As Europe Hunts for Gas, Atlantic LNG Carrier Rates Hit New Record

The Swinous — The Swinoujscie LNG facility in Poland

As European nations push to secure natural gas supplies ahead of the winter heating season, Atlantic basin day rates for LNG carriers have soared to record levels. Shipowners lucky enough to be in the LNG sector can hope for spot rates pushing the $400,000 mark, a price bracket usually reserved for the ultradeepwater drillship sector on its best days.

The latest data from Spark Commodities shows that average rates for LNG carriers have hit $397,500 per day, up from about $14,000 per day in February and $80,000 in late August.

The new rate easily beats the previous regional record of $300,000 per day, which was just set last week, according to the firm's data.

This time of year usually sees a substantial price hike in the region's LNG transport market, but 2022 is unusual: Russia has all but completely cut off pipeline gas supplies to the European Union, leaving EU customers dependent on Norwegian and North African pipeline gas, limited domestic production, and LNG.

The import volume of LNG into the EU is restricted by terminal capacity, but with half a dozen new FSRU charters arranged by the leading European gas utilities, the quantity is rapidly on the rise. EU LNG imports are up about 65 percent for the year through August, according to the International Energy Agency - most of it from the United States.

That demand has radically increased the price of LNG, with knock-on effects for other sectors. Asia's major LNG importers - the world's top consumers of the commodity - are paying far more than their usual pricing. Less affluent nations have cut down on LNG buying, and Bangladesh - which has a high dependence on LNG for its power grid - has had to implement rolling blackouts.

Most LNG dual-fuel ships have stopped running on LNG and have switched back to VLSFO bunkers, which currently cost about one-sixth the price per BTU. Dual-fuel powerplants and industrial thermal energy consumers are expected to make the same choice, driving about 600,000 barrels per day of additional oil consumption by the first quarter of next year, according to Platts.