Tides of supply and demand: Carrying LNG where it’s needed

At a glance

  • LNG has become “the most geopolitically important fuel” recently
  • The size and scope of LNG shipping has soared since the 20th century
  • Samsung C&T is involved in the LNG business through joint venture investments and agency

Few commodity markets have attracted attention quite like liquefied natural gas (LNG) in recent times. Developments last year made LNG “the most geopolitically important fuel,” as nations in Europe were forced to find alternatives to natural gas piped in from Russia, which has by far the world’s largest reserves of natural gas.

Natural gas is important because it’s seen as a relatively clean-burning fossil fuel, compared with coal, for example – and is needed for applications such as powering and heating homes as well as cooking. By extension, LNG allows many countries that don’t have enough of their own natural gas to access this energy source. This is because it can be shipped anywhere in the world in viable quantities, as it takes up 600 times less space than natural gas in its gaseous state.

However, it’s not quite as straightforward as that – trading companies like Samsung C&T need to constantly monitor the LNG logistics ecosystem if they are going to successfully move this commodity where it’s needed. In this article, we will look at some of the most important LNG shipping considerations.

Special cargo, special ship

It was not possible to ship LNG until the twentieth century. This is because LNG was only first produced in 1912, and even after that, there were concerns over how to transport it due to explosion fears and the fact that LNG needs to be kept very cold – at a temperature of around -163C.

Yet, the LNG carrier was born in 1959, when the “Methane Power” carried the first ever LNG shipment on a voyage from the Unites States to Great Britain. Its capacity of 5,034 deadweight tonnage (DWT) would have been enough to supply around 2,500 American homes for a year, but LNG carriers went on to transport much larger loads – including the world’s largest LNG tanker to date, Qatar’s 128,900 DWT MOZAH vessel.

Technological advancements have made possible various kinds of LNG carrier, each equipped with large tanks made up of multiple layers that allow them to maintain the necessary temperatures and safety controls. LNG carriers are highly specialized, double-hulled tankers that are generally larger than regular cargo ships and do not come cheap – the rising cost of steel and other materials placed the average cost of an LNG tanker at $250 million in 2022, up from $200 million the previous year.

Ships struggling to keep up

Demand for LNG has been so high that it has created the logistical challenge of finding enough tankers to ship it to various destinations across the world. As of last April, there were 641 LNG tankers in operation worldwide, according to the International Gas Union, but there is constant pressure to increase this number.

Global orders for specialist LNG tankers reached 163 in 2022, more than twice as high as 2021. This trend has been driven by Qatar’s expansion of its LNG export capacity, environmental pressures forcing alternatives to fossil fuels such as coal, and the impact of the Russo-Ukrainian War.

Looking ahead, the LNG market outlook is flourishing to 2026, particularly boosted by European demand despite an unseasonably warm winter heading into 2023. And traders need to be especially alert to market fluctuations, like when we saw a rush of LNG tankers from the U.S. to Europe last year. Moreover, China’s lifting of COVID-19 controls is set to trigger an upturn in domestic LNG consumption, after 2022 saw an estimated fall in Chinese demand for natural gas for the first time in two decades.

Where does Samsung C&T fit in?

Through joint venture investments and agency, Samsung C&T is participating in the LNG business across a range of gas-producing countries such as Qatar, Oman, and Malaysia. The company is also making efforts to capture opportunities presented by global LNG market trends along with carbon neutrality progress.

In addition, Samsung C&T’s Engineering & Construction Group has been constructing various LNG terminals to help build the international infrastructure required to support global trade – as import destinations need to be able to properly handle LNG once it arrives via shipment, this has in turn led to worldwide demand for LNG terminals for storage and regasification.

In the face of this exploding demand for LNG, trading companies can find new opportunities and connect them to all business stages, from natural gas production and liquefaction to storage and regasification. Samsung C&T regards LNG as an important global product and an essential energy source, and is working hard to find new business opportunities by closely monitoring market changes.

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