The situation and development trend analysis of FSRU market

By Gao Fei & Shen Cheng

Since the delivery of the world's first Floating Storage and Regasification Unit (FSRU) in 2005, 27 sets of FSRU have been delivered worldwide. Among the 41 countries with LNG regasification terminals in the world, 18 of which have deployed FSRU while 11 of which use FSRU only as the terminal. As more and more LNG regasification terminals are put into operation, the proportion of investment in FSRU will increase from less than 10%in 2010 to more than 40% in 2017. It shows that FSRU is becoming more and more favored by the market.There is a broad prospect for LNG, with global demand increasing rapidly. As one of the recognized and widely accepted clean energy sources in the world, LNG poses little pollution to the air after combustion,but with large heating power. According to the International Energy Agency (IEA),the global demand for natural gas will reach 450 million cubic meters in 2030 and the global LNG trade volume will continue to grow in the future. According to the forecast by Durban, global trade volume will substantially increase to nearly 300 million tons by 2018 and will further increase to 360 million tons in 2021 which means that it will maintain growth rate of over 4% before 2021.Considering the advantages of the FSRU compared with the land-based terminal as analyzed above, the FSRU market will be more favorable in the long-term given the increasing LNG trade volume.

With the increase of investment, FSRU demand continues to grow. According to IHS statistics, there are currently over 60 FSRU projects in the bidding / planning /evaluation stage in the world, some of which will be suspended or canceled. Taking into account the current progress of the project and market holdings, IHS expects that there may be 45 FSRU in service in 2021, with an average annual delivery of 4 ships which is higher than the average of the past 10 years. The Asia-Pacific region especially in China and India, Africa and South America will be the regions with stronger demand in the future. According to the IHS’s investment statistics and projections of FSRU for 2011～2020, currently the annual investment is above $ 1.5 billion since 2017(Excluding speculative orders that have not yet appeared)

With the market competition becoming fiercer,speculative orders have increased significantly. The previous FSRU market was largely monopolized by Excelerate Energy, Golar LNG and Hoegh LNG. As the demand for FSRUs continues to increase, new ship owners based on existing LNG carriers such as MOL,Dynagas, Maran Gas Maritime gradually enter the market by way of new FSRU orders. Currently of 16 sets of FSRU, 6 are out of orders (including those under construction) and there are several active FSRU in short term leases. It is foreseen that competition in the future FSRU market will be quite fierce, and Golar LNG has stated since 2016 that it will adopt a competitive pricing strategy to secure its market share. At the same time,Hoegh LNG has always been maintaining a lease-free FSRU under construction as its strategy so that it will be able to dominate short and medium-term project bidding while new entrants will also be inclined to use this competitive strategy. The continuous increase of speculative orders will make the market competition more intense.