GTT lowers new FSRU order expectations

French engineering firm GTT has lowered its expected order numbers for new floating storage and regasification units (FSRUs) over the coming decade.

The firm — which makes LNG storage tanks for waterborne and land-based units — puts expected tank orders for new FSRUs at 10-20 units over 2020-29, down from expectations in July last year of 30-40.

The reduction is based on a greater likelihood of conversions of older LNG carriers into FSRUs — a process previously seen as unattractive because of the older carriers' lower storage capacity and greater boil-off and fuel consumption.

But with a sizeable portion of the global LNG fleet due to roll off long-term charters in the coming years, and amid limited vessel scrapping, there is set to be ample availability for conversions. Older vessels are unlikely to be able to compete with the existing dual-/tri-fuel diesel-electric (TFDE) and two-stroke propulsion vessels in the spot LNG freight market.

And the global vessel orderbook is overwhelmingly composed of two-stroke vessels with a capacity of around 174,000m³, suggesting that steam turbine vessels are set to become increasingly uncompetitive as these orders come on to the water in 2020-24.

Demand for FSRUs has picked up in recent years, as the global LNG market balance has moved into surplus, with firms seeking to meet potential gas demand in regions with limited gas and power infrastructure.

And this demand is expected to continue growing, because of the shorter installation period and lower required investments compared with onshore import terminals, South Korean shipbuilder Samsung Heavy Industries (SHI) said last month.

Floating LNG-to-power units may require lower LNG import volumes, which could make converted smaller steam turbine carriers a more attractive option for developers, compared with purpose-built FSRUs. Only around 954,000 t/yr of LNG supply is required for every 1GW of gas-fired capacity running at full load — assuming 60pc efficiency — and providing around 8.76 TWh/yr.

Some firms — such as Norwegian owner BW LNG — have also sought to convert newer two-stroke carriers into FSRUs, tying them to long-term charters with terminal developers. This is likely an attempt to meet the greater demand for FSRUs and avoid the weaker rates in the spot shipping market, which is entering what a number of shipowners see as an era of surplus tonnage.

That said, GTT has revised upwards its expectations for LNG carrier tank orders in 2020-29 — to 285-315, from 280-310 in July last year — a figure that includes tanks for new carriers and replacements for existing vessels.

And the firm held its expected orders for floating LNG export units (FLNG) over the period at up to five, in contrast to SHI's expectations that demand for FLNGs will increase in the coming years.

By Samuel Good