FSRU demand is expanding on the back of a shift in global LNG trades.
FSRU capacity will grow at a CAGR of 6%, supported by robust LNG trade growth of 8.3% between 2024 and 2029, Drewry Maritime Research said in a report.
While Europe’s LNG demand is immediate, Asia is seeking more long-term growth.
However, FSRU availability is tight, due to European projects acceleration, and this trend will continue, as plans for more LNG import projects emerge.
Increasing unit supply will be challenging, due to the unavailability of shipbuilding slots, which will spur demand for LNGC conversions. Drewry also expected that some FSRUs deployed in Europe will be re-assigned, as the region’s LNG demand growth becomes saturated.
Following the Russian/Ukraine war, a surge in FSRU usage became evident, as six units (24.4 mill tonnes per year capacity) came online in 2023, preceded by three FSRUs (9.8 mill tonnes) in 2022, compared to just one (1.2 mill tonnes) in 2021 and none during 2019/20.
However, it brings with it signs of uncertainty, as other factors begin to influence demand for LNG in Europe. These are weather conditions, industrial production, energy efficiency measures and renewable energy output.
Europe continues to expand its regasification capabilities, with three FSRUs – Stade FSRU, Alexandroupolis FSRU and Mukran FSRU – adding 12 mill tonnes per annum of new import capacity, in 1Q24.
Around 85% of Europe's new regasification capacity since 2022 has utilised FSRUs, a trend that will continue, as the current and planned European units will cater for robust LNG demand until the end of this decade, Drewry said, when about 100 mill tonnes per annum of FSRU-based regasification capacity will be available.
Drewry also warned that a widening gap is expected between the expanding regasification capacity and LNG demand growth after peaking in early 2030.
This imbalance will lead to significant underutilisation of the existing infrastructure.
Any potential over investment will encourage FSRU-based terminals utilisation, as they offer operational flexibility and lower cost, compared to onshore terminals.
The current utilisation rate will be reduced in the long run once the reliance on LNG begins to wane, leading to a reduction in investor interest and thus, Drewry was pessimistic for FSRU usage post 2030.
In Asia, the demand outlook is bright, with potential investments on the horizon, supporting LNG import infrastructure expansion, particularly FSRUs.
Despite Europe absorbing most of the operational FSRUs since 2022, Asia started two FSRU projects in 2023 – the Hong Kong Offshore terminal (4.4 mill tonnes) and Batangas FSRU LNG terminal (5.2 mill tonnes). In addition, India is set to launch its first offshore terminal– Jafrabad FSRU (5 mill tonnes per annum) this year.
Emerging markets
Apart from the major players, such as China and India, emerging markets, including the Philippines, Vietnam and Sri Lanka, are encouraging FSRU developments to support their snowballing LNG requirements, as these countries aim to introduce additional gas-fired power plants.
The current utilisation rate of FSRUs averaged around 50-55% in Asia in 2023, which could be attributed to - intensified competition from Europe in securing LNG cargoes, lower LNG intake and elevated and volatile LNG prices.
However, lower prices were expected post-2027, while the region’s growing LNG demand will boost imports, expanding regional FSRU utilisation.
This will also be supported by the rising conversion opportunities during 2025/26, as several steam turbine vessels (constituting 30% of the current fleet) will become unoperable, due to ageing and growing environmental regulations.
Drewry identified about 20 planned projects and 28 potential projects that could require an FSRU. This will keep newbuilding prices elevated, encouraging market players to opt for conversions.
About 25 mill tonnes per annum of under construction and planned FSRUs will be in service by 2027/28 in South and Southeast Asia, which will cash in on lower LNG prices or competitive supplies by 2028.
Growing regional LNG trade and increasing strategic alliances could also accentuate the FSRU’s role. For example, India’s Petronet has signed an alliance with Sri Lanka to provide LNG.
The company will build an FSRU terminal in Sri Lanka, which will provide impetus to the government to accelerate the development plans for the Colombo LNG terminal (2 mill tonnes per annum).
Overall, Drewry predicted that FSRU utilisation will be higher than that of onshore LNG terminals in Europe as opposed to Asia. However, Asian FSRU utilisation will improve, as the continent is expected to lead the growth in LNG demand, supported by the expansion and improvement of domestic infrastructure.
In the long run - beyond 2035 - European utilisation will decrease, as the region moves away from fossil fuels, while it will continue to grow in Asia, Drewry said.
