The use of liquefied natural gas (LNG) as a clean energy source has increased dramatically over the past decade. In the 1990s, worldwide LNG sales grew by about 45 per cent, but many industry observers expect the sector to double in size by 2011 and to triple by 2020.

With long-haul pipeline transportation often prohibitively expensive, one of the most viable commercial alternatives is for the natural gas to be cooled to a liquid form and then transported by sea. The number of dedicated LNG carriers has doubled in the last 10 years, and indications are that this rapid growth will continue. At present, there are about 180 LNG carriers engaged in the international trade, with a further 121 under construction or on order. In 2004 alone, 77 new building orders were placed.

LNG carrier size and technology have kept pace with the expansion of the industry. Traditionally, large long-haul carriers were mainly in the 138,000-145,000-cubic-metre size range. However, the Q-flex class of LNG carrier has capacity of 200,000 cubic metres, while the proposed Q-max class comes in at 240,000 cubic metres – an indication that ship size will continue to grow rapidly. Together with the increase in carrier size, there has been a shift away from the traditional steam turbine propulsion system towards diesel-electric power. This allows increased cargo carrying capacity – as a result of reduced machinery space – and addresses the shortage of ship engineering officers qualified to serve on steam ships.

One key advantage of transporting LNG by sea is flexibility. Producers can sell to more than one destination, while buyers have a choice of what to buy – and the destination of an LNG cargo can be changed to respond to market demand.

However, the LNG market is unlikely to develop along the lines of the spot market for crude oil and petroleum products. Given the massive capital investment involved in establishing an LNG project, it has historically been a long-term business. LNG spot sales generally consist of one-five cargo-by-cargo deliveries, and a short-term sale is more than five deliveries with an LNG sale contract term of one-three years. But both these forms of sale have, until very recently, been rare. Where they have occurred, it has been to meet occasional peaks in demand and, in some cases, to offtake excess production.

From the perspective of the shipping industry, due to the high cost of construction, LNG carriers have usually been built on a dedicated project basis, most often on the back of a 20-year time charter. Conventional wisdom suggests shipowners cannot afford to build LNG carriers on a speculative basis and run the risk of having such an expensive asset sitting idle for long periods while waiting for cargoes. Nevertheless, it will remain an important niche market. In the first quarter of 2005, for example, Drewry Shipping Consultants determined that short-term and spot trades rose by 10.1 per cent, compared with the same period in 2004. Drewry estimates that in 2004 short-term trades in LNG represented 15.5 per cent of the total. In 2004, the quantity of short-term trade was 20.1 million tonnes of LNG, while total seaborne trade of LNG was 129.9 million tonnes.

Small spot market

Trinidad & Tobago is the largest supplier of LNG under short-term agreements, mainly to the US, followed closely by Malaysia. Together they account for more than half of short-term LNG supplies. In the first quarter of 2005, Drewry reports that the US imported 4.9 million cubic metres of LNG under short-term agreements, and continues to be the largest importer. Although there will always be a small LNG spot market, it is unlikely to develop much further.

The rapid expansion and growth of the LNG industry has led to a severe shortage of experienced senior officers. The shortage has been exacerbated by the unrealistic demands of charterers wh