Gibson: To LNG or Not to LNG?

 The current orderbook for dual-fuel vessels shows some considerable growth in shipowners’ investment in LNG-powered vessels, Gibson Shipbrokers says in its weekly tanker market report.

Some significant orders have been Sovcomflot’s 4 ice class Aframax tankers and AET’s order of 4 Aframaxes in addition to 2 Afras and 3 MRs capable of switching to LNG bunkers currently trading.

Prompted by the upcoming global sulphur emission limit of 0.5%, shipowners have been faced with making tough decisions ahead of the impending deadline, one of them being investing in LNG as a marine fuel.

Even though the decision has been widely embraced by vessels currently operating in ECAs however, the global merchant fleet has so far not been so enthusiastic in choosing a path, Gibson said.

Excluding LNG carriers, the global merchant fleet of dual-fuel vessels (capable of burning LNG bunkers) has grown considerably since 2014. Nevertheless, the numbers show that this is still a fairly insignificant portion of the global fleet.

As disclosed in the report, the majority of LNG bunker ready ports are located in the Baltic and North Sea, where Norway has the largest with 6, mostly catering to ferries and cruise ships. However, new bunkering facilities or upgrades are planned in the Netherlands, France, Belgium and Spain.

Repsol in cooperation with Enagás has completed what is considered to be Europe’s first pipe-to-ship LNG bunkering at the Cartagena regasification terminal. Furthermore, the port of Fujairah, the second-largest bunkering port globally, has begun strengthening infrastructure whilst introducing LNG ship-to-ship transfers. The United States has grasped available technology and aims to take advantage of an abundance of cheap gas to push forward plans for LNG bunkering. Further afield in Asia, momentum is gathering to remove obstacles standing in the way of a widespread implementation of LNG as a marine fuel.

In Japan, the port of Yokohama can provide truck-to-ship bunkering, and is planning to introduce ship-to-ship bunkering by 2020, positioning Yokohama as a regional LNG bunkering hub. South Korea now provides LNG bunkering services from Incheon with an additional facility planned at Busan. China will also be increasing LNG services at inland waterways and at Zhoushan. Unsurprisingly, given its position as the world’s largest bunkering port, Singapore has also made big strides. The Maritime and Port Authority of Singapore has awarded two separate LNG bunkering licenses and expects to begin supplying LNG bunkers this year. In addition, Singapore has joined forces with other global ports to progress and harmonise LNG bunkering standards and operations, the report further reads.

“Oil majors including Shell, BP, Chevron and Total have invested heavily in downstream LNG distribution and infrastructure. Shell in particular is taking an active role as evidenced by the agreement to supply bunkers to Sovcomflot’s newbuilding Aframax tankers for the North Sea and Baltic,” Gibson noted.

Despite its environmental benefits, there are still numerous downsides to its widespread use across the industry, one of them being LNG pricing- a relative unknown when compared with traditional marine fuels.

Another significant drawback is that LNG will require around twice the storage space of marine fuel, reducing cargo intake.

“There are several positives and negatives to LNG bunkering but expect it to become a more viable alternative in the coming years. With the dual-fuel capable fleet forecast to grow and major strides being made by ports to harmonise operations and improve global standards. Perhaps we will see an increasing number of owners turn to LNG as a viable marine fuel in the future,” Gibson said.

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