Custom-Built Tool Digitalizes the Vessel Nomination Process for LNG Carriers

Success Story

Scalefocus developed scalable and fit-for-purpose technology solution that provided our client with enhanced Liquefied natural gas (LNG) trading and risk management capabilities. The sophisticated platform for portfolio optimization and vessel nomination – the LNG Leadtime tool, ensured that the client’s IT landscape could cope with the growing business demands for LNG, replacing the inefficient Excel spreadsheets. Equipped with detailed intelligence about incurring costs, vessel availability, routes, and delivery windows, the company could easily work to determine the vessel’s next commercial move. 

The Client

An international energy company that operates numerous power plants and leverages advanced technologies and innovations to manage large-scale power systems and infrastructure. The company sources oil, natural gas, and global commodities and trades electricity, emissions certificates, natural gas, LNG, and coal. 

The Challenge 

With the growing volume of trading activities, the existing LNG applications were no longer sufficient to support our client’s business. The manual processes required updates of multiple related deals in heavy spreadsheets, resulting in errors and incorrect position reporting. The IT landscape hindered the LNG operational and trading activities with weaknesses in shipping and logistics functions.

These functions were business-critical. Approximately 35% of LNG was traded on the spot market or in short-term deals, creating a constantly changing trading landscape. Moreover, the global fleet of LNG commercial carriers comprised only 615 vessels, and their logistics needed to be fine-tuned as much as possible. The cargo cost increased by an average of around 47% compared to the previous year, adding extra financial pressure to the operations. The demand for LNG in new markets also surged, requiring adaptation to diverse trading activities. Furthermore, natural boil-off in LNG ships caused daily profitability losses in floating storage. To address these complexities, a digital solution was essential to streamline processes, provide rapid insights, and eliminate inefficiencies.

The Solution

Scalefocus developed the LNG Leadtime tool that supports the creation and transfer of information to the counterparty to fulfill contractual obligations related to delivery windows, loading and discharge port, vessel, quantity, LNG quality, etc. 

The entire ecosystem of tools supports the everyday operations of the energy traders. The digitalized funnel calculates when and where the LNG shipment will reach the buyer and what will be the quality and quantity of the LNG cargo. It also tracks the route of the LNG carrier, at which terminal it will be unloaded, and at what time.   

The introduction of nomination functionality built the foundation to represent LNG business processes within the trade lifecycle accurately. This also includes deal linkage for nominated deals and improved data quality, providing more accurate position and PnL reporting.  

Based on our nomination formulas and streamlined database, now the Leadtime tool plays a central data repository role. It could be used in other use cases, like In-tank optimization, and automated shipping scheduling.  

The vessel estimation functionality allows charterers to calculate different vessel deal scenarios to help maximize profits. The solution has also provided logistical functionality which supports the operational processes for managing LNG vessels and cargos. 

The Benefits 

Scalefocus delivered the platform’s first demo just 4 months after the project kick-off. The final product optimized the portfolio of the client for vessel nomination and the whole processes became more efficient, data tracking was centralized, and voyage planning was supported with many new functions. According to preliminary estimates, the new tool and its integration as a central data repository for other vital LNG systems will bring cost savings of up to a few million euro per year.  

Results

• Reliable and scalable tool for LNG planning and portfolio management 
• Optimization of the complex workflows 
• 360° view on the profitability of each voyage 
• Process automation and central data repository, unlocking the potential for further improvements