Natural gas is the cleanest-burning fossil fuel, producing less pollutants than coal or oil. When natural gas is cooled to -259 degrees Fahrenheit, in a process called liquefaction, it becomes LNG -- a clear, odorless, colorless liquid. It also weighs less than water so it floats when spilled. Perhaps the most salient attribute of LNG is that it's 1/600 the volume of natural gas in its gaseous state. It is this final detail that makes it so ideal for transport and economical for trade.
While natural gas for export is abundant, the liquefaction process requires expensive equipment. Despite concerns over limited addition in liquefaction capacity in the short term, most analysts remain positive on the industry in the long-term. The Ukraine will certainly increase the degree of exports flowing out of the U.S., and while the liquefaction of America's natural gas is highly political, the energy implications of a standoff with Moscow provide ample cover. Additionally, as more liquefaction projects come on-line the demand for LNG transportation will continue to rise.
Japan is the largest importer of LNG as a consequence of reactor meltdowns at the Fukishima facility in 2011 -- this event catalyzed a movement toward LNG. According to Reuters, Japan's top shippers plan to order 90 new liquefaction natural-gas tankers worth $17.6 billion by 2020 "as they gear up to transport rising volumes of super chilled fuel from North America to Australia." To be clear, liquefaction refers to the storage of LNG, while regasification refers to the usage of LNG, which is to say Japan's top shippers are focused on the supply and storage of LNG. Still, we don't know much about the size of the vessels ordered, but larger tankers are required in order to carry liquefaction equipment.
According to an article in the Maritime Connector, 67 LNG carriers were ordered in 2013, "the third highest annual total for such ships." The article also discusses the diversity in size or function:
The total comprised 42 conventional-size LNG carriers, eight small-size vessels, six floating storage and regasification units (FSRUs) and an LNG bunkering tanker, the world's first such ship.
During the fourth quarter of 2013, the average time charter equivalent rate across the entire fleet, including our fully refrigerated vessels was approximately $830,500 per calendar month ($27,300 per day), compared to $798,230 per calendar month ($26,243 per day) for the comparable period in 2012.
The LNG market is growing and the size of the ships available to transport is growing as well, but who will transport from the FLNGs to the terminals across the world that need LNG? Since smaller vessels make up less of the overall fleet, and there were fewer on order in 2013, both StealthGas and Navigator are in a position to benefit from the increase in export demand.
OPEC is absolutely terrified of this game-changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000… per hour (that’s almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company’s can’t-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we’re calling OPEC’s Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock… and join Buffett in his quest for a veritable LANDSLIDE of profits!