Shell Wants LNG Bunkers to be Priced Better than Fuel Oil

Shell is working towards making LNG more affordable as well as increasing its availability

Shell Marine Products (Shell) has revealed its intention to make the use of liquefied natural gas (LNG) bunkers commonplace, and to create an LNG network for container shipping, ShippingWatch reports.

"The trick is to make [using LNG] more competitive compared to fuel oil, and this hasn't been done yet," said Surinderdeep Singh, General Manager of Shell Marine Products.

"The technical challenge remains. How to create an engine that can run on LNG at a level at least as competitive as fuel oil. We're working with partners such as Marine OEMs to solve this problem. We're not there yet, and it's still a challenge globally."

Supply and Demand

Last year, Royal Dutch Shell's LNG production is understood to have outstripped oil production by volume meaning strong demand for LNG is strategically important to the oil and gas major, but Singh acknowledges there are both technical and logistical challenges involved in convincing the shipping industry to use LNG bunkers.

The fact that LNG is not currently available at many ports, including some major ones, is a significant logistical hurdle, but Singh says shell already has LNG facilities at Rotterdam and Houston and is "looking at Singapore."

"If we have hubs such as Shanghai, Singapore, Qatar, Rotterdam and Houston, it represents an LNG network that the major container carriers can start to use. From there it will spread to smaller units, but the catalyst is the commitment to some major investments. And Shell has the capability to do this."

Singh says multi-fuel engines capable of running both LNG and traditional oil based bunkers could help bridge the gap until such LNG bunkering infrastructure is in place, noting the uptake of MAN Diesel & Turbo's 2-stroke gas engine, ME-GI, "could hold the key to some of our biggest customers converting to LNG more broadly."

Even with efficient engines, long term pricing and product availability is likely to be a key factor in whether or not shipping companies opt to switch to LNG powered vessels, and Singh says ship owners are looking ahead 25-30 years when commissioning vessels.

"The catalyst is the commitment to some major investments," he says. "And Shell has the capability to do this."

Earlier this year the story of LNG as a marine fuel was explored as part of the Fathom Spotlight series.