Oversupply of LNG shipping capacity is unsustainable - SFOC

Seoul-headquartered NGO Solutions for Our Climate's (SFOC) report highlights that there is a "massive oversupply of LNG shipping capacity."

PHOTO: A visualisation of an LNG carrier at sea. Getty Images

The SFOC’s new report has drawn on datasets from the maritime research firm Clarksons for the current LNG ship fleet in operation and on order till May 2024. It also studies the International Energy Agency’s (IEA) latest net zero scenarios published in October 2023.

While 2023 saw a total of 64 LNG carriers on order, the first five months of 2024 alone saw 55 new orders, the report notes. Comparing these figures to IEA’s Net Zero Emissions pathway, which aims to limit global temperature rise to 1.5°C, the SFOC says no new LNG carriers are required. 

Despite this, the LNG vessel orderbook continues to grow rapidly and the number of vessels being constructed is projected to grow over the next few years. “In 2024, 2025 and 2026, 251 carriers with a total of 43 million cbm of shipping capacity are projected to be delivered – 38% of the capacity in operation as of 2023,” the report reveals.  

The SFOC's findings suggest that the influx of new LNG carriers will push the market into "oversupply territory." By 2030, the global fleet of LNG carriers is projected to exceed 400 vessels. China and South Korea were identified as the primary shipbuilding hubs responsible for constructing the majority of these carriers.

This massive oversupply of LNG shipping capacity is unsustainable, the SFOC argues, saying that it will lead to more LNG carriers being abandoned in the long run. Additionally, the organisation claims that this oversupply will be costly, as funds allocated to building these vessels could be better invested in alternative energy transition initiatives.

LNG, essentially a fossil fuel, is made of around 95% methane. During its life cycle, right from extraction to transportation and storage LNG emits methane, a greenhouse gas (GHG) which is much more polluting than CO2, says the US-based NGO Natural  Resources Defense Council (NRDC). 

By Manjula Nair

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