Martin Cartwright is the Global Business Director for the gas carrier segment (LNG, LPG, ammonia, hydrogen, multi-gas) at DNV. With a degree in naval architecture from the universities of Glasgow and Strathclyde, Martin spent ten years specializing in newbuilds and ships within the offshore vessel and gas carrier segments at DNV, including floating storage and regasification units (FSRUs). Martin brings his competence and passion to future energy carriers whilst supporting the segment in tackling the twin challenges of decarbonization and digitalization.
How do you see the role of LNG evolving in the global energy market?
Global demand for LNG has never been higher. This is mainly being driven by the highest population centres in the world – led by China – where traditional energy sources like coal are being replaced by cleaner natural gas. Gas is widely seen as a bridging fuel for the energy transition, and this has led to skyrocketing demand for LNG, which enables the transport of gas to areas not reachable by pipeline. LNG demand is also on the rise in Europe, mostly due to the ongoing Ukraine conflict. After the sharp demand peak in 2022, the realignment of European supply is largely complete. European gas storage volumes are now stable ahead of the winter period, leading to much more settled markets in 2024
What LNG supply can be expected in the coming years?
Sharp increases in LNG production and liquefaction capacity have taken place in key regions like the United States and Qatar in recent years, making the market well supplied. Even more is expected to come online over the coming three to four years, with global LNG supply expected to increase by around 35% by 2027.
Is that demand and expected supply reflected in the order books already?
Yes, definitely. Although orders might never again reach the number registered in 2022, the market is now in a consistent, healthy phase. Some 133 vessels were ordered in 2023 and over 60 orders have been placed so far in 2024. While in the past, ordering tended to occur in peaks and troughs, the ordering process is now much smoother and more predictable. This is largely driven by the economics of liquefaction development: most of the recent major production and liquefaction projects secured long-term offtake agreements before reaching final investment decision (FID), resulting in much more certainty around how many vessels are required for transport.
Are new trade routes that emerged from geopolitical conflicts reflected in the order book?
Geopolitical trends have resulted in a slow segregation of the routes of LNG vessels and this is reflected by the order book. The vast majority of newbuilds in 2023 and 2024 will be for vessels transporting LNG from the Qatar North Field project to China, its main customer. Europe’s continued close ties with the United States means that replacements for lost Russian gas will continue to be largely sourced from this market, and much of the newbuild activity ahead will be linked to the completion of projects like Golden Pass and Calcasieu Pass 2.
What can be expected in terms of charter rates?
Over 60 newbuilds are set to come online this year, and this figure will increase in both 2025 and 2026 as the backlog begins to materialize. The market is well supplied and relatively balanced and this is being reflected by a steadiness in charter rates. Allowing for the usual variations in summer/winter demand, both spot and term charter rates have returned to more regular levels of around USD 80–90,000 per day, with variations between east and west. While spot charter rates have dipped lately, they should increase again in the winter months.
Is energy efficiency already having an impact on charter rates?
In general, LNG vessels are split between three propulsion types: older steam vessels, dual-fuel/tri-fuel diesel electric vessels and modern two-stroke vessels. The day rates that these vessels can command vary, largely due to cargo capacity but also due to their efficiency. The question now is whether we will see a fourth generation added to the LNG carrier fleet in the near term, with propulsion changes and modular designs becoming ever more popular in order to decarbonize and increase cargo capacity.
What are promising future efficiency measures for LNG carriers?
Despite current efficiencies in more modern vessels, extra ways of reducing emissions for LNG carriers will need to be found in the future. Like most segments during the boom years, this was largely ignored in 2022, due to limited yard space and higher costs. However, the more settled newbuild environment of today should see more innovation. The next generation of LNG vessels could include technologies which include minimized methane slip, fuel cells and on-board carbon capture. In addition, if global supplies of bio-LNG increase, most owners would welcome using this as a drop-in fuel, while research is already being conducted around the possibility of using fuels like hydrogen as a drop-in fuel on the current fleet. However, like other maritime segments, challenges around supply and extra costs will make this kind of fuel transition difficult.
Source: DNV
