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2013 sanctions on Nigeria’s LNG operations drive global charter market rates

LNG-Gas-Ship

The impoundment of multiple vessels during NLNG’s force majeure by the Nigerian Maritime Administration and Safety Agency (NIMASA) resulted in a rate hike for short-term shipping charters by more than 11%, based on analysis from International Gas Union’s (IGU) World LNG Report for 2014. A blockade was imposed by NIMASA on May 3 after a dispute with NLNG over what the regulatory body believes is unpaid levies, according to Business Monitor’s Nigeria Shipping Report. Furthermore, this led to a rate hike from $90,000 per day to above the $100,000/day level from mid-2013 through to year-end.

This rise was in significant contrast to the drop in spot rates from $120,000 per day to $90,000 that occurred in the first half of 2013. The decrease at the time was due to unplanned supply disruptions at major LNG export plants that freed up related shipping assets for short-term charter market use. In addition, the increase in charter rates was influenced by delays in new-build orders.

Overall, Nigeria’s LNG export volume declined by 15% or 3.06 MT from 2012 to 2013. The Asian region, which represented a huge chunk of 46% of Nigeria’s total export portfolio, experienced declined demand of 18%. Taiwan had the largest drop of 50% in the region. Europe, Nigeria’s second largest regional market, witnessed the largest fall of 43% of trade volumes. France, Spain and Portugal experienced the largest decline in exports in Europe.

Globally, there was a marginal decline in LNG trade volumes between countries from 237.67 metric tonnes (MT) in 2012 to 236.83 MT. The drop was majorly concentrated in Europe where Spain accounted for the largest decrease in import volumes from 14.22 MT in 2012 to 9.36 MT in the year under review. This was followed by France and Turkey. Overall, Europe’s share of LNG demand declined for the second year in a row, this time around by 6 percent, on the back of increased competitiveness of coal; availability of renewable power and higher pipeline gas imports.

Depressed LNG trade volumes in Europe were offset by demand growth in Latin America (28 percent), Asia (10 percent), Asia Pacific (6 percent) and North America (6 percent). Latin America with the largest trade increase was spurred by Brazil with 76% growth. Significant demand in Brazil was influenced by increased gas usage by the country’s gas-fired plants, which are producing considerable quantities of energy to supplement the declined production of the country’s hydroelectric power plants. According to Platts, Brazil’s industrialised Southeast region remained the largest consumer market for natural gas with average daily volume of 52.1 million cu m/d in August.

Going forward, IGU estimates renewed softening of short-term charter prices is expected in 2014, as 21 unchartered vessels are scheduled for delivery. Overall, there was a differential increase over the prior period of 3.8 MT or 5 percent in LNG traded on the short-term market in 2013. This accounted for a significant 33% of global LNG trade. Qatar and Nigeria maintained their leading positions as spot exporters, accounting for 44% of total short-term trade volumes. The largest increase in supply though, was as a result of Brunei LNG. 74% of spot LNG demand was from the Asian region with strong consumption from China.

OMOSOMI OMOMIA