Asia-Pacific Freight Premium Increases

The Asia-Pacific freight premium for XDF-powered LNG carriers reached its highest level of the year.

Share:

The Asia-Pacific freight premium for LNG carriers with two-stroke engines reached its highest level of the year on September 16. Many ships are used as floating LNG storage facilities. This use results in a reduced supply prior to the winter shopping season.

Freight premium increase

The premium for bi-fuel (XDF) equipped LNG carriers was approximately $25,000/d in June of this year. This premium increased fivefold to $132,500 per day on September 16.

The current market situation can be summarized the statement of a broker from Singapore:

“The premium that larger vessels command is on the rise. This is because there are virtually no two-stroke LNG carriers available for spot loading in Asia.”

The cause of this increase: floating LNG storage

Multiple factors are driving this increase in the LNG freight premium. The structure of the contango market, difficulties in financing Russian cargoes and the shutdown of the Nord Stream 2 pipeline have combined to push freight prices higher.

The structure of the market is such that merchants stand to gain if they stock and sell only in November. Nevertheless, the onshore tanks are full. Traders are then forced to store LNG on ships.

In addition, LNG ships with XDF engines are best suited to undertake this type of storage. In fact, their size is relatively larger. They also have reliquefaction facilities on board and boiling in such vessels is less. Daily LNG boiling in traditional vessels can be as high as 0.25%, compared to 0.03% in XDF-powered vessels.

Alternatively, these vessels can use fuel oil in floating storage to reduce costs in the midst of high LNG prices.

The exact number of vessels used as floating storage is not available. Nevertheless, market participants said the number was at its highest level since the beginning of the year.

TotalEnergies’ Mozambique LNG gas project is at the centre of a legal challenge in Washington, following the approval of a $4.7 bn loan by the US Exim Bank, amid security concerns and opposition from civil society groups.
Investors are closely watching U.S. midstream companies’ announcements regarding new gas pipeline expansions targeting promising markets in the West and Northeast, beyond traditional regions in Texas and the Southeast.
PPL Corporation and Blackstone Infrastructure announce a strategic partnership to develop new gas-fired power plants to supply electricity to data centers through long-term contracts in Pennsylvania.
Falcon Oil & Gas Ltd announces a new record initial flow test result at the Shenandoah S2-2H ST1 well and the start of its 2025 drilling campaign in the Beetaloo Basin.
The Azule Energy consortium has identified a significant gas and condensate field during Angola’s first exploration drilling dedicated to gas, marking a milestone for the country's energy sector.
Technip Energies has secured a contract to lead preparatory works for a floating liquefied natural gas unit in Africa, confirming its presence in the international gas infrastructure market.
The Slovak government is seeking guarantees from the European Union to secure its supplies as talks continue over ending Russian gas and adopting a new round of sanctions.
ArcLight Capital Partners announces the acquisition of Middletown Energy Center, a combined-cycle natural gas power plant, aimed at meeting the substantial rise in energy demand from data centers and digital infrastructure in Ohio.
The commissioning of LNG Canada, the first major Canadian liquefied natural gas export facility led by Shell, has not yet triggered the anticipated rise in natural gas prices in western Canada, still facing persistent oversupply.
Horizon Petroleum Ltd. is advancing towards the production launch of the Lachowice 7 gas well in Poland, having secured necessary permits and completed preliminary works to commence operations as early as next August.
European Union member states have requested to keep their national strategies for phasing out Russian gas by 2027 confidential, citing security concerns and market disruption risks, according to a document revealed by Reuters.
TotalEnergies becomes a member of PJM Interconnection, expanding its trading capabilities in North America's largest wholesale electricity market. The decision strengthens the company's presence in the United States.
Despite record electricity demand, China sees no significant increase in LNG purchases due to high prices and available alternative supplies.
US natural gas production and consumption are expected to reach record highs in 2025, before slightly declining the following year, according to the latest forecasts from the US Energy Information Administration.
Naftogaz announces the launch of a natural gas well with a daily output of 383,000 cubic meters, amid a sharp decline in Ukrainian production following several military strikes on its strategic facilities.
Sonatrach and ENI have signed a $1.35 billion production-sharing agreement aiming to extract 415 million barrels of hydrocarbons in Algeria's Berkine basin, strengthening energy ties between Algiers and Rome.
Maple Creek Energy is soliciting proposals for its advanced 1,300 MW gas project in MISO Zone 6, targeting long-term contracts and strategic co-location partnerships with accelerated connection to the regional power grid.
VMOS signs a USD 2 billion loan to finance the construction of the Vaca Muerta South pipeline, aiming to boost Argentina's energy production while reducing costly natural gas imports.
According to a Wood Mackenzie report, Argentina could achieve daily gas production of 180 million cubic metres per day by 2040, aiming to become a key regional supplier and a significant exporter of liquefied natural gas.
Côte d'Ivoire and the Italian group Eni assess progress on the Baleine energy project, whose third phase plans a daily production of 150,000 barrels of oil and 200 million cubic feet of gas for the Ivorian domestic market.