With over 60 thousand commercial vessels active around the world, the market for LNG bunkering is vast and largely untapped. Panelists at the European Autumn Gas Conference (EAGC) in Milan last week discussed the opportunities and roadblocks surrounding the quickly materializing market for LNG as a maritime fuel. During the lively panel discussion, concern was voiced that infrastructure development and fleet conversions have stagnated as participants wait for counterparty entrance. Following this, if neither suppliers nor fleet owners are willing or able to make the first move, both could miss out on the prime opportunity of LNG bunkering. While this opinion is common among natural gas stakeholders, focus on more tangible hurdles to market development could quicken supply and demand realization.
In contrast to this “chicken and egg” problem, another panelist suggested that maritime LNG progress is not primarily hindered by participant entrance but by the lack of price discovery, a transparent fee structure, and clear regulatory guidelines. This would suggest that there is unrealized demand waiting for available and reliable supply. Ferry fleets are natural early adopters of LNG as maritime fuel as operators around the world have already begun phasing out older diesel ferries for replacement with LNG-fueled vessels.
The 2020 IMO low sulfur fuel oil requirement should spur this demand. This requirement will force transition of other commercial fleets to LNG once initial LNG fueling stations are operational and sales and regulation clarity improves. Dual-fuel vessels and diesel-to-LNG retrofits are also positioning the maritime market to take advantage of any new bunkering projects. Given a supportive price environment, ship owners are making the switch to LNG, even for vessels that are not yet at the end of their lifecycle.
Maritime analysts from the World Port Climate Initiative predict that about 20 percent of the worldwide commercial shipping fleet will be fueled by LNG by 2030. Under current market conditions, LNG has a clear cost advantage over conventional diesel fuel for consumers. This number may end up being lower than expected due to the 2020 low sulfur fuel oil requirement. Considering the supply glut is projected to continue through the coming decade, bunkering is a logical market space for producers to capitalize on excessive volumes.
LNG has social and political goals on its side as it emits less carbon than diesel and provides healthier and more pleasant riding conditions for passengers and crew. Support for this market seems to be present from all sides, now it is time for regulators and suppliers to finalize the details.
Article provided by Genscape - Genscape deliver unique, real-time, fundamental data to provide market insight and intelligence using the world’s largest network of patented and proprietary monitoring technologies. To learn more click here.
After the successful event in Milan, the European Autumn Gas Conference will be held in Belin for the 33rd annual edition. To find out more about the 2018 event and how you can be involved, click here.
Photo: Panel discussion "The promise of LNG bunkering" at the 2017 EAGC
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.