LNG Trade: A View from Greece

Global LNG trade and shipping has been rapidly expanding worldwide over the past few years and Greece is at the forefront due to the dynamics of its shipping industry as its considerable investment in the sector.

At the 4th Mediterranean Oil & Gas Conference in Athens, interesting details on the subject were discussed that highlighted an emerging trend that will surely impact the European natural gas market as a whole, especially since the European Union is actively pursuing a rise in LNG consumption for the long-term.

Presently eight Greek ship-owners are building almost 50% of the new LNG vessels with an estimated $8.5 billion in investments just in the past two years. An additional $4 billion was spent on LNG vessels between 2008-2011 in the midst of the global financial crisis, a detail of significance since the deteriorating global environment did not change the overall global energy trade, which calls for the greater use of this kind of gas.

The Greek Minister for shipping Kostis Mousouroulis emphatically pointed out that shipping and energy are interrelated and the dynamics of each affected the other. More specifically, he explained that the sea transport of energy is the most important link in the global energy supply and all that it implies for the world energy index and the competitiveness of the industry in a worldwide level. 

He also explained Greece's vital role since the country's ship-owners control almost a quarter of the world's sea energy transport, in addition to optimistic findings in the Eastern Mediterranean and Greek seas. That is of importance not only for the Greek economy but also for the EU, which is supplied by foreign markets.

Presently South Korea has emerged as the top manufacturer of LNG vessels. Out of 82 constructed, 38 belong to the Greeks with the most important companies being, Maran Gas Maritime with 11 LNG vessels on order, GasLog (8 vessels), Dynagas (7 vessels) and Cardiff Maritime with another 4 in construction. Each ship of this type costs on average $250 million, making an expensive investment usually covered by syndicated banking loans, which shows that the financial world has also bet on a rise in LNG trade worldwide in the coming years so as to achieve high yields from this financing as well.

In 2012 world LNG trade totaled 239 million tons with a 5.4 million additional increase to be expected for 2013. Moreover, countries such as Pakistan, Uruguay, El Salvador, South Africa, Bahrain, Croatia, Philippines, Jamaica and Lithuania are planning to establish terminals in the short-term and it is also expected that the shale gas boom will enable in the mid-term US to begin significant exports of LNG to European and Asia markets.

In the Eastern Mediterranean the most important projects of such kind is the Cyprus in the Vassilikos region in order to exploit its gas offshore and talks are underway between the Noble Energy and Nicosia to agree upon the timetable, while Israel is undecided if it will join Cyprus or if it will proceed with its own terminal. 

It is of interest also to note that Gazprom Marketing & Trading Switzerland AG and the Israeli Levant LNG Marketing Corporation had recently signed an agreement for the former to exclusively buy LNG from the latter who has the rights to explore the Tamar field. The participants in the conference were certain that eventually all the discovered gas fields in the East Mediterranean would be exported by LNG terminals thus further increasing the importance of that sector.

In the meantime it was widely discussed that there also a future opportunity for Israeli gas to be linked with the Trans-Adriatic Pipeline (TAP), since the vice-President of the European energy regulators council, Valeria Termini, has had talks with Israeli senior officials from the Ministry of Energy on the issue, which most probably would include the transfer of LNG quantities to Greece. This would certainly be decided by Tel Aviv in due time if it wants to link its exports towards the European markets, while Greek DEPA already lobbying in Brussels for the Aegean LNG terminal, as the head of its international department Dimitris Manolis stated, a plan which is inexorably related with the export routes to be followed both by the Cypriot and the Israeli gas reserves.