The LNG shipping sector, with its fluid demand and growing supply, requires a dynamic, deft approach to commercial maritime management. At the start of 2020, the sector was expecting explosive growth for LNG, thanks to the global increase in demand for natural gas as fuel and the implementation of IMO 2020. Unfortunately, in February of 2020, a global market crisis disrupted the voyages of four LNG tankers, stranding them at sea without destination. The cause? The coronavirus pandemic and the sharp decrease in LNG demand it created in China. It was reported that the Chinese buyer connected to the four LNG tankers invoked force majeure, thus suspending its contracts with at least three LNG suppliers. Those ships, as a result, were turned into floating storage until they could be appropriately rerouted.

Unlike crude oil or other similar cargo, a floating storage status is enormously detrimental for an LNG carrier. In order to be transported, LNG is cooled to -160°C. LNG carriers are built with enough insulation to reduce cargo boiling, but this process naturally occurs over the course of a voyage. It is estimated that up to 6% of the total volume of LNG originally loaded into a vessel will be lost over a 20-day voyage. Thanks to that natural boil-off, every day an LNG tanker is deemed floating storage dramatically cuts into the profitability of the voyage.

The routine commercial operations of LNG voyages are inherently complex, even in stable market conditions. They are even more challenging to navigate in a floating storage scenario. Here’s how the right commercial solution can help.

Immediately ascertain the P&L impact.

Mitigating the negative effects of an LNG voyage that has been turned into floating storage starts with a robust understanding of its many P&L implications—from the cost of operating the ship for an extended time to the impact on its bunkers and the diminishing cargo value due to extended boil-off. Armed with detailed knowledge of costs, voyage operators and tonnage charterers can act to contain costs while they work to determine the vessel’s next commercial move.

Identify optimal alternatives.

In a floating storage scenario, the right commercial solution can also powerfully enable charterers and marine logistics professionals to identify the best ‘next move’, evaluating the commercial implications of every potential course of action—from charting the ideal route to its next destination, to optimizing a multi-part voyage with several counterparties, and considering the commercial implications of potential ship-to-ship transfers.

Manage contracts seamlessly.

New destinations and counterparties mean new marine contracts. The right commercial solution empowers operators and tonnage charterers to efficiently create, execute, and manage complex contracts without missing a beat. In a scenario that requires efficient operations, a digital solution is key to eliminating the layers of time and effort associated with spreadsheet- or email-based contract management.

Rapidly change the course.

Once the voyage’s next commercial move has been determined, it is essential to ensure that downstream processes, stakeholders, and systems are all informed and aligned around the next leg of the voyage. Without a dynamic, digital solution, it is nearly impossible to uphold this kind of continuity in any scenario—let alone a crisis.

Navigate Any Scenario in LNG with the Veson IMOS Platform (VIP)

For LNG vessel owners, operators, commodities traders, and tonnage charterers, 2020 transformed from a year of anticipated highs to a year of unanticipated realities. The events of February underscore the importance of a proper commercial platform to navigate any set of market conditions, even the most unexpected. From up-to-date P&Ls to LNG-specific reports, the Veson IMOS Platform (VIP) provides LNG marine stakeholders the capable tools and comprehensive insights they need to maximize their commercial success in any scenario. With its holistic, integrated, cloud-based architecture, the VIP empowers its users to make the right decisions at the right time, no matter where they are in the world.