It is common in the Middle East to hear project clients bemoaning the shortage of contractors. Such is the weight of investment during this golden period that finding the right contractor at the right price can be a strenuous process.

They should consider themselves fortunate. In the energy shipping sector finding anyone, anywhere, to build you a ship is almost impossible. Fuelled by the unprecedented growth for large container, liquefied petroleum gas (LPG) and liquefied natural gas (LNG) vessels, the order books of the giant shipyards of the Far East are overflowing as shipbuilders strain to keep up with demand.

No shipbuilding sector has seen quite the meteoric rise as the LNG market, the orders for which have been the most responsible for the current bottleneck. Global liquefaction capacity is expected to nearly double to 197 million tonnes a year (t/y) by 2007 as world demand for gas increases and the sector moves into the mainstream. In the last three years alone, orders have been placed for about 100 LNG carriers, some 65 of which are now under construction. Compared to the current global fleet of 150 vessels, the addition of these new ships will increase global LNG shipping capacity to 25 million cubic metres (mcm) from 17 mcm. With an average carrier costing about $150 million, the current order book, excluding future orders, has a value of more than $15,000 million.

A third of these orders have been generated by the Middle East. However, it is only the tip of the iceberg. The region is expected to increase its LNG capacity by up to 70 million t/y over the next decade. Qatar, with its massive North field reserves, will lead the way. It is aiming to become the world’s largest producer of LNG, through the addition of new capacity of 55 million t/y. Qatar now has 21 LNG carriers on order from South Korea. In its most recent purchase, a letter of intent was signed between the recently formed Qatar Gas Transport Company (Q-Gas) and Maran Gas Maritime of South Korea for Q-Gas to take an equity stake of up to 30 per cent in four 145,700-cubic-metre vessels. But this is only the beginning. A further 56 LNG carriers are required by Qatar Liquefied Gas Company II (Qatargas II) and Ras Laffan Liquefied Natural Gas Company II (RasGas II) to meet their transportation needs up to 2012.

Flooding

‘The number of orders we are getting is unprecedented,’ says one South Korean shipbuilder. ‘We’ve had to increase our LNG carrier capacity to eight ships a year. We are working day and night to meet demand, but the orders just keep flooding in.’

The LNG shipping sector is not alone in facing a capacity gap: the regional petrochemicals industry is also booming. Gulf annual polyethylene and polypropylene production will double over the next four years to 8 million t/y and 4 million t/y respectively, while the region’s ethylene production as a share of global output will rise to 18 per cent from 11 per cent. However, unlike the LNG sector, where there should be just about enough transportation capacity to meet demand if fleets are built on schedule, the petrochemicals sector is facing a substantial annual shortfall of some 3.5 million tonnes of container capacity, hampering the effective distribution of products.

‘Both ports and terminals have missed the boat and underestimated demand,’ said Jack Helton, chief executive officer of Salalah Port Services Company, speaking at the Terrapinn Chemical Logistics & Supply Chain Management conference in Dubai in early October. ‘Almost every port is now congested; we did not forecast it [the increase in demand] and failed to act. It will take four-five years for the industry to recover.’

This is not the only issue facing the sector. Vessels are getting larger; the most modern now require draught depths of up to 18 metres. The problem is that very few ports in the world can receive ships of