LNG a Viable Option for Deep Sea Shipping

Hector Sewell, head of Marine Business Development for Lloyd's Register, said LNG is unlikely to simply replace heavy fuel oil.

A new study by Lloyd's Register (LR), "LNG-fuelled deep sea shipping", has concluded that in the long term, LNG-fuelled engines are a viable option for deep sea trades, with ports surveyed as part of the study saying they thought it was "very likely" within the next 10-15 years.

It also said LNG bunkering is likely to be adopted for short sea shipping in Emissions Control Areas (ECAs) over the next 13 years, but overall the level of demand for the fuel is uncertain, and will depend largely on pricing.

In a base-case scenario assuming current ECAs and a 0.5 percent global sulfur limit for marine fuels implemented starting in 2020, LR predicts LNG bunker demand will reach 24 million metric tonnes (mt) for deep sea trades by 2025 and 653 LNG-fueled newbuilds will be added, representing 4.2 percent of deliveries from 2012 to 2025.

However, under an alternate scenario assuming a 25 percent decrease in LNG bunker prices and a 75 percent increase in propensity for newbuilds to convert to LNG-fuelled designs, LNG bunker demand for deep sea trades would reach 66 million mt, and 1,963 LNG-fuelled newbuilds - 12.6 percent of global deliveries - would be added.

A third, low case scenario that assumes a 25 percent increase in LNG bunker prices and a shift of the implementation of global sulfur limits back to 2023 would bring demand for LNG bunkers for deep sea trades to only 0.7 million mt and lead to just 13 LNG fuelled newbuilds, or 0.1 percent of global deliveries.

First Movers

"LNG is unlikely to simply replace heavy fuel oil," Hector Sewell, head of Marine Business Development for Lloyd's Register, said in a statement.

"We will see specific niches – such as in Norway – embrace LNG in small scale applications. Adoption in the deep-sea trades is a different affair; there are different drivers, and we are also likely to see other fuels and technologies emerge as options."

Sewell said that, despite excitement about LNG bunkering, the market has not yet seen an order for deep-sea, large-engined LNG-fuelled ships.

"The most likely first movers could be the big containership operators who are able to bunker at two ports at either end of a liner trade route, such as in Rotterdam and Singapore or Shanghai," he said.

"This might take years. Or it may happen tomorrow."

The study found that shipowners see LNG-fuelled engines as a viable option in the long term, particularly for ships on liner trades, while low-sulfur fuel oil is the short-term method for compliance with emission regulations, and abatement technologies are seen as a medium-term option.