As a result, owners laying up their ships or selling them for demolition are increasing. In fact, a Japanese operator is putting one of its ships on cold lay-up.
These aged LNG carriers are to find their way in limited trades where they can be utilized or conversion into floating storage & regasification units (FSRU), but naturally, it is impossible for all of them to find their way for survival. Thus, it is highly possible that lay-ups and demolition of these ships will further increase.
Since 2008, large number of LNG carriers has been in surplus. This is because while scarce cargo is growing into a serious problem, LNG carriers turning to free vessels are increasing sharply. These surplus vessels can be divided into three groups.
The first group ships are those to be employed under long-term contracts but becoming temporarily surplus because of delays in project startups. The second group ships are state-of-the-art vessels ordered by speculation purposes without long-term contracts, eyeing spot market, based on expected higher ship prices. Ships in the last group are aged ones freed from long-term contracts upon expiry. The third-group ships are having hardest time on the market.
As LNG carriers have durability, it was once said that they can be used for more than 40 years. But a Japanese operator source points out that, "Costs of aged LNG carriers are low as they are fully depreciated, but still, these ships are inferior to high-priced newbuildings in overall competitiveness. Amount of gas leaking out of tanks is large, and fuel-efficiency is low for aging vessels. Above all, recent ships are becoming large, and old ships cannot compete with them. Physically, LNG carriers can be used for 40 years, but aged vessels are losing competitiveness."
Thus, owners of aged vessels are increasingly advancing lay-ups or demolition for them. The Kotowaka Maru, a 125,199-cbm LNG carrier completed in 1984 for joint ownership by Nippon Yusen Kaisha (NYK), Mitsui OSK Lines (MOL) and Kawasaki Kisen Kaisha (K Line), was put on a cold lay-up for a period of one year from late April.
The ship had been used for the Arun project in Indonesia. It became a free ship, but as the market environment is bad, it was put on lay-up. The ship aims to return to LNG transport job or conversion into an FSRU from here on. Besides this ship, independent LNG carrier operators and owners affiliated with oil majors are said to be laying up about five ships, completed in the latter half of 1970s through 1980s.
Demolition of aged LNG carriers is also seen occasionally. In 2008, Bluesky LNG Corp., a subsidiary of Taiwan Maritime Transport (TMT), reportedly scrapped the Cinderella, a 25,500-cbm world's oldest ship completed in 1965, and the Charm Junior, a 50,000-cbm one completed in 1971.
Spain's Maritima Del Norte also reportedly scrapped the Laieta, a 40,000-cbm ship completed in 1970. Since the turn of 2009, multiple LNG carriers appear to have been scrapped. Of aged ships scrapped, many are those completed around 1970 and small-size ones with less than 50,000-cbm in capacity.