LNG ship shortage hurts new players -Golar

Tue Mar 1, 2011 4:49pm EST

Related Topics

* Lack of tankers makes new deals hard for smaller players

* Charter rates on the rise due to ship shortage

* Qatari LNG tanker chartering increases

By Edward McAllister

NEW YORK, March 1 (Reuters) - A lack of available liquefied natural gas (LNG) tankers helped push charter rates up this winter and continues to hamper trade for smaller players without access to tonnage, shipper Golar LNG (GLNG.O) said on Tuesday.

Large increases in Asian demand and new projects coming online have shrunk the number of available tankers in recent months, making it difficult to secure short term deals, Golar said.

While higher charter rates helped Golar's shipping arm, its new trading subsidiary, Golar Commodities, struggled to make inroads into a market long dominated by players like BG Group (BG.L), BP (BP.L) or Royal Dutch Shell (RDSa.L) with fleets of their own.

"The earnings and prospects of Golar Commodities have been negatively influenced by the tightening of the LNG shipping market," Golar said at the release of its fourth quarter results. "Shipping challenges are making it difficult for new entrants."

Golar launched its trading subsidiary in May last year to market and trade LNG cargoes, but after a couple of deals earlier in the year transactions have been hard to come by. The company said that activity in the fourth quarter was limited to "residual" deals from the previous three months.

According to ship broker Fearnleys LNG, there was about one tanker available for charter at the beginning of the year, down from about 15 last summer. Conversely, shipping rates doubled from less than $30,000 a day to over $60,000 over the same period.

Some deals fell through last year after parties failed to secure a ship after winning an LNG supply tender.

"Vessel availability has now reached a level of tightness not seen in the market for several years," Golar said.

HARD FOR NEW PLAYERS

A whole string of new trading players like banks have entered the LNG market over the last couple of years, looking to make the most of growing production and increased trading opportunities. [ID:nN07295676]

But spot tenders have been won almost exclusively in recent months by major players with their own fleets. New players have been limited to more peripheral, riskier trades like re-exporting cargoes from the U.S. Gulf to Europe and Asia.

One cause of the shipping shortage is an increase in tanker chartering by top exporter Qatar to increase its flexibility. Analysts say that the large tankers built by Qatar, which were intended for shuttling LNG to U.S. terminals, are not suitable for other smaller terminals now that shale gas has dented U.S. import needs.

Last week, Waterborne LNG analysts said that Qatar, which is already chartering up to 10 tankers this year -- up from about five last year -- had chartered two more vessels from Excelerate Energy while it retrofits some of its own tankers to run on LNG boil-off.

Qatar Petroleum and Excelerate were not available for comment.

Golar reported revenues of $64.6 million in the fourth quarter, off slightly from $65.5 million over the same period in 2009. (Additional reporting by Daniel Fineren in London; Editing by Marguerita Choy)

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article