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  • By Steve Hemsley
  • In Blog
  • Posted 12/09/2017 09:20:00

When the first US export of liquefied natural gas (LNG) set sail the industry had mixed emotions about what this meant for its future. LNG pricing suffered due to a combination of factors: the sharp decline in the oil price, decelerating economic growth in Asia, and increasing production capacity worldwide. LNG buyers have a range of options for supply, and this is placing both new and existing projects under pressure.

To be successful in today’s ever-evolving environment LNG operators need to stay cost-competitive and, more than ever, understand downstream market dynamics. In this interconnected value chain logistics is a significant factor, which can have a critical impact on the bottom line.

LNG fleet owners are now building ships that aren’t bound to fixed rates or schedules. However, this increased flexibility also brings greater risk to fleet utilisation. Operators, especially in the US, need to know if they can shoehorn in extra routes and seize spot-cargo opportunities. This flexibility means that it is essential for fleet owners to understand all the external risk factors at play to ensure optimised operations and increased revenues.

This year the Panama Canal has been certified for LNG carriers – just as US LNG exports are coming online. As one of the world’s busiest shipping routes, this development will cut journey times and costs between the Pacific and Atlantic significantly. This can only be a positive for US operators. But, the expansion of the Panama Canal itself poses new challenges for LNG operations.

For example, a ship delayed by heavy fog in a US export terminal misses its scheduled slot to transit the Canal. Instead it finds itself holed up for days before another convoy time can be found. Therefore, it misses its scheduled berthing and unloading time at its eventual destination in the northeast of Asia, with all the operational costs and margin loss that entails.

To mitigate these challenges and negotiate the dynamic LNG environment operators can utilise simulation software to understand the consequences of changes in the market. Through simulation techniques companies can respond rapidly to unforeseen events with informed, evidence-based strategies. Operators at every stage of the value chain can use simulation solutions to model port operations, vessel scheduling, the impacts of changing seasons, weather and tides, fleet size and composition, as well as to calculate and test annual delivery programmes.

But in light of increasingly volatile market prices and complex demand patterns, LNG operators require a more flexible approach. The use of simulation and modelling to continually re-evaluate initial positions is set to increase as companies search for ways to increase operational efficiency, mitigate risks and seize opportunities. Competition in the LNG is market heating up and LNG players need to react quickly with more informed decisions to carve out a profitable, successful and long-term future.

Find out more about our LNG simulation solutions here.

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