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I bet Vlad owns the tankers too! Honestly, the sanctions are really working.

It's amazing how the NATO based sanctions are hurting Putin. Sort of like telling someone to stop hitting your hand with their face. Think it's bad now...the real fun starts this winter when the EU's demand for oil and natural gas ramp.


Europe’s Natural-Gas Crunch Sparks Global Battle for Tankers

Charter rates and prices for new LNG tankers surge as Europe looks for alternatives to throttled Russian gas supplies


By Georgi Kantchev and Joe Wallace, WSJ

Updated Aug. 22, 2022 3:48 pm ET


Europe’s energy crisis has unleashed a global battle over natural-gas tankers, leading to a shortage of ships and further boosting the fuel’s record prices.


European countries ramped up their purchases of liquefied natural gas from the U.S., Qatar and other sources this year as Russia cut supplies to the continent. They are competing with peers in South Korea and Japan—where gas demand has surged during a heat wave—for a finite amount of supply ferried by a limited number of vessels.


The jostling has increased orders for new tankers transporting LNG—specialized ships the length of three football fields—as well as their price. Rates to charter existing tankers have jumped too, which has helped push gas prices to records in Europe and Asia.


Gas prices in Europe jumped a further 15% Monday after Russia said it would temporarily close a major pipeline for unexpected maintenance later this month. The rise in Europe dragged the U.S. natural-gas market up 3.7% to its highest level since 2008. Traders expect gas prices and tanker rates to zoom even higher if China, where demand has been curtailed by Covid-19 lockdowns, steps back into the market before winter.


The race to secure tankers is another sign of the reshuffling of the global energy map following Russia’s invasion of Ukraine. The war has intensified competition for tight energy supplies, reoriented commodity flows and fractured parts of the global oil-and-gas market, with supporters and opponents of Russia paying different prices.


LNG and the tankers that carry the fuel were in high demand even before the conflict, as extreme weather curtailed hydropower and many economies sought to ditch coal to reduce carbon emissions. The war has turbocharged that trend.


Before the war, Russia covered 40% of the European Union’s gas supplies, mostly via a network of pipelines. Given that it will take time to upgrade the continent’s pipeline network to receive imports from other nearby exporters, the main short-term alternative is LNG, which can be bought from producers further away and shipped, albeit at a higher price.



In the production of LNG, gas is chilled to minus 260 degrees Fahrenheit and shrunk to a liquid that can be stored and shipped to terminals. There it is returned to a gas state and used to power factories and heat homes.


Just one LNG tanker is available to be chartered for a single voyage in Asia two months or more from now, said Jason Feer, head of business intelligence at Poten & Partners, a shipbroker. None is available in the Atlantic Ocean.


“Everything out there is going to be snapped up,” said Toby Copson, head of trading and advisory at Shanghai-based Trident LNG. “Effectively you’ve got Europe and Asia bidding against each other and propping the market up.”


The scramble for ships adds another challenge for Europe, where governments are racing to fill storage facilities ahead of the heating season and companies are buckling under high gas prices. Russia has capped deliveries to Germany via the key Nord Stream pipeline at 20% of its capacity, blaming Western sanctions. German and European officials have called the throttling an economic attack.


Amid the gas rush, daily charter rates for existing tankers that traders will take hold of between mid-September and mid-November have risen to $105,250 a day, up from about $64,000 now and about $47,000 a year ago for vessels heading from the U.S. to Europe, according to Spark Commodities.



An LNG tanker under construction at a shipyard in Geoje, South Korea.

PHOTO: SEONGJOON CHO/BLOOMBERG NEWS

Rates were above $100,000 a day in June, before dropping when a fire at an LNG export facility in the U.S. reduced exports and demand for boats. Analysts and traders expect them to rebound because trading companies have booked many more boats on a long-term basis to make sure they can ferry LNG, in turn reducing the pool of vessels immediately available.


To avoid getting caught out in the future, traders are going on a buying spree for ships. Customers have shelled out $24.1 billion on orders for new LNG tankers—including orders for eight vessels in August—so far in 2022, according to Stephen Gordon, managing director at London-based shipping firm Clarkson. They have already blown past the full-year record of $15.6 billion from 2021.


Currently, 257 vessels are on the order book globally, according to consulting firm Rystad Energy. Shipmakers in South Korea, the world’s biggest producer of LNG tankers, don’t have free capacity for new orders until 2027, Rystad estimates.


Among the biggest buyers of LNG tankers is Qatar, one of the world’s largest LNG exporters. This tiny Persian Gulf kingdom has emerged as one of Europe’s best hopes to wean itself off Russian gas, and European countries have been in talks with it about long-term LNG contracts.


Demand for tankers has raised the price of the new vessels. Surging steel prices and limited shipyard capacity are also contributing to the tanker inflation, with newbuild prices approaching $240 million a ship from $190 million a year ago, according to Rystad.


Higher tanker prices and rising rates for chartering ships are feeding into the LNG value chain and boosting already high gas prices worldwide, said Kaushal Ramesh, an analyst at the consulting firm. “The recent focus on energy security means the entire market has gone back to taking a long-term view on supply and shipping,” he said.


Demand has also risen for so-called floating storage and re-gasification units, which are often converted LNG tankers moored at the coast. Setting up these facilities, known as FSRUs, is faster than building a dedicated LNG terminal, which usually takes years.


Across Europe, 14 FSRUs are currently planned. FSRU charter rates have risen to $200,000 a day in some cases, more than double the rate in early 2021, according to Rystad.


Germany, which had for years been dependent on cheap Russian piped gas, doesn’t have a single LNG terminal. Now, Berlin is planning to have two such FSRUs ready by the end of the year, with several others following next year.



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