FSRU market thrives amid robust LNG demand growth

Outlook of FSRUs in Europe

Europe continues to expand its regasification capabilities, with three FSRUs – Stade FSRU, Alexandroupolis FSRU and Mukran FSRU – adding 12 mtpa of new import capacity in 1Q24. The continent aims to end reliance on Russian gas, prompting several countries to build LNG infrastructure and enable them to diversify import sources. Around 85% of Europe's new regasification capacity since 2022 has been FSRU, offering possible relocation and repurposing of floating infrastructure. This trend will persist as the current and upcoming FSRUs in Europe will cater to the robust LNG demand until the end of this decade. 

Source: Drewry Maritime Research

About 100 mtpa of FSRU-based regasification capacity will be available in Europe by the end of this decade. Meanwhile, Drewry expects a widening gap between the expanding regasification capacity and LNG demand growth after peaking in early 2030. This imbalance will lead to significant underutilisation of the existing infrastructure, posing a high risk of over investment and questioning the economic feasibility of these import infrastructures. The potential overinvestment will encourage the development of FSRU-based terminals as they offer operational flexibility and lower cost compared to onshore-terminal. 

Although the utilisation of FSRUs in Europe ranges between 70% and 80%, the current utilisation rate will be curtailed in the long run once the reliance on LNG begins to reduce. Subsequently, decreasing utilisation of FSRUs will dent investors’ interest, and thus, we hold a pessimistic outlook for FSRUs post-2030. 

Source: Drewry AIS, Drewry Maritime Research

However, the existing infrastructure will be used to accommodate other energy carriers in the long term. For example, ammonia or hydrogen, which are considered cleaner energy alternatives, can be stored and regasified using the existing infrastructure with minor and specialised modifications. Such strategic planning will support the deployment of FSRUs in Europe, thereby balancing immediate energy security with long-term sustainability goals.

Outlook of FSRUs in Asia

The LNG demand outlook for Asia is bright, with potential investments on the horizon, supporting the expansion of LNG-import infrastructure, particularly FSRUs – offering flexible and rapid solutions to the region's rising energy needs. The share of FSRU in total regasification build-up stands low in Asia compared to Europe. Despite Europe absorbing most of the operational FSRUs since 2022, Asia started two FSRU projects in 2023 – the Hong Kong Offshore terminal (4.4 mtpa) and Batangas FSRU LNG terminal (5.2 mtpa); moreover, India is also set to launch its first offshore terminal– Jafrabad FSRU (5 mtpa) this year. 

The region’s growing appetite for LNG, especially in power generation, will support the development of FSRUs. Apart from the major players such as China and India, emerging markets including the Philippines, Vietnam and Sri Lanka are encouraging FSRU developments to support their snowballing LNG requirements as these countries aim to introduce additional gas-fired power plants, increasing the share of natural gas in their energy mix. Unlike Europe, the current utilisation rate of FSRUs averaged around 50-55% in Asia in 2023, which can be attributed to:

1. Intensified competition from Europe in securing LNG cargoes, 
2. Lower LNG intake, and 
3. Elevated and volatile LNG prices

However, we expect lower prices post-2027 and the region’s growing LNG demand will boost imports, expanding regional FSRU utilisation. 

Source: Drewry AIS, Drewry Maritime Research

Moreover, the deployment of FSRUs in Asian countries will be supported by the rising conversion opportunities during 2025-26 because several steam turbine vessels (constituting 30% of the current fleet) will become unserviceable due to ageing and growing environmental scrutiny. Furthermore, Drewry identifies about 20 planned projects and 28 potential projects to require FSRUs (although not all will materialise), which will keep the price for new-built FSRUs elevated, encouraging market players to opt for conversions.

Source: Drewry Maritime Research

About 25 mtpa of under-construction and planned FSRUs will be in service by 2027-28 in South and Southeast Asia. These upcoming FSRUs will cash in on lower LNG prices or competitive supplies by 2028. Moreover, growing regional LNG trade and increasing strategic alliances can also accentuate the role of FSRUs. 

For instance, India’s Petronet signed a strategic alliance with Sri Lanka to provide LNG supply. The company will build an FSRU facility in Sri Lanka, which will provide impetus to the government to accelerate the development plans for the Colombo LNG terminal (2 mtpa).

Conclusion

FSRU development is a pivotal response to the changing dynamics of the global energy demand, particularly, due to Europe’s urgent need to secure alternative gas supplies amid geopolitical tensions. 

While Europe’s infrastructure faces potential challenges due to the push towards renewable energy and the attainment of net-zero emissions, the adaptability of FSRUs for future energy carriers such as hydrogen and ammonia offers a strategic advantage.

Conversely, the growing energy requirements in Asia and strategic collaborations underscore a positive FSRU outlook development, supported by significant infrastructure expansion and emerging opportunities. 

The future of FSRUs lies in their ability to evolve and adapt to the changing energy landscape, catering to immediate and long-term needs across different regions. We expect FSRU utilisation to be higher than the onshore LNG terminals in Europe as opposed to Asia. The utilisation of FSRU will improve in Asia as the continent is expected to lead the growth in LNG demand, supported by the expansion and improvement of domestic infrastructure. However, in the long run (assuming beyond 2035), the utilisation in Europe will decrease as the continent moves away from fossil fuels, while it will continue to grow in Asia.