“With the clear trend towards decarbonization, investing in and constructing an onshore LNG terminal is no longer a realistic option in Europe or Asia,” Kondo told Kpler on the sidelines of the FSRU Asia Summit in Singapore. “If a country needs to import LNG, it will choose an FSRU.”
Onshore terminals take at least three to four years to construct, whereas an FSRU-based terminal could take between seven months and two years to come online.
And, with many countries aiming to fulfill their net-zero carbon emission targets by 2050 or 2060, the cheaper FSRU option provides developers with the option of repurposing them as LNG carriers, unlike permanent onshore infrastructure. Securing an FSRU could cost around $40 million, while the price tag for constructing an onshore LNG terminal is far heftier at around $1 billion, according to industry participants.
However, Kondo points out that the options for any developer looking to launch an LNG import project in the next two years are extremely slim, thanks to Europe’s rush last year to develop new LNG import capacity after Russia drastically cut its pipeline gas deliveries to the region.
“Starting an FSRU terminal in two years will be difficult because you won’t find an FSRU in the market,” Kondo said. “Most of the free(ly available) and speculative FSRUs are now on short-term contracts with European developers. They are no longer available and newbuildings take three years, conversions take under two years.”
Europe has brought online seven FSRU-based LNG import terminals since last year, with three in Germany at Wilhelsmhaven, Brunsbüttel and Lubmin; two in the Netherlands at Eemshaven, and one each at Inkoo in Finland and Piombino in Italy. These are aimed at replacing pipeline gas deliveries that Russia has curtailed in the wake of its war with Ukraine and achieving greater energy security. And, several more FSRUs have been secured for installation over the next two years in Italy, Germany and Greece.
Kondo estimates that around 10 FSRUs were probably available before last year, with some of them developed on a speculative basis to serve prospective LNG import terminals. But the slow pace of development of FSRU-based terminals in recent years meant that some were forced to serve as LNG carriers, supporting LNG trade.
The MOL and the Turkish power producer Karadeniz-controlled Karpowership joint venture, Karmol, has recently completed the conversion of an LNG carrier to an FSRU at Singapore's Sembawang shipyard. And the FSRU is expected to be deployed in Mozambique. Karmol has previously installed an FSRU in Senegal, which has been idle since its installation in September 2021, because of unaffordable LNG prices. However, there are no plans at the moment to redeploy the vessel, Kondo said.
Europe’s push for decarbonization and switch from LNG to cleaner fuels could free up a few FSRUs for new projects in Asia, provided the technology and costs are on track.
“There are significant hurdles to utilizing hydrogen imports in terms of marine transportation and infrastructure, and it is not clear whether it will proceed at a fast pace,” Kondo said. He added that FSRU contracts in Europe could be extended if the switch to alternative fuels does not proceed as rapidly as planned.
Three terminals in Germany, in Stade, Brunsbüttel and Wilhelmshaven, have been designed to import green gases such as hydrogen in 2026 and 2027, replacing the FSRUs that are stationed at these sites up to then.