I.M. Skaugen to focus on small-scale LNG

I.M Skaugen, the marine transportation service company, believes its small scale LNG carriers will have a key role in the developing markets for transportation and redistribution of the chilled gas for power generation and transportation. 

LNG will replace diesel and heavy fuel oil for many such power plants and as fuel for heavy duty vehicles and ships. The cost savings are real and will rapidly make up not only for the switching cost and additional required infrastructure, but offer real operational cost savings and a contribution to the climate, the company said in a statement.

I.M. Skaugen has made several investments to develop its small scale LNG concept with more than $15 million invested in R&D.

The company expects LNG production and supply to start expanding again in the years ahead and the price for LNG to become more competitive. Much of the new capacity of LNG in the coming years will be based on lower cost US shale gas. US LNG will probably become the marginal price setter for LNG and could ensure the availability of competitive priced LNG vs alternative fuels such as diesel and naphtha. US gas prices are expected to remain low and these are not linked to the oil price but the local supply & demand situation.

The recent drop in oil price has lowered the margin between oil and gas but the margin needed between gas vs diesel for use in power plants and for transportation remains. Taking into account that diesel prices usually are 15-20% higher than crude oil prices, it makes the margin bigger and will justify the switching costs for power plants to a cleaner and more economical fuel, according to the statement.

I.M. Skaugen currently has six LNG capable vessels. Having LNG capable vessels available now provides the power plant operators with the opportunity to start saving sooner instead of having to wait for 3 years or more for a new smaller scaled LNG vessel. The current order book for similar sized vessels for LNG transportation is limited, the statement said.

“For smaller LNG vessels we can note a global order book of only three smaller sized LNG vessels, all targeted for dedicated marine bunkering operations in Europe. There are three Chinese flagged smaller LNG vessels being built that will serve the domestic closed markets in China. The remainder of the current sailing fleet of small scale LNG vessels is tied up in longer charter agreements,” I.M Skaugen said.

In its outlook, the company stressed that its primary focus will be the small-scale LNG market where prospective contracts are more attractive compared to the more spot focused LPG/petrochemical gas trade.

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LNG World news Staff, image: I.M. Skaugen