Traditional Bunkers Will Trump LNG Well into the Future: OPEC

OPEC says the high cost of LNG development will dissuade significant investment

The Organization of the Petroleum Exporting Countries (OPEC) says the savings advantage of using Liquefied Natural Gas (LNG) instead of traditional bunker fuel "could be far less than anticipated" given the current low cost of oil and the expense of new LNG ship construction.

Writing in the recently released World Oil Outlook 2015, OPEC notes that a new LNG ship costs about 15–20 percent more than a vessel that uses more conventional technology, and that this along with the expense of retrofitting, plus the idle time required for conversions "will be overly prohibitive for shipping companies."

The Outlook further postulates that although IMO sulfur emission rules for international waters could well be be implemented globally in 2020, this is subject to review and could be postponed until 2025.

"This element adds further uncertainty to the market," said OPEC.

However the OPEC analysts also warn that uncertainty about emission regulations may also result in refiners not committing to major investment projects that would expand low sulfur marine fuel capacities. 

"It can thus be concluded that LNG ships will only continue to increase their share in the marine sector slowly – as the supply and, to a lesser extent, the demand situation of LNG bunkers steadily improves, and as more experience with the technology is gained," said OPEC.

"However, lower oil prices and continuing uncertainties about the future of LNG infrastructure and regulatory developments, alongside possible delays in the implementation of new IMO rules, adds uncertainty for market players and, therefore, will support conventional ship technology and the ongoing use of oil-based fuels in the future."

Earlier this year Boston Consulting Group predicted a much brighter future for LNG bunkers, saying it is likely to become the marine fuel of the future, commanding up to 27 percent of the bunker market by 2025.