Vytautas Kielaitis/Shutterstock Save for later Print Download Share LinkedIn Twitter The European Union’s inclusion of maritime transport in its Emission Trading System (ETS) starting next year could push dirtier steam-turbined LNG vessels to the Pacific Basin. The new regulation is expected to have cost and operational implications for shipowners, charterers and the near 700 vessel-strong global LNG fleet, with the older steam-propelled vessels expected to take the heaviest hit due their higher emissions and boil-off rate compared to more modern LNG carriers.The EU ETS will be extended to maritime transport in 2024 and will be applicable for vessels over 5000 gross tonnage. The scheme is set to go through a gradual phase-in that will see shipowners purchasing permits to offset 40% of their emissions in 2024, 70% in 2025 and 100% in 2026 for all voyages within the EU and the European Economic Area (EEA). In turn, 50% of the emissions for voyages outside of the EU/EEA will need to be offset via allowances.The regulation could open a regulatory arbitrage for the owners and charterers of steam-propelled vessels, since they could opt to move these vessels to Asia to avoid paying the expected high costs to offset their emissions. Modern newbuild vessels with lower emissions would then be favored to serve the EU, a European LNG shipbroker tells Energy Intelligence. By moving steam vessels to Asia, shipowners would also benefit from the tight shipping market and the resulting increased charter rates in the coming years.However, the shipbroker expects that some steam-powered LNG vessels are unlikely to remain on the market. “Some steam [vessels] could be converted to floating storage and regasification units (FSRU) or simply be scrapped,” he says. Depending on the project, another European shipbroker suggested that the conversion of a vessel into an FSRU could be more profitable for the owner than to keep using it as a conventional LNG carrier.Overall, what seems clear is that the market will continue to need steam-turbined vessels in the foreseeable future, with demand for tonnage on the rise. “There are around 250 steam [vessels on the market], they cannot disappear overnight,” one of the shipbrokers says.Tight LNG Vessel AvailabilityThe LNG shipping market looks tight for the immediate future with a years-long waiting list for new-built vessels, as the major South Korean and Chinese shipyards remain fully booked, according to shipbrokers. Ordering an LNG vessel today means that the shipowner will receive the carrier in around 2027, at the earliest.Last year saw both deliveries and contracting of new-built vessels drop year on year. Deliveries fell from 57 vessels to 25, while a total of 30 new ships were ordered in 2022 compared to 71 in the previous year, according to data from commodity analytics firm Kpler. Deliveries of new LNG carriers are set to increase this year, with 44 newly-built ships estimated to be delivered throughout 2023, and 56 during 2024, before falling back to 43 in 2025, according Kpler estimates. “The most tight years I think are those that are coming now until 2026, as there will be quite a lot of ships that will be coming out of the shipyards,” a shipbroker says.