 2011 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 28
  • 30. LNG Spot Charter RatesSource: Teekay Corporation 4. Voyage Costs • Voyage Cost Circulation from: - Market rates - Operating costs of ship - Voyage days - Waiting days - Port days - Mileage - Fuel prices - Speed & consumption of fuel - Canal, port and terminal fees • To get: - Total cost of voyage - LNG shipping rate 5. Main Engine Bunker Fuel Prices • Volatility of this main fuel price leads to necessity for contractual coverage (price hedging) of this. • Market price vary with geography and are quoted monthly at Rotterdam, Houston, Middle East and Singapore Copyright © 2012 Capman Consulting – Strategic Human Resource Management 29
  • 31. 6. Additional Voyage Charges Port Charges ($ 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 30
  • 32. • 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 trade2. 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 Copyright © 2012 Capman Consulting – Strategic Human Resource Management 31
  • 33. Estimated LNG Charter Rates and New Build OrdersNote: 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) Copyright © 2012 Capman Consulting – Strategic Human Resource Management 32