The global liquefied natural gas (LNG) shipping market is heading for tighter capacity by the end of 2027, with older vessels set to retire and demand for fuel supplies growing. This reduction in capacity is expected to push up freight rates, according to Nicholas Gleeson, Chief Financial Officer of Adnoc Logistics and Services (Adnoc L&S), as reported by The National.

Gleeson explained that while freight rates have been weak recently due to an oversupply of LNG carriers, the long-term outlook for LNG remains strong. He added that the current low rates are likely to force less efficient older ships out of service, leading to a significant tightening of the market by late 2026 or 2027 when new LNG projects come online.

Last year, freight rates in major regions like the Atlantic and Pacific dropped sharply, with rates in November standing at $19,500 and $23,000 per day, respectively, compared to over $190,000 per day a year earlier, according to S&P Global Commodity Insights.

To prepare for the future, Adnoc L&S has been expanding its fleet. In November, the company received the first of six new LNG carriers from a Chinese shipyard, two months ahead of schedule. Five more vessels are expected to be delivered by next year. Additionally, in 2024, Adnoc L&S placed orders for up to 23 new energy-efficient ships, including LNG carriers and large ethane and ammonia carriers.

Meanwhile, the market for tankers, which transport crude oil and related products, remains subdued, but Gleeson noted some signs of recovery. He also highlighted that US sanctions on vessels transporting Iranian and Russian crude are tightening the shipping market, as restrictions limit access to certain routes.

In the Red Sea, Adnoc L&S continues to monitor the situation closely, avoiding high-risk zones due to ongoing attacks on commercial ships by Yemen’s Houthi group. Gleeson said vessels are taking longer routes around the Cape of Good Hope to ensure safety.

Adnoc L&S is also pursuing growth through mergers and acquisitions. This week, the company finalized the purchase of an 80 per cent stake in Navig8 Topco Holdings for $1.04 billion. The deal is expected to increase Adnoc L&S’ earnings by at least 20 per cent in 2025. The remaining 20 per cent stake will be acquired in 2027, based on performance metrics.

Navig8, a global shipping pool operator with 32 tankers and operations in 15 cities, is expected to strengthen Adnoc L&S’ presence in deep-sea energy shipping. Gleeson emphasized that the phased acquisition will keep Navig8’s management motivated to drive growth until full ownership is achieved.