LNG-fuelled newbuildings to remain minor component of global fleet
LNG-fuelled newbuildings will remain a minor component of the global fleet going forward confirming the conclusions of a 2012 study on the matter, according to Maritime Strategies International (MSI).
MSI said that there had been a step up in interest in LNG as a fuel in recent months, with several deals being reported or floated for the main cargo sectors.
“While gas is clearly not a long-term solution to reducing GHG emissions from shipping, it is argued that it offers a bridge for those companies that need a solution today when the development of other fuel technologies are in their infancy,” the company said.
MSI looked at the current fleet and orderbook for LNG-fuelled ships using data from IHSMarkit and other sources. One of the key distinctions in this area is between LNG ready and LNG fuelled vessels.
Some owners opted to build the former, with designs given a gas ready notification by classification societies. These vessels have space allotted for LNG fuel tanks along with supporting materials used for low temperatures, engines that can be converted to dual-fuel operation, and space for pipes and ventilation.
This affords shipowners and yards the flexibility to limit initial investment outlay while planning for the substantial costs of future conversion to dual-fuel. One such example is Hapag Lloyd’s conversion of a 15,000 TEU containership Sajir from LNG ready to LNG fuelled at a cost of $30 million.
Although an LNG-ready vessel is more expensive to build than a standard vessel, the premise is to future proof and provide optionality and flexibility to the owner, which could mitigate, over the life of the vessel, additional upfront costs.
While significant, and involving the deployment of a substantial amount of capital, LNG-fuelled newbuildings will remain a minor component not only of the global fleet but also the newbuilding market going forward.
Estimates prepared by MSI suggest that this fleet would consume in the order of 3.5 million tonnes of LNG when fully delivered in 2023, a massive increase when compared with an LNG bunker market that is estimated to be less than 500 thousand tonnes in 2019.
To put that in context, MSI first analyzed this issue in 2012 in a report published with Lloyds Register. In that study, the firm assumed that the IMO2020 regulation would be the primary trigger to the adoption of LNG as fuel.
At the time, MSI predicted almost no global take-up of LNG before 2020 but an acceleration in consumption to a total of 7-9 mtpa by 2025. Based on current take up the total is more likely to be around 5-6 mtpa, assuming further evolution of the LNG fuelled fleet.
In case the LNG ready fleet is completely transformed to LNG operation, it would dwarf the current LNG fuelled component and offer a maximum potential LNG powered fleet of close to 45 million gross tonnes by 2025.
Under this scenario, the size of the LNG bunker market would jump to 10-11 mtpa, if shipyards were able to complete the required conversions.
MSI estimates that if all LNG ready vessels were fully converted to LNG, then the total LNG powered fleet would represent just over three percent of the global total and bunker consumption, while the impact on the wider LNG market would be even more modest at 1.8 percent of total demand.
Beyond the moves by major charterers, it is difficult to see LNG as fuel taking more than a marginal share of the world fleet, given the barriers of cost and technology it requires owners to overcome, as well as the incentives needed to make adoption attractive.