Despite falling freight rates for FSRUs, investment returns at current asset prices and charter rates are higher compared with standard LNG vessels, according to the global shipping consultancy Drewry.
The global floating storage and regasification unit fleet has grown at an annual growth rate of 21 percent over the last five years, and currently, there are 24 FSRUs operational with an aggregate LNG import capacity of 82 mtpa.
An additional 74 mtpa FSRU import capacity is under construction or in the planning stage.
“FSRUs are attractive because of various advantages they have over land-based terminals, such as low cost, quick commencement and flexibility,” Drewry said.
However, of late rates for FSRUs have come under pressure and are currently around $100,000/d, markedly lower than $120,000-130,000/d in 2013-15.
Drewry notes there are a number of reasons for this, first being the growing number of players in the FSRU segment, which is creating competition.
Other reasons are the falling asset prices of FSRU’s making it possible to charter out vessels at lower rates, while further pressure on charter rates is being put by older LNG vessels looking for an FSRU conversion.
Despite falling rates, owning an FSRU gives a better return than an LNG vessel.
Drewry has calculated the rate of return on a newbuild FSRU to be 16 percent that currently costs $250 million and earns a long-term (20 years) charter rate of $100,000/d.
Meanwhile, the rate of return on a newbuild standard LNG vessel is just 13 percent that currently costs $185 million and earns a long-term charter rate of $70,000/d.
“Therefore, despite falling charter rates, FSRUs are proving to be a better investment option than standard LNG carriers,” Drewry said.
“We expect long-term charter rates for LNG carriers to improve in the coming years as the market is expected to tighten. However, we do not believe that charter rates for FSRUs will significantly change because of increasing competition and a growing understanding of FSRU technology,” Drewry’s Shrest Sharma said.
Drewry expects charter rates for FSRUs to stay in the range of $90,000-$100,000/d for the next three to four years, still higher than equivalent LNG charter rates.