FSRU Market Thrives Amidst Robust LNG Demand Growth

53

FSRU demand has been expanding due to a shift in global LNG trade. FSRU capacity will grow at a CAGR of 6%, supported by robust LNG trade growth of 8.3% between 2024 and 2029. While Europe’s LNG demand is immediate, Asia seeks long-term growth. 

Europe Deployment Revived

FSRU deployment in Europe has revived significantly since the Russia-Ukraine war, driven by the urgent need to secure alternative energy sources. Efforts by European countries to reduce their dependency on Russian gas resulted in a massive shift towards LNG, in turn, boosting investments for import infrastructure. This surge is evident from the growing operational capacity, as six FSRUs (24.4 mtpa) became operational in 2023, followed by three FSRUs (9.8 mtpa) in 2022, compared to just one (1.2 mtpa) in 2021 and none during 2019-20. 

Investments in regasification and FSRUs have been on an uptrend, with terminals securing FIDs and FSRU relocation.  Although this massive investment has been a response to avert any energy crisis, it brings along some signs of uncertainty as other factors begin to influence demand for LNG in the region. 

Outlook of FSRUs in Europe

Europe continues to expand its regasification capabilities, with three FSRUs – Stade FSRU, Alexandroupolis FSRU and Mukran FSRU – adding 12 mtpa of new import capacity in 1Q24. The continent aims to end reliance on Russian gas, prompting several countries to build LNG infrastructure and enable them to diversify import sources. Around 85% of Europe’s new regasification capacity since 2022 has been FSRU, offering possible relocation and repurposing of floating infrastructure. This trend will persist as the current and upcoming FSRUs in Europe will cater to the robust LNG demand until the end of this decade. 

About 100 mtpa of FSRU-based regasification capacity will be available in Europe by the end of this decade. Meanwhile, Drewry expects a widening gap between the expanding regasification capacity and LNG demand growth after peaking in early 2030. This imbalance will lead to significant underutilization of the existing infrastructure, posing a high risk of over-investment and questioning the economic feasibility of these import infrastructures. The potential overinvestment will encourage the development of FSRU-based terminals as they offer operational flexibility and lower cost compared to onshore-terminal. 

Although the utilization of FSRUs in Europe ranges between 70% and 80%, the current utilization rate will be curtailed in the long run once the reliance on LNG begins to reduce. Subsequently, decreasing utilization of FSRUs will dent investors’ interest, and thus, we hold a pessimistic outlook for FSRUs post-2030. 

Outlook of FSRUs in Asia

The LNG demand outlook for Asia is bright, with potential investments on the horizon, supporting the expansion of LNG-import infrastructure, particularly FSRUs – offering flexible and rapid solutions to the region’s rising energy needs. The share of FSRU in total regasification build-up stands low in Asia compared to Europe. Despite Europe absorbing most of the operational FSRUs since 2022, Asia started two FSRU projects in 2023 – the Hong Kong Offshore terminal (4.4 mtpa) and Batangas FSRU LNG terminal (5.2 mtpa); moreover, India is also set to launch its first offshore terminal– Jafrabad FSRU (5 mtpa) this year. 

The region’s growing appetite for LNG, especially in power generation, will support the development of FSRUs. Apart from the major players such as China and India, emerging markets including the Philippines, Vietnam, and Sri Lanka are encouraging FSRU developments to support their snowballing LNG requirements as these countries aim to introduce additional gas-fired power plants, increasing the share of natural gas in their energy mix. Unlike Europe, the current utilization rate of FSRUs averaged around 50-55% in Asia in 2023, which can be attributed to:

  1. Intensified competition from Europe in securing LNG cargoes, 
  2. Lower LNG intake, and 
  3. Elevated and volatile LNG prices

Moreover, the deployment of FSRUs in Asian countries will be supported by the rising conversion opportunities during 2025-26 because several steam turbine vessels (constituting 30% of the current fleet) will become unserviceable due to ageing and growing environmental scrutiny. Furthermore, Drewry identifies about 20 planned projects and 28 potential projects to require FSRUs (although not all will materialise), which will keep the price for new-built FSRUs elevated, encouraging market players to opt for conversions.

Did you subscribe to our daily Newsletter?

It’s Free! Click here to Subscribe

Source: Drewry