DUBAI: The cost of shipping liquefied natural gas may advance 67 percent to a five-year high as Japan replaces its crippled nuclear industry with power plants burning fossil fuels. LNG-tanker rates will average $100,000 a day in the fourth quarter from about $60,000 this quarter, according to Oyvind Hagen, an analyst at ABG Sundal Collier in Oslo, whose team's share recommendations returned 16 percent in six months. Analysts covering Golar LNG Ltd., which operates 13 of the vessels, raised their 2011 earnings estimates by 24 percent in four weeks, according to data compiled by Bloomberg. Demand for LNG, liquefied by cooling the gas to about minus 260 degrees Fahrenheit, will reach a record this year as nations from the UK to South Korea increase curbs on pollution, Barclays Capital estimates. Natural gas emits about 50 percent less carbon dioxide than coal. Owners are sailing the 900-foot tankers at the highest speeds in at least three years as the rush for gas erodes a decade-long glut of the ships. "There's no vessel available in the spot market," said Martin Korsvold, an analyst at Pareto Securities AS in Oslo who also forecasts rates of at least $100,000 a day in the fourth quarter. "In a shipping market where you have capacity utilization of 100 percent, it's almost 'pick a number'" for rates, said the analyst, whose share recommendations returned 13 percent in six months, data showed. The surge in rates contrasts with slumping earnings elsewhere in the merchant fleet. Profit on supertankers carrying oil from Saudi Arabia to Japan, the benchmark route, fell 58 percent to $15,588 a day in the past 12 months, according to data from the Baltic Exchange. Returns on capesizes hauling coal plunged 62 percent to $10,810 a day, according to the bourse in London, which issues rates for more than 50 maritime routes. The anticipated increase in LNG cargoes to Japan also contrasts with some disrupted services in container shipping. Hapag-Lloyd AG, which carries about 5 million containers a year worldwide, stopped calling at the ports of Tokyo and Yokohama. Any contamination to ships from the damaged Fukushima Dai-Ichi nuclear plant can be scrubbed off with soap and water and poses no threat to people, said Commander Jeff Davis, a spokesman for the US Navy's Seventh Fleet. The Baltic and International Maritime Council, representing two-thirds of the world's merchant fleet, has had no indications from members that they are avoiding Japan, said Peter Sand, a spokesman for the Bagsvaerd, Denmark-based group. Japan, already the world's biggest buyer of LNG, is facing power shortages after a magnitude-9 earthquake and 23-foot tsunami damaged nuclear, coal, oil and gas-fired power plants, including Fukushima, which has become the world's worst atomic accident since Chernobyl a quarter century ago. The country generated about 34 percent of its electricity from nuclear in 2009, Credit Suisse Group AG said in a report March 16. LNG will probably be used to compensate for about half of the lost capacity, with crude and fuel oil making up another 30 percent and coal the remainder, Credit Suisse estimated. That would mean about 6.5 additional LNG cargoes a month. Russia, Qatar, Indonesia and South Korea have said they are willing to ship more, the bank said. Royal Dutch Shell Plc, Europe's biggest oil company, diverted six LNG cargoes from Brunei, two from Russia and one from Nigeria to Japan, De La Rey Venter, the Hague-based company's head of LNG, told reporters in Amsterdam on March 22. More will follow in the next several weeks, he said. Japan also relied on fossil fuels for extra power generation in 2007, when an earthquake shut the Kashiwazaki- Kariwa nuclear plant, with LNG making up 20 percent of the additional purchases, according to Credit Suisse. LNG's share will be higher this time because it now costs about half as much as crude, compared with near-parity in 2007, the bank said. Extra demand for gas may also come from nations shutting nuclear plants or canceling orders for new ones. Germany suspended its seven oldest reactors and the European Union is planning safety checks on the region's 143 atomic stations. Global LNG demand will increase 5.1 percent to the equivalent of 31.1 billion cubic feet a day in 2011, according to Barclays Capital. Japan accounted for about 36 percent of demand in 2009, according to GIIGNL, a Levallois, France-based group with 54 full members drawn from the industry.
