Teekay LNG Partners does not expect to see any cancellations of charters on its LNG fleet despite the current market volatility and weakness.
Speaking on a first quarter results call, Teekay Gas Group president and chief executive Mark Kremin stressed that all the company’s LNG carriers are fixed on take or pay contracts.
He said there is no provision for the terms of the charters to change with the company getting paid for every day the ship is available for operations.
“We do not forsee any of our fixed rate contracts .. are in jeopardy of being cancelled despite the uncertainty in today’s energy environment,” Kremin said.
Teekay LNG, which boasts a 47-ship LNG fleet, said it has 100% charter coverage for 2020 and 94% for next year.
Kremin gave guidance to analysts on the charter rates on the companies recently-fixed three dual-fuel diesel-electric LNG carriers, the 165,500-cbm Marib Spirit, Methane Spirit and Arwa Spirit (all built 2008).
He said they were all concluded around the $30,000 to $40,000 per day mark, adding that charter rates for this type of vessel have already moved a little lower with tri-fuel diesel-electric and ME-GI LNG carriers getting a premium.
The CEO said operationally the company is not seeing LNG floating storage to the extent it is being talked about.
He said Teekay LNG is also not seeing any slowdown in ship speeds. “For the most part we are not doing a lot of slow-steaming."
Kremin added that the company has seen cargo cancellations but said these have not impacted the company.
But he said Teekay has seen a certain amount of sub-chartering in the market.
“So no we are not seeing an operational change for the most part in how we are steaming and certainly not in how we are sitting yet,” he said.
Kremin said the company recognises “the unprecendented volatility and uncertainty that has occurred in the natural gas and LNG markets, both a demand, supply and pricing point of view, and the impact this has had on LNG shipping and new projects.”
He said more will become clear as markets start to reopen.
Kremin stressed that growth is not the first priority for the company.
He said final investment decisions on LNG projects have been pushed back by six months to a year, although he recognised forward movement on Qatar and Nigeria’s LNG projects.
“We will see what happens with these opportunities," he said. "It is not anytime soon is my guess."
