In terms of new production capacity 2013 has been another nondescript year in the LNG sector. The volume of LNG traded globally during the current 12 months is expected to just about match the total achieved in 2012, itself a desultory year and one of only three in the past 30 in which LNG shipments actually slumped. Yet in every other respect 2013 has been a glorious year for LNG. Natural gas, and LNG as a means of moving the product from a growing range of sellers to an even wider band of buyers, continues to hog the energy transport limelight. Developments in the oil and coal sectors appear tame by comparison to what has been happening in the world of LNG.

As of 1 October, a total of 44 LNG carriers had been ordered so far in 2013. The new contracts comprise 32 conventional size LNG carriers, eight coastal tankers, three floating storage and regasification units (FSRUs) and the world’s first dedicated LNG bunker vessel. The last of the FSRUs to be ordered, in recent weeks, is a vessel of 263,000 m3, or 50% higher in capacity than the next largest FSRU ever conceived.

In value terms the 2013 LNG orderbook represents approximately USD 8 billion worth of new contracts. Korean yards have secured 25 of the 44 newbuilding contracts, Chinese yards 14 and Japanese yards five.

Allowing for the 11 LNG carriers completed so far in 2013, the vessels ordered this year have boosted the number of LNG vessels on order to 119. This total is equal to about one-third the size of the current fleet in terms of vessel numbers. The size of the current LNG orderbook has only been eclipsed once before – midway through the previous decade.

Today’s list of LNG vessels on order is more diverse than that of 10 years ago. It includes three floating production (FLNG) units, 13 FSRUs and three 30,000 m3 ships with Type C tanks earmarked for Chinese coastal distribution duties. The FLNGs and the three Chinese coastal LNG carriers, like the LNG bunker tanker mentioned earlier, are the first vessels of their types.

The healthy LNG orderbook is configured to provide the tonnage that will be required to transport the new waves of LNG production due to come on stream in the years ahead. The immediate focus is the 65 million tonnes per annum (mta) of new liquefaction plant capacity currently under construction in seven separate projects in Australia.

The new Australian capacity represents approximately one-quarter of the global trade in LNG, which currently stands at the 236 mta mark. The first LNG from the new projects will begin to flow in 2015 and by 2017 Australia will have an LNG production capacity approaching 90 mta.

Qatar, currently the world’s leading LNG producer, has the capacity to liquefy 77 mta of LNG from 14 trains at Ras Laffan. Most of this capability is currently being utilised and the 76.4 million tonnes sold to the global marketplace in 2012 was more than three times the volume of its closest rival, Malaysia.

Gas currently brings Qatar revenues of USD 8 billion per month and Qataris enjoy the world’s highest per capita earnings. The master-plan to develop the country’s offshore North Field, which provides all the gas for LNG production, has been in place for two decades. In 2005 Qatar established a moratorium on further exploitation of North Field to enable an assessment of how the rapid escalation in output was impacting proven reserves. That moratorium is scheduled to remain in place until at least 2015.

The absence of new output from Qatar will enable Australia to become the world’s leading LNG exporter within the next few years. The seven new Australian projects, however, will represent only the start of a worldwide drive to ramp up LNG production capacity.

The growing demand for LNG, most notably in Asia, has prompted studies for new Worldscale production plants in the US, Canada, Russia and East Africa as well as further facilities in Australia. The first of these has already been approved and is under construction while several others are well advanced and approaching the final investment decision (FID) stage.

Gas buyers are looking with favour at the potential for LNG exports from the US. The development of the technology that enables the country’s vast reserves of shale gas to be captured is turning the global energy picture on its head. Not least it has realised new flows of gas that have reduced US domestic prices to one-third of those that pertain in Europe and one-quarter of those in Asia.

Over 20 US LNG export projects based on the exploitation of domestic shale gas have been put forward for approval. Permission to despatch cargoes to countries with which the US has a free trade agreement (FTA) is virtually guaranteed but requests to sell LNG to non-FTA nations require rigorous assessments by the Department of Energy (DOE).

To date, one US export project has achieved all the necessary approvals, and four liquefaction trains to enable the export of up to 18 mta of LNG, including to non-FTA countries, are under construction. Conditional approvals have been granted to three additional US non-FTA projects. Korea is currently the only major LNG importer with which the US has an FTA in place.

The DOE has intimated that similar permissions will be awarded to the remaining proposed export projects and that it will let the market and financiers be the ultimate arbiters of which schemes come to fruition. However, there is a cumulative element to its project assessment procedure and if a level is reached where aggregate US LNG exports begin to push up domestic gas prices unduly or jeopardise energy security, then export volumes will be reappraised. DOE retains the right to rescind project permissions.

The 20-plus US LNG projects that have been tabled call for exports totalling 200 mta. Such a volume would be unsustainable because the global demand is not there for starters and, secondly, at that leve,l domestic prices would be driven upwards. The consensus view is that US exports will be around the 50 mta mark by 2025.

Asian buyers are already lining up purchases of US LNG, including from several of the projects that have yet to win DOE approval. The chosen vessel for the transport of LNG from a US Gulf export terminal westbound through an enlarged Panama Canal is a Pacificmax ship of 170-180,000 m3. A total of 25 of the LNG carriers ordered this year fall within this size range.

For Asian LNG buyers the prospect of US cargoes holds the promise of delinking the price they pay for their gas from that of oil, the traditional arrangement governing the region’s LNG imports. Even allowing for the cost of shipping a cargo across the Pacific, LNG sourced from the US Gulf and priced according to the local Henry Hub index would arrive in Asia at a discount of up to 20% compared to a cargo linked to the price of oil.

Amongst the other potential suppliers of new LNG volumes, Canada is seeking to develop exports from ports in British Columbia and seven projects have been proposed so far. Such locations are much closer to Asian markets than the US Gulf terminals and Canadian gas is also competitively priced. The downside for Canada is the current lack of pipelines connecting the gas fields of Alberta and eastern British Columbia with the proposed terminals on the province’s west coast.

Russia is another country seeking to develop new LNG export projects and build on the success achieved by its existing Sakhalin 2 liquefaction plant. Two further schemes have been put forward for the Russian Far East but the project closest to an FID – it could come in the next few months – is the ambitious Yamal LNG project in the Russia Arctic.

Yamal would necessitate a fleet of icebreaking LNG carriers that would also be ground-breaking vessels in terms of the application new gas carrier design, construction and operating technologies. The Russian government sees Yamal as a prestigious, high-profile project and is poised to end the monopoly that Gazprom, the state gas company, currently holds over the country’s LNG exports to enable the scheme to happen.

Elsewhere, companies exploring for oil and gas off the coasts of Mozambique and Tanzania have been pleasantly surprised by the scale of their discoveries. The first LNG project to be proposed for Mozambique, for example, calls for the construction of two trains initially and as many as eight eventually. Each train would have a 5 mta capacity and a start-up date of 2018 has been targeted for the first pair.

If Australia is able to further build upon its LNG export capabilities, once the seven projects currently under construction are completed, the chances are that it will be by means of an offshore gas deposit developed using an FLNG vessel.

High labour costs and the strength of the Australian Dollar mean that the country is now one of the most expensive places in the world in which to undertake a land-based infrastructure project. If Australia is to compete with the many new LNG export proposals currently under development worldwide, it will need to look to the cost-saving advantages offered by offshore LNG.

Editor's Note: Mike Corkhill is a technical journalist and consultant specialising in oil, gas and chemical transport, including tanker shipping and chemical logistics. A qualified Naval Architect, he has written books on LNG, LPG, chemical and product tankers and is currently the Editor of LNG World Shipping.