Another day at the trading desk
Ever heard about LNG cargoes changing hands several times across the Atlantic because traders are… eh, trading? Or LNG carriers meeting each other on the oceans with full cargoes in opposite directions?
I have heard those stories for a long time, so I wanted to find out how inefficient LNG shipping really is. Now, bear with me dear traders and commercial guys, this is just a theoretical exercise.
In 2012, a fleet of about 350 LNG carriers sailed about 41 million nautical miles to transport 328 billion cubic meters of natural gas. The BP statistical review shows the sources and destinations for those volumes.
We put that into a spreadsheet, and we asked the spreadsheet to calculate the optimal routes to transport these volumes under the constraint that all countries should export or import the same volumes as they actually did in 2012.
The result was that a fleet of 191 LNG carriers could have sailed 29 million nautical miles to transport the same 328 billion cubic meters of natural gas.
That’s a 45% reduction in the number of LNG carriers, and its a 29% reduction in sailed distance. The fact that the number of LNG carriers is reduced by more than the sailed distance indicates that there are other inefficiencies in this market as well, such as waiting times for whatever reason. But the choice of contract counterparts is the source of 2/3 of the inefficiencies in LNG shipping.
This translates into two things; a lot of money can be saved, and a lot of carbon emissions can reduced.
I’ll leave the monetary opportunity with the traders, but the environmental impact is easy to estimate: The total CO2 emissions from the 41 million nautical miles in 2012 can be estimated to 25 million tons of CO2. If 29% of that could be avoided, it would mean a CO2 emissions reduction of 7 million tons of CO2.
