LNG shipping sector facing acute skills shortage

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The LNG shipping sector is facing a serious shortage of skilled workers that will be compounded by a one-third increase in the number of LNG vessels over the next three years, a leading industry figure has said.

Speaking at an international LNG summit in Cannes on Monday, Andrew Clifton, chief executive of the Society of International Gas Tanker and Terminal Operators, said a lack of training has slowed the development of potential fleet staff.

“There is an acute shortage of trainers. It is important that these positions are made more attractive,” said Clifton. “There is no option but to invest in training,” he added.

There are around 450 LNG vessels in service worldwide, each of which needs 14-20 officers. The skills gap is set to widen further because an additional 168 new vessels are on order, Clifton said.

Clifton also addressed what he perceived to be the primary challenges facing the global LNG industry. He said the sector was up against a well-funded anti-LNG lobby and faced numerous commercial difficulties.

“The anti-LNG lobby is very well organised and very well funded – particularly in North America and British Columbia,” Clifton said.

Public confidence in the safe shipment of LNG will be key for the industry in the future, he said, adding that LNG shipping’s “unprecedented” track record on safety – with around 4,000 cargoes shipped every year with no loss of tank containment – would need to be maintained.

The construction of LNG ships will face stricter guidelines when the new international code for the construction and equipment of ships carrying liquefied gases in bulk – known as the IGC Code – takes effect in July this year. The code will affect the design and construction of new vessels.

Commercial challenges
Other speakers at the conference turned their attention to the commercial barriers facing the LNG industry.

The global LNG glut has led more and more companies to renegotiate their supplies, with trade increasingly being done on a short-term rather than a long-term basis.

“The consequences of this could be quite dramatic, making LNG much easier to trade and allowing the spot market to expand significantly,” Howard Miller, director of LNG at Lyndon Energy, told conference delegates.

But the pressure to renegotiate prices and move to new contract terms will shift more risks to sellers and could have a profound impact on new projects, Miller suggested.

“The risk of too many renegotiations could undermine the viability of LNG project developments by damaging the financial prospects of new LNG trains. This could lead to higher prices in the long term, which is not in the buyer’s interest,” Miller added.

Portfolio players are already struggling to find buyers for the volumes they have signed up for. More than 100 mtpa of LNG under flexible contracts – most of it from the United States – is still looking for a home, according to Edward Gomersall, business intelligence manager at shipping brokerage Poten & Partners.

The global oversupply has left sellers looking for new markets. For example, although Europe still has little demand for LNG, it is sensitive to lower prices for the fuel and its imports could double year on year, Gomersall said.

Niche markets in Pakistan, Jordan, West Africa, Indonesia, Bangladesh and Uruguay – where FSRUs and small-scale LNG is seen as a short-term solution to energy supply problems – could also increase demand for the fuel. “The role that FSRUs can play to help find a home for surplus LNG has been underestimated,” Gomersall said.

However, in Asia – which is still the world’s biggest consumer of LNG – contracted supply is set to peak in 2019. “These contract expirations are a significant source of uncertainty in the LNG market. Some production aimed at Asia could face delays and the timing will depend on when buyers sign sale and purchase agreements,” Gomersall added.

However, one silver lining for LNG is that demand for its use as a fuel in the marine sector is expected to increase.

Jan Tellkamp, principal consultant for project management at classification body DNV, said the market for LNG-powered ships was expanding beyond Europe.

“Seventy-five percent of the 85 new LNG-fuelled ships ordered are for European and global consumers, which shows that it has become a global trend,” Tellkamp said.

Even countries such as Germany, which have been lagging behind the global market, are catching up, sending clearer policy signals to the shipping industry.

Source: Interfax Energy

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