Gaslog expects LNG newbuild delays

Around 40 LNG vessel orders are scheduled to be fulfilled later this year, the owner said, adding that it expects a number of the deliveries to be pushed into 2021-22, especially those vessels that are not tied to long-term charters. Owners of these vessels may want to secure term charters ahead of delivery, Gaslog said.

Slower newbuild deliveries this year could cut global tonnage availability and buoy demand, as firms that had expected to begin charters are required to secure replacement shipping capacity on the spot market. And with uncommitted vessels more likely to be delayed, spot vessel availability could be cut.

The vessels are likely larger two-stroke vessels, which are generally placed higher in the LNG freight merit order — because of their lower fuel costs, higher storage capacity and lower boil-off rates — than the on-water fleet, which is typically made up of older steam turbine and dual-/tri-fuel diesel-electric (D/TFDE) carriers.

A high number of vessel deliveries in the second quarter of 2020 through to the last quarter of the year have weighed on forward spot charter rates in recent months, as global liquefaction growth is scheduled to slow by mid-2020, cutting a structural support to tonnage demand growth.

Delays hit Gaslog too

Gaslog has not been immune from delays at shipyards, the firm said, noting that the conversion of its 155,000m³ Gaslog Singapore carrier into a floating storage unit (FSU) is set to be delayed by 1-3 months.

The vessel had been scheduled to begin a charter with Chinese firm Sinolam LNG at the firm's planned import project in Panama in November 2020, following a dry docking and FSU conversion. The Gaslog Singapore was offshore the Philippines today, having delivered an Australian cargo to Japan's Naoetsu import terminal at the end of April.

A number of dry dockings scheduled for the second quarter of this year have been delayed, market participants said, suggesting that there could be a higher number of vessels heading into yards next quarter, weighing on vessel availability in July-September.

But next Gaslog delivery on schedule

The firm's next newbuild delivery is scheduled to take place on 11 May, Gaslog said.

The 180,000m³ Gaslog Wales is set to sail straight under a term charter with Japan's Jera, Gaslog noted, having completed sea trials on 18 April. The delivery will be the second of four Gaslog newbuilds penned in for 2020 delivery.

Gaslog's remaining two 2020 newbuilds — also built by South Korean shipbuilder Samsung Heavy Industries — are scheduled for delivery in August and October, data released by the South Korean shipbuilders association shows. The vessels will be chartered to UK firm Centrica and US operator Cheniere, respectively. Cheniere is also set to receive three Gaslog newbuilds slated for delivery in 2021, with no other outstanding orders remaining on the owner's orderbook.

Limited impact from US turndowns

Gaslog does not expect a significant impact on the spot market from US offtakers turning down their contractual US fob volumes in June, because of weak global gas prices.

Around 25 cargoes are currently thought to have been turned down, the owner said — in line with what market participants had told Argus — but this would translate to only around 10 vessels being offered on the spot market, Gaslog said.

This would suggest that although tonnage supply is likely to rise, the extent of this may be muted, with offtakers instead seeking other fob volumes to meet their downstream selling obligations, mirroring recent comments by market participants.

Two vessels exit the spot market

Gaslog subsidiary Gaslog Partners has secured short-term charters on two of the seven vessels rolling off term charters this year.

The 145,000m³ Methane Alison Victoria, which ended its term charter in January, has been chartered from March through to the end of this quarter, the owner said. And the 145,000m³ Methane Rita Andrea is under a charter that started in April and runs through the third quarter of this year, having ended its previous charter in April. Both vessels are older steam turbine carriers.

Gaslog has a further two vessels — one steam turbine and one TFDE — that are set to end their charters in June, pending charter extension periods of 30 and 360 days, respectively.

By Samuel Good