LNG Shipping as a Diversification Tool for Energy Security: The Impact of the Ukraine-Russia War on LNG Ship Orders

Abstract

Natural gas is one of the most important energy sources used in many fields since ancient times. Because it is monopolized by some countries due to its random distribution throughout the world, it can be difficult to supply this energy source in times of crisis with its suppliers. The most recent example of this is the war between Russia and Ukraine. Especially since European countries are mostly dependent on Russia and have problems in gas supply, they have turned to LNG transportation for resource diversification and increased demand. On the other hand, increasing demand caused a backlog in LNG ship orders. In this study, we aimed to determine whether there is a structural break in the order amounts of LNG ships, especially due to the recent war. As a result of the structural break analysis applied to monthly data, it was determined that an increase in orders started months before the war and that the highest orders of all time were placed during the war period. This situation can be explained by the fact that European countries accelerate their LNG infrastructure investments in order not to experience the problems brought by high dependency again, and this situation increases the high demand expectations in the sector and increases ship orders. Thus, the LNG market will continue to be an important sector in ensuring energy supply security in the near future.

Keywords

• shipbuilding
• energy security
• liquefied natural gas