LNG Tanker Market Heats Up

The market for LNG (liquefied natural gas) has heated up, thanks to demand from Japan, China and other Asian nations.

In addition, LNG has become more available with the opening of new export facilities in Qatar, the world's largest LNG exporter.

These two factors in combination have fired up the market for the LNG tankers which transport the gas all over the globe.

This was once a sleepy market with long-term 20 year contracts tying up ships with little profit for the ship owners. No surprise then that about 30 percent of the fleet was sitting idle just two years ago.

But now things have changed...more and more of the ships, especially the new LNG carriers, are being leased on the short-term or spot market.

Charter rates were languishing at a barely profitable $30,000 a day have recently surged to as high as $125,000 a day thanks to surging demand for these vessels. In fact, Swedish shipper Stena Bulk has calculated that 90 to 95 percent of the world's roughly 360 LNG tankers would soon be in use

The CEO of another tanker operator, Norway's Hoegh LNG, said the market was likely to remain “very tight” until 2013 or 2014. And after that the completion of export facilities, such as in Australia, will require still more ships.

Andreas Sohmen-Pao, CEO of BW Gas – owner of the world's biggest LNG fleets – agrees. He said the market will expand even further if the United States started to export significant amounts of its natural gas supply.

By the way, the UK's BG Group last month signed the first contract to export LNG from the United States, once the first export liquefaction terminal is ready in 2015.

This boom in the LNG market is all good news for the LNG carrier companies which are publicly traded here in the U.S. These companies are: Golar LNG Ltd. (NASDAQ: GLNG) and Teekay LNG Partners L.P. (NYSE: TGP).