Americas News
LNG Bunker Prices Fall, but Weak Oil Prices Hampering their Adoption
The plunge in crude prices has also sent liquefied natural gas (LNG) prices tumbling, but the resulting low bunker prices have hampered adoption of the alternative fuel, Marine Link reports.
According to reports, LNG prices have so far mimicked crude prices, having fallen to roughly half of what they were a year ago.
Prices are also not expected to rise any time soon due to higher supply than demand, and the fact that LNG prices are tied to the price of crude.
"There is a formula in these big, long-term contracts that when the price of crude goes up or down – the contract price for LNG goes up or down based on a fixed number, and then it's tied to the price of crude, the index of the price of crude on a long-term basis internationally, so the drop in LNG is always slightly less than what happened on the crude side," said Jim McCaul, managing director of International Maritime Associates.
McCaul notes that in the U.S., the decision to use LNG seems entirely dependent on pricing, while Europe seems much more conscientious of environmental concerns.
The latest Emission Control Area (ECA) regulations that came into effect at the beginning of the year are expected to have a positive effect on LNG adoption in the U.S. in the long run, especially as it is seen as a way to meet both the current and potential future legislation.
The report suggested that widespread uptake of LNG will rely largely on newbuilds as retrofit modification are typically complicated, and the large LNG storage tanks also take up space previously used for cargo.
"You have to ask yourself, 'Would someone build a ship like that under normal circumstances if the emissions requirement was not there?'" McCaul said.
"I doubt it."
In the meantime, the crash in LNG prices is said to be causing multiple projects to be canceled, delayed, or put on hold around the world, with Pacific Rubiales having held a barge for a liquefaction plant that was two months from completion.
"At the moment, we're not really seeing a big degree [of use] in LNG," McCaul said.
Earlier this year, Boston Consulting Group estimated that LNG could make up 27 percent of the bunker market by 2025.
