At the end of 2003 there were 152 LNG vessels in service with a further 34 on order, the largest of which was 153,500 cbm capacity. RasGas II had a tender for up to 8 ships with market talk of about another 47 ships needed with the likelihood that we would see 200,000 cbm and larger vessels ordered.
 

• Korean shipyards control over 75 % of the new orders,
• GTT membrane designs account for 82 % of the orderbook,
• 16 ships on order are not steam turbine and 2 of them are purely speculative,
• 8 ships are over 209,000 cbm fitted with re-liquefaction plants,
• China finally signed their long awaited order for 2 new ships,
• 1 new Korean yard (Samho) has gained an order just a few weeks after a new Japanese yard (Imabari) enters the Club,
• One recent LNG entrant has been bought out by an even newer entrant, 
• Two new Russian LNG owners have joined,
• 4 newcomers have won the sought after (but non lucrative?) Qatar orders,
• Yard prices have risen as steel prices have increased and yard slots have disappeared,
• Greek shipowners have 8 ships on order, 4 of which are unfixed,
• Charter rates and periods are falling: 2 new orders fixed against 10 year charters,
• 2 new orders have been placed at Universal for 75,000 cbm ships for Mediterranean trade.

However we must stress that, among all types of ships, LNG carriers are the ones that have recorded the smallest rise in newbuilding prices, due to a fierce competition among shipyards in this sector. Shipyard's strategy has also diverged among the LNG builders: Daewoo and Samsung have invested in the construction of series of ships, Hanjin has decided not to take LNG orders any more and Hyundai has chosen to concentrate on "standard" ships as prices for the latter have risen more sharply and account for less cgt (compensated gross tons) than their LNG counterparts.

Of the 113 ships on order at end 2004, 69 have been placed this year which in some respects follows the old school of LNG (circa early 1980's) where projects and Japanese buyers prefer to order rather than charter ships that are available or are already on speculative order - 19 ships on order are unfixed with 4 existing new ships sitting idle.
 

Ever since the company has been involved in LNG shipping, the standard line used by banks and projects has been "No new or unproven technology and we will not be first of a class": this probably accounts for no new developments in nearly 40 years! However, in the space of 12 months we have seen the size rise from 145,000 cbm in January to 154,000 cbm in August and to 216,000 cbm in November.

Likewise, the need for the reliable steam turbine engine was an absolute must, with much scepticism voiced at the innovative French companies of Gaz de France and Chantiers de l'Atlantique for building dual fuelled diesel electric (hereafter DFDE) vessels, but that was until November when it would seem that several parties threw caution to the wind when first BP ordered 4 DFDE ships, swiftly followed by AP Moller ordering 2 similar vessels. However, these owners were clearly outdone by Qatar, aided by ExxonMobil, who confirmed their long awaited selection by allocating 8 new 200,000 cbm plus vessels with slow speed diesel engines equipped with re-liquefaction plants

The year started with almost historically low LNG shipyard prices, but it closed with prices having risen by over $ 30 million per unit.

Twenty years charter hire period was the usual duration for the shipping contracts, twenty years matching the SPA (sales and purchase agreement). However, the long term would appear to be stretching out to 25 years with short term settling around 3-5 years, with the exception of the occasional spot fixture of which the year's low was reported to be $ 25,000 per day. This is a strange phenomenon when VLCC's were fixing at $ 260,000 per day, yet there is a rush of tanker owners wanting to get into LNG. Does the new world LNG need some explanation to the new entrants?

The tonne-miles demand for LNG is increasing as the Atlantic Basin and West Coast US source the gas from further afield. The increased distance inflates the transportation costs that would naturally reduce the net revenue for the LNG producer if the end market could not absorb a higher price for the transportation. The transport costs can be reduced by increasing the amount of cargo carried, and hence delivered, on each ship, reducing the fuel costs and keeping the daily hire rate as low as possible.

The Qatar projects of RasGas II and Qatargas II have clearly been the most successful projects in reducing transport costs, as they have managed to combine all three of the above elements. New entrants would appear to have been the most co-operative with the Qatar shareholders, as they have secured 15 of the 16 contracts awarded in 2004. So, was there a price to enter the hallowed "Club"?
 

2004 has been a phenomenal year for LNG shipping and it would be impossible to repeat this in 2005. However the Qatari projects will continue to expand, likewise Nigeria. New projects will be agreed in Brass River, Angola, Yemen, Iran, Libya and Australia that should produce in total a requirement for about a further 70 ships. If the fashion for non steam turbine continues, there could be some obsolescence of the older, smaller, thirsty tonnage that could promote some more orders but only if there are the slots available.

No doubt ever more new entrants will arrive, especially if Qatar and ExxonMobil continue with their selection criteria - cheapest wins.

Ship prices may peak but stability in steel prices and exchange rates will be needed.

Technological innovations have apparently been accepted so there may be a new containment system developed to compete with the membrane design and perhaps another new propulsion system will be ordered: Shell is rumoured to be seriously looking at a gas turbine design. The standard ships design should rise to 163,000 cbm as this is the optimal size to access most of the existing terminals, as opposed to the dedicated terminals required for the 216,000 cbm size.