Ongoing conflict in the Middle East and other disruptions will lead to more companies hiring LNG ships under long-term contracts rather than on the spot market, NextDecade shipping vice president Peter Fitzpatrick said on Wednesday at an event in Houston.
The LNG industry became comfortable with hiring ships on the spot market when there was an oversupply of the fuel, with very few long-term deals done in 2024 and 2025, Fitzpatrick said. The market, however, is beginning to realize there will be increased volatility and is starting to adapt, he added.
“The long-term impact of the geopolitical crisis is that we will see more long-term shipping where you manage your own risk and not rely only on the spot market,” Fitzpatrick said at Lloyd’s Register’s Global LNG Forum.
He said supply chain challenges in acquiring gas turbines will slow the ability of U.S. LNG project developers to make final investment decisions because it is difficult to determine when the equipment will be available.
“There was a time when gas turbines were mainly for plants like LNG, but with the amount of data centers being built and the LNG expansion it is very challenging to get gas turbines,” Fitzpatrick told Reuters on the sidelines of the conference.
European resistance to long-term purchases, meanwhile, is also making FID challenging for some U.S. developers, as well as continued high interest rates which are driving up costs, he added.
With growth in LNG exports, the shipping industry is on track to build 100 carriers a year, with new ships carrying up to 15% more than current tankers, Gaztransport & Technigaz North America general manager Patrice Brossard said at the same event.
The United States, already the world’s largest exporter of LNG, is on track to double its export capacity by 2030. NextDecade is building a 30 million metric ton per annum export facility in Brownsville, Texas.
(Reporting by Curtis Williams in Houston; Editing by Nathan Crooks, Kirsten Donovan)