The industry has been undervaluing the LNG sector by using unrepresentative spot prices as a benchmark, according to Gaslog ceo Paul Wogan.
“We talk about the spot LNG market a lot, but it’s only 10% of the market,” Wogan told the Marine Money London conference. “We’ve got lots of vessels on long term contracts with some very favourable rates.”
The LNG shipping market remains dominated by long term supply contracts in the 10 – 25 year range, however, a nascent spot market has developed over the last decade or so. With LNG liquefaction and related export projects suffering delays, LNG carriers already built are deployed to the spot market. This has resulted in oversupply in the market which drives down rates, but the majority of vessels remain on long term contracts.
Exmar coo Patrick De Brabandere, too, said his company did not prioritise the spot market in its LNG business plan. “A lot of people underestimate the challenge of operating LNG on the spot market,” he said. “Building a spot fleet is quite difficult. We are much more favourable of long term business – we will focus much more on upstream and downstream FSRU projects.
“Conventional shipping is there, but it will not be a large part of future development at Exmar. But our existing ships are chartered until 2022 and 2025 so I will still have time to think about it – I may even retire!”
In fact the bearish LNG spot market, Wogan argued, could even be “playing into owners” hands’ by putting off potential competitors. “Nobody is ordering speculative newbuildings right now,” he said. “If you’re ordering a new vessel Korea you’ve got until 2019 to see the benefit.”