Companies looking to charter in vessels are prioritising boil-off efficiency to lower fuel costs given high prevailing LNG prices.
The newest, higher-efficiency LNG carriers typically exclusively consume boil-off gas from their LNG cargoes, and high prices at present — more than $30/mn Btu in Europe and nearly $32/mn Btu in Asia — mean that charterers are increasingly looking for the highest-efficiency LNG vessels for charter.
The typical modern two-stroke carrier has an average boil-off rate of 0.08pc/d, compared with the most efficient two-stroke vessels which can have a boil-off rate as low as 0.05pc/d when its reliquefaction units are running at full capacity, traders said. This 0.03pc/d difference is the equivalent of 21.6 t/d of LNG consumption, or about 1,100mn Btu/d. Even a 0.01pc/d difference in boil-off efficiency would cost an additional $11,500/d in fuel costs at LNG prices of more than $30/mn Btu.
If a charterer can secure the most efficient 0.05pc/d boil-off vessel, this would imply savings of about $34,000/d compared with the average two-stroke carrier. Based on indicative round-trip journeys from the US Gulf to northwest Europe and northeast Asia, average savings would be around $880,000 and $1.35mn, respectively, based on Argus calculations.
Prior to the US-Iran war when des prices were about a third of current levels, vessel boil-off specifications were less important for charterers, although higher-efficiency vessels could perhaps command a small premium of $2,000-5,000/d. But because of the high prices, an extremely efficient vessel would command a premium of more than $10,000/d depending on delivery location, length of charter and the promptness of requirement.
Freight availability is generally quite high at present, although not all firms are offering vessels into the spot market. Some companies took on multi-month charters lasting into the winter, and a closed inter-basin arbitrage at present is set to weigh on demand. Companies that have issued spot charter requirements are heard to be very selective with vessel specifications, prioritising vessels with better boil-off rates.
Even lower-efficiency tri-fuel diesel engine (TFDE) vessels are functionally not being considered for the majority of US loadings, as they incur steep emissions penalties for deliveries to Europe in addition to average boil-off rates of 0.1pc/d. And many TFDEs owned by high-risk appetite owners have been chartered to state-owned QatarEnergy and the UAE's Adnoc for dark transits through the strait of Hormuz, leaving the remaining TFDEs in the market with few options in the Atlantic basin.
XDF engine two-strokes are also easier to charter out than MEGI engine two-strokes, because methane slippage is slightly better on XDF vessels, a priority for those looking to deliver to Europe given stricter emissions penalties. There are also more XDF vessels than MEGI within the global LNG fleet, and some firms prefer XDF vessels for operational consistency within their existing fleet.
