London / Hamburg, 23 September 2025. Investments totalling US$48 billion in LNG tankers may have to be written off by 2035. The reason is a looming oversupply of vessels in a 1.5-degree scenario characterised by declining use of fossil fuels, as a new study by the UCL Energy Institute and the Kuehne Climate Centre (KCC) shows. Whilst orders for LNG tankers have risen by 300 per cent over the last five years, demand forecasts for the transport of liquefied natural gas (LNG) fall short of fleet capacity in almost all decarbonisation pathways for the global economy. Even in scenarios involving very high fossil fuel consumption – which would lead to catastrophic global warming of 4 degrees – the LNG fleet will remain oversized over the next ten years.
Dr Vishnu Prakash, Managing Director of Alethiarc and head of the research project, explains: “Our new tool and analysis highlight previously overlooked investment risks. They also show that the LNG tanker fleet will be exposed to significant financial risks even under moderate climate scenarios.”
In addition to LNG tankers, the tool and analysis also cover oil and LPG tankers. These pose a lower risk due to their greater potential for conversion to alternative, non-fossil cargoes. Dr Marie Fricaudet, a research fellow at the UCL Energy Institute, explains: “For the first time, we have taken into account in our risk assessment that certain types of ships can be converted to carry alternative cargoes. With our tool, users can therefore also assess the benefit of this cargo flexibility in terms of investment risks.”
The results are publicly available in the new, interactive online tool ‘Investment Risk Monitor for Fossil Fuel Carrying Ships’ developed by UCL and KCC. It contains aggregated estimates of supply and demand for the maritime transport of various fossil fuels under different climate and energy scenarios.
Maarten Biermans, a partner at Prow Capital, says: “Anyone who is active in financing these ships, or who wishes to become so, should definitely use the tool. It helps to understand and avoid investment risks, and can also support dialogue with regulatory authorities.”
The tool also highlights the countries where the financial risks lie: 75 per cent of the fossil fuel fleet is on the balance sheets of companies from the ten largest shipping nations. These include Japan, South Korea, Greece, Norway, Singapore and the People’s Republic of China. In the US, it is not only shipowners who face significant risk; the New York Stock Exchange is also the world’s largest trading venue for companies that own oil and gas transport vessels. Around 42 billion US dollars – representing 12.5 per cent of the market value of the global fleet – is listed there.
Stefanie Sohm from the Kuehne Climate Centre emphasises: “The shipping industry is facing a profound transformation. With the Risk Monitor, we aim to provide owners and investors with information that can help them with their upcoming decisions.”
The demand for the transport of other fossil fuels such as coal, oil and liquefied petroleum gas (LPG) is also declining in the energy scenarios. However, these fleets are less at risk. This is partly due to the natural phasing-out of older vessels and partly because they are better suited to conversion for carrying non-fossil cargo. The fleet of LNG tankers, by contrast, is very young, has a significantly higher new-build value and is specifically designed for the complex transport requirements of liquefied natural gas. A conversion to other cargoes, if possible at all, would require considerable additional investment, which would further weaken the vessels’ competitiveness.
The Investment Risk Monitor will be presented for the first time during New York Climate Week at an event co-organised by the South Korean organisation Solutions for Our Climate (SFOC). Rachel Eunbi Shin of SFOC said: “The Investment Risk Monitor provides crucial data. Korea dominates global LNG shipbuilding, accounting for over 70 per cent of the market. This sector is heavily supported by public funds. As freight rates for LNG transport have now fallen below the break-even point, we are working closely with policy-makers to ensure these risks are factored into investment decisions.”
The tool and an accompanying briefing are available at: www.shipping-transition.org