LNG

The London-based Joint War Committee, which advises Lloyd’s marine insurance underwriters on risk, has expanded the portion of the Red Sea that is considered to be part of the riskiest waters for insurance purposes following continued attacks by Iran-backed forces on global shipping traversing the Suez Canal after passing Yemen.

Shipping analysts said that the cost of insurance cover has surged almost 10-fold since the missile attacks from Iran-supported Houthti rebels in Yemen first began as a show of support for the Hamas terror group by Iran using its proxies in Yemen.

The latest liquefied natural gas prices are largely unaffected by a market currently experiencing a supply glut because of mild weather in Europe and ample storage levels and global supplies.

The Dutch Title Transfer Facility price was quoted at around $11.185 per million British thermal units on December 19, its lowest level since 2021 and with the UK National Balancing Point price at $11.240 per MMBtu.

The Japan Korea-Marker price for spot cargoes sold to North Asia was at an unchanged level of $15.197 per MMBtu, a bit less than last week. The JKM was also moving to the February front-month with new lower values of $12.372 per MMBtu.

Analysts said that with Iran leading Yemen’s Houthi rebels in their missile attacks on shipping, the greatest price risk for LNG, oil and other fuels is an attack by Iran on shipping in the Arabian Gulf that could lead to the Shaat-al-Arab waterway route in and out of the Gulf being closed.

This would lead to the cut off of about one-fifth of global LNG supplies that is currently supplied by Qatar and the United Arab Emirates.

Possible outcomes

The analysts added that a Gulf shipping shutdown could happen if Iran sucker-punches an innocent vessel in the Gulf or Iran is itself is sucker-punched by Israel.

Iran is also heading for severe sanctions for its proxy war on global shipping that is proceeding because part of the Iranian armed forces in the Revolutionary Guard has apparently gone rogue. Analysts stated that the overthrow of the Tehran regime and the freeing of the long-suffering Iranian people may be nearer that most people currently could imagine.

A missile fired by the Iran-backed Yemeni Houthi rebels has just hit another cargo ship in the Red Sea near the strategic Bab el-Mandeb Strait leading to and from the Suez Canal, following other attacks in previous days against various vessels and where Iranian ships posing as legitimate cargo vessels were confirmed as acting as command ships for the attacks.

The containerships and tankers owner Maersk, the world’s biggest shipping company, and Germany’s Hapag-Lloyd as well as BP Shipping of the UK and many other companies, have stopped their fleets from taking the Bab el-Mandeb Strait past Yemen to or from the Suez Canal.

The BP LNG and tanker fleet would be particularly vulnerable as they mostly have the word “British” in their names which would be seen to attract terrorism unless there was a Royal Navy vessel nearby.

Among the BP LNG fleet, the “British Listener” was lifting a cargo from the Mozambique FLNG hull “Coral Sul” offshore the southeast African nation so is well placed to deliver into Asia far from the Red Sea and would be likely heading for South Korea.

Other basins

The BP LNG vessels are mostly doing shuttle deliveries from Mozambique to Asia as BP has purchased all of the offtake from very first but not the last Mozambique project. Some of BP's LNG carriers are operating in the Asia-Pacific market.

The “British Contributor”, for example, is scheduled to discharge a cargo on December 25 at the Sendai import terminal in Japan after lifting it from the Northwest Shelf plant in Western Australia.

One of the few LNG carriers in the East Mediterranean on December 19 was the “BW Tulip” that had just delivered a shipment to the Marmara Ereglisi import terminal in Turkey and was heading through the West Mediterranean into the Atlantic and with the destination given as the Freeport plant in Texas, according to shipping data.

Another LNG carrier in the West Med off Gibraltar was the “Diamond Gas Metropolis”, with 174,000 cubic metres capacity. This ship was now heading for the UK Isle of Grain LNG import terminal near London with a cargo lifted from the Cameron plant in Louisiana on December 8.

Most carriers using the Suez Canal would come from Qatar on the East-to-West route for Europe while those going West to East would be rarer and carrying cargoes stored off a port like Gibraltar and delivered to Italy, Spain or Turkey and very unusually now India via the Suez Canal or further afield via Suez.

That’s as the norms of LNG carrier and other energy and container shipping navigation have been upended by a year of chaos and sky-high tariffs at the Panama Canal caused by the drought in the region and low water levels in the Gatun Lake that is part of the Canal water system.

Awilco LNG, the small Norwegian-based shipping provider with two vessels, managed to swing back to profit in the third quarter as the ships returned from dry dock and said that overall LNG shipping market rates were still at healthy levels though vessels may soon be used for storing LNG with land-based facilities full in the European Union.

May 16 (LNGJ) - Flex LNG, the Norwegian shipping company with a fleet of 13 vessels and several chartered to the largest US exporter Cheniere Energy, reported a fall in first-quarter profits despite a rise in operating revenues. The average time charter equivalent rate declined in the quarter to $80,175 per day compared with $81,699 per day for the fourth quarter of 2022.

   Flex reported vessel operating revenues in the first quarter of $92.47 million compared with $74.57M in the same three months of 2022. Net income dropped to $16.53M from $55.76M in the prior-year quarter. “As we completed the balance sheet optimization program during the first quarter, we had some additional financing costs in our accounts for the first quarter,” explained Øystein M. Kalleklev, Chief Executive of Flex LNG Management AS. “However, we have now put in place new attractive long-term financing for all our 13 ships, boosting our cash balance to $475M at quarter-end, or about $9 per share,” added Kalleklev.

European natural gas prices and LNG values of the Dutch Title Transfer Facility (TTF) fell by more than 5 percent on the week while the Japan-Korea Marker for spot cargoes remained solid as other energy markets including crude oil dropped towards mid-2021 levels amid mixed economic and demand signals.

The attractive spot LNG charter rates in the West of Suez market remained mostly limited to the 2-stroke segment, though most of these deals were being concluded for loadings in late March 2023.

Clarkson, the UK-based global shipping services company and maritime consultancy for LNG and other transported hydrocarbons and products, reported a jump in annual revenues of over 36 percent and record profits even as uncertainties remained in the industry from geo-political issues.

The early 2023 LNG shipping market has opened with a “trembling uncertainty” in the LNG freight market with charter rates in the first few weeks alone falling 30 percent in the Atlantic Basin and 16 percent in the Far East,

London-based global shipbrokers Simpson Spence Young have given an upbeat outlook for LNG carrier charters and vessel sales and purchases in the coming year after a record-breaking 2022.

Centrica plc, the UK owner of the British Gas utility business and an LNG importer, said in a trading update that it continued to deliver a strong operational performance from its balanced portfolio.

European natural gas market prices and Asian spot LNG cargo values slipped to near last year’s levels as hotter weather temporarily dispelled gas supply concerns and available shipping remained short for the Northern Hemisphere winter to come.