With a global energy crisis looming, European and Asian natural gas suppliers are rushing to charter LNG carriers and that competition could potentially drive up gas prices, according to a new note from S&P Global.
This is particularly problematic for Europe, which has already shelled out billions to secure gas supplies since Russia cut gas flows to the continent this summer. Recently, Russia announced that it would halt flows on the Nord Stream 1 gas pipeline indefinitely, driving up Dutch natural gas prices TTF, the European benchmark, to 268 euros, or $266 per megawatt hour.
“Short-term charter vessels are still scarcely available but long-term [LNG carriers are] not. There’s not enough supply,” an industry source told the research firm.
Indeed, it takes years to build new tankers and prices are expected to rise as new ships are being built. Around the world, around 286 LNG carriers are on order until 2028, and only 165 of these ships will leave by 2025.
Another industry source told the S&P that LNG carrier charter rates “will fly as the winter season arrives”, and one tanker broker speculated that tri-fuel tanker charter rates of the Pacific on round trips could reach $400,000 a day during the winter.
That’s a 20% premium over what it cost to ship natural gas last December at $320,000 a day, and it’s more than 13 times what tankers had chartered at the time of the charter. invasion of Ukraine by Russia, at $30,000 a day in February.
This could have a major impact on gas prices, according to a Wall Street Journal report, as charter rates have contributed to the record prices seen so far in Europe and Asia.