Asia/Pacific News
TRI-ZEN: Low Oil Prices Creating "Fog" Around Adoption of LNG Bunkers
Singapore-based consultancy TRI-ZEN says the path to adoption of liquefied natural gas (LNG) as a marine fuel is currently unclear as a result of low oil prices.
In its report, LNG Perspectives 2016, TRI-ZEN used the term "foggy passage" to describe the effect that current "artificially low oil prices" have had on the coming shift to LNG bunkers.
According to the Tri-Zen analysts LNG remains the fuel to take "shipping into the coming decades" as the "drivers and incentives are still there," but the passage to this new future cannot be seen as clearly right now as a result of the remarkably low price of crude.
The report assumes oil supply will continue to be buoyant in the short-term; the current "fog" will last as long as OPEC, and particularly Saudi Arabia, continues to assume its share of oil market volume is more important than controlling supply.
Nevertheless, change will surely come, and for "solid fundamental reasons."
"Underinvestment in the current pessimistic climate is building problems for the future. Energy demand continues to grow and oil demand, which each year grows by more than a million barrels a day, will catch up with supply and leave behind those who are unprepared," says TRI-ZEN.
"When demand starts to close in on supply, the current low cost energy ride will come to a bumpy end and the fog will evaporate. Oil prices will hike significantly and quickly."
TRI-ZEN analysts see demand and supply in oil markets approaching balance by 2018, resulting in a return to higher oil pricing and a clearer economic incentive for gas.
Meanwhile the shale revolution in the U.S. will see natural gas supply exceed 30 tcf in that country, while rapprochement with Iran will unlock the world's second largest proven gas reserves of 1,000 tcf, or 16 percent of the global total, increasing supply of LNG in the years to come, according to TRI-ZEN.
The report suggests that shippers that don't want to be caught on the wrong side of this market dynamic would be smart to make plans now.
TRI-ZEN analysts note it typically takes one to three years to build a ship; currently yard capacity is available for new vessel construction, but the surge in demand for LNG fuelled propulsion could see this capacity taken up fast.
"Structurally, LNG is 50% cheaper than its compliant alternative, low sulphur Marine Diesel Oil and those left paying diesel prices for fuel will be seriously uncompetitive," says TRI-ZEN.
In May of 2015 Ship & Bunker reported that LNG bunker ports have been established in Europe and the U.S. but were experiencing slower-than-hoped for business.
