EMEA News
Dual-Fuel LNG Carriers "Still Make Sense" Despite Oil Price Drop
Norway-headquartered maritime law firm Wikborg Rein & Co. has said that low-speed, dual-fuel engines should remain an attractive option for Liquefied Natural Gas (LNG) carriers, LNG Industry reports.
"The application of dual-fuel, gas-injection technology to newbuildings and the conversion of slow-speed diesel engines on existing ships still make sense, despite the recent fall in the price of oil," said Partner, Joe McGladdery.
However, he said that there is "some doubt about the viability of dual-fuel gas-injection technology in the current market."
Energy companies are reining in capital spending due to a dramatic drop in oil prices in recent months, with McGladdery pointing out that this is leading to LNG production projects, which incur high start up costs, being shelved.
Consequently, LNG cargoes are unlikely to be forthcoming in the quantities previously predicted and the development is weighing on charter rates for LNG carriers, he said.
In addition, "the economics of slow-speed diesel engines works when there is a marked differential between the relative prices of oil and LNG, but the recent collapse in the price of oil has been accompanied by a fall in the price of LNG as well."
But dual-fuel engines give ship operators more flexibility, offering a choice between different fuels, whereas scrubber technologies do not.
"The fact remains that converting an LNG carrier's engines so that it is capable of burning LNG as a low-sulfur fuel allows owners and operators to comply with the new requirements for ships operating in Emission Control Areas (ECAs)," said McGladdery.
Last week, LNG spot charter rates were said to be at their lowest level since 2010.
