Average LNG tanker speeds have raced to the highest since February 2015 and voyage length has shortened dramatically as sellers seek to capitalize on surging spot prices, a S&P Global Platts LNG market outlook report released Wednesday said.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Global LNG tanker speeds have risen to over 12 knots in December, above the average range of 11.3-11.6 knots recorded across April to September this year, data by PIRA Energy Group, a unit of Platts, shows.
This trend has been driven by midstream LNG traders arranging faster and shorter voyages for deliveries amid seasonally strong spot prices.
"With so much money on the line and wholesale pricing in Asia eclipsing $11/MMBtu, cargo owners are incentivized to churn their tankers as much as possible to cover increasing costs, but also the prospect of increased margins per cargo," said PIRA analysts, including Ira Joseph and Madeline Jowdy, in the report.
The analysts estimated that tanker speeds from liquefaction to regasification terminal range between 19 knots and 21 knots, depending on how modern the vessel is.
Higher chartering rates have also led to a higher number of shorter haul deliveries. Platts assessed LNG carrier day rate in Asia Pacific at $85,000/day Wednesday, up from the year-low of $25,000/day in April.
The higher charter rates have boosted the cost of long-haul deliveries, with PIRA estimating that the cost of delivering a cargo from Sabine Pass to Beijing has risen by $1/MMBtu as a result.
"High market pricing can change not just tanker directions to capture arbitrage opportunities, but also in terms of getting fuel from point A to B," PIRA said.
For example, the world's largest LNG exporter Qatar has benefited from a strategic geographical location where it can flexibly deliver to countries in South Asia, the Middle East and the Mediterranean.
A third of Qatari cargoes in December are headed to India or Pakistan, which takes three or four days to deliver as opposed to China which takes on average over 17 days, according to PIRA.
"Qatar is likely receiving lower delivered prices to South Asia, but the shorter haul is offsetting the netback effect of capturing lower prices," PIRA said.
This efficiency gain should serve Qatar well during peak winter demand season, but possibly meant losing market share to other exporting countries like Australia, into premium Asian markets, PIRA noted.
The Platts JKM for cargoes to be delivered in February was assessed at $11.20/MMBtu Wednesday, 95 cents/MMBtu higher than the DES West India assessment.