LNG Cargoes Returning Seen by DNB to Help as Ship Rates Decline

Cargoes of liquefied natural gas returning from outages in Norway and Nigeria will increase demand for shipping as rates decline, according to DNB Markets.

Rates will probably extend losses while returning volumes from the Snohvit project in Hammerfest, Norway, and Nigeria LNG support demand, Oslo-based analysts led by Nicolay Dyvik said in an e-mailed report today. The fuel costs enough in Asia to make trades from Europe profitable, according to DNB.

“Volumes are returning to market from both Snohvit and Nigeria LNG, and we expect a general market catch-up after having seen 2012 world export volumes down 1.5 percent from 2011,” the analysts said. “LNG charter spot estimates from brokers have started to slide -- we expect this to continue somewhat, but expect that stronger volumes will cushion the fall, as demand for short-term tonnage will increase.”

Statoil ASA shut down the Hammerfest LNG plant at the end of January for an undisclosed period of time, probably “weeks rather than days,” spokesman Ola Anders Skauby said Jan. 23. Royal Dutch Shell Plc declared force majeure on gas supplies to Nigeria LNG as of Feb. 5 after a leak on a pipeline serving two processing plants, according to a statement from the company on Feb. 8.

April deliveries of LNG in Asia cost more than $18 per million British thermal units, compared with $12.60 in northwest Europe, DNB said in the report, citing figures from Argus LNG. That’s more than the $3.50 to $4 premium need for profitable trades, the bank estimated.

Spot rates for LNG carriers fell 5.9 percent to $120,000 a day last week, according to Fearnley LNG. They averaged a record $128,400 in 2012, the shipbroker’s figures show.

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