INTERVIEW: SEA-LNG Sees 'The Game Just Starting' on LNG Bunkering

Peter Keller is chairman of SEA-LNG. Image Credit: SEA-LNG

LNG bunker industry body SEA-LNG has an optimistic outlook for the bunker fuel after some important progress in 2024.

In its annual report the company noted 638 dual-fuel LNG vessels in operation globally by the end of last year, up by 33% on the year. Ships capable of running on LNG made up 70% of the alternative fuelled vessel orderbook last year.

While the organisation is pleased with the progress seen in 2024, it still sees the current state of play as an early stage in LNG's development, Peter Keller, chairman of SEA-LNG, said in an interview with Ship & Bunker in London.

"We could sit here and say, 'oh, 2024 was a terrific year', but it's not game over," Keller said.

"The game's just starting, because we've got to get to a mature market level.

"We have about 94% of the fleet yet to convert to alternative fuels.

"Right now, the orderbook by tonnage is about 6% LNG, as we note in our View from the Bridge report, but that means there's 94% yet to go.

"So that's a pretty aggressive marketplace; I think it's very, very positive and will continue to be so for many years to come, until we get to a point where we fill out the fleet and it is all alternative clean fuels."

Regulation as a Demand Driver

While the organisation sees increasingly tough emissions regulations as part of the reason for increased LNG demand, it also sees other factors at play.

"A robust regulatory environment for maritime has always been important," Keller said.

"The position of the IMO and regional regulators has always been something that helps drive the industry in a particular direction, and this is no different.

"There's also a tremendous amount of capital out there that's looking to make the energy transition happen.

"It's not just government capital; there's tremendous amounts of private capital.

"And you see companies like MSC, CMA CGM and now Maersk and Hapag-Lloyd moving very aggressively in this direction.

"The amount of pressure coming from the average world citizen is going to be what really dominates at the end of the day, because that's also what dominates the political environment."

Keller expects the new Trump Administration in the US to have a positive impact on the LNG industry.

"The president and secretary of energy say they want to make the US energy-independent again.

"That means a renewed emphasis on natural gas.

"This will be good for LNG, and good for the transition to clean fuels."

The organisation is also supportive of the current European approach to regulating emissions from shipping.

"I think the Europeans have taken a non-prescriptive route, which we always suggested was most appropriate, setting standards as opposed to defining solutions," Keller said.

"I think that's a very mature regulatory process, and I think the IMO process as it develops hopefully will complement that."

Setting Up Supply

A key element of the next stage for LNG bunkering will be the setting-up of supply at smaller ports around the world, following suit from the large hubs where the alternative fuel is now almost universally available.

This can be expected to follow a clear pattern, Keller said, with limited initial investments leading to larger projects.

"The way it started in Port of Hamilton, Ontario is a classic example," he said.

"One of our members - REV LNG - has been bunkering ships in the Great Lakes now for a year and a half or two years.

"They started by truck-to-ship using what we call queens, so they could manifold two trailers of LNG together to speed up the process, fueling modest-sized vessels with maybe 8-10 trailer loads of LNG.

"And then they transition to a skid, as we did at TOTE in the early days. They used a skid that had two trailers, but there are skids up to four and six trailers now, and you can manifold that number of trailers together to increase your bunkering flows.

"That puts you into another size of ship where you can do 20, 25 trailer loads of LNG or more, in a reasonable amount of time, maybe five or six hours of bunkering time.

"And a skid and the equipment associated with it is about a few million dollars.

"It's a significant investment in a small port, but nonetheless modest in world terms. And it's from there that you transition to a bunker barge or vessel of modest size - in the case of TOTE it was a 2,000 m3 bunker vessel initially.

"So the idea that one needs to jump in at $25-50 million for the opening round is just incorrect.
There are lots of good ideas to start bunkering truck to ship and transition over time."

Growth in LNG bunkering can be expected across multiple regions, Keller said.

"We're seeing ports in the Med, the Spanish ports, the Middle East is starting now, the US, especially the East Coast for the cruise segment, has been growing very nicely," he said.

"We're now seeing Seaspan, out of Vancouver, bunkering down as far as Southern California, and that's going to continue.

I'd expect to see some growth coming out of Mexico again, to also serve the Southern California market.

"And China is a bit of an unknown at the moment, but there are an awful lot of ships going in and out of China, and we know that they're typically quite aggressive going into new markets."

Retrofits Unlikely to Emerge at Scale

SEA-LNG is less optimistic as an organisation about the prospects for currently conventionally-fuelled vessels to be retrofitted to LNG propulsion in large numbers, even those ships that came with an 'LNG-ready' notation.

"Retrofitting is extremely expensive and it is very complex," Keller said.

"With many of the 'ready' ships, all they had was available races for the piping and things of that nature.

"When you see the 'ready' designation today, irrespective of what the fuel is, I do not expect more than 1-2% of those ships ever to be converted.

"It's too complex, too expensive, and frankly, in the early days it was a way of owners being seen to do something without really having to do anything."

More Segments Expected to Order LNG-Fuelled Ships

Thus far, the container segment has been the largest buyer of LNG-fuelled ships, but other segments are now also investigating the alternative fuel, and increasing supply options will be key to accelerating that change.

"Until we get more fueling capabilities in more ports, it's going to be hard to get into the tramp segments and some of the other segments," Keller said.

"Right now the liner trades dominate, because they typically go to known places.
"It's much easier to project the fueling logistics, which are very important.

"Cruise will continue to be a very important segment, and PCTC, where over 90% of the new orders are all LNG and dual-fuel, will continue to be important.

"But now the other vessel types, such as as bulk and other segments, are starting to move into LNG, especially for those bulk vessels that are built for more specific trades, like Australia to Japan and Brazil up into Europe."

Shift to Greener LNG

Over the long term, the viability of LNG as a bunker fuel will be determined by how quickly the greener alternatives to fossil LNG - bio- and synthetic LNG - can have production scaled up to meet the needs of the shipping industry as it decarbonises.

There are as yet no easy answers to this problem, Keller said.

"There's a massive amount of research and work being done on the hydrogen economy, but that was predicated upon finding enough energy to make hydrogen, which is a very energy-intensive process," he said.

"The question right now is how much bio-products will be developed, and who's going to compete for them.

"What's going to happen with local energy production?

"What's going to happen with industrial energy?

"What's going to happen with aviation?

"What's going to happen with road and off-road transportation?

"There's going to be a lot of competition for that fuel, and obviously maritime will compete.

"We're not talking about making hydrogen and it only going to shipping, quite the opposite; shipping will probably be the tail-end Charlie.

"We will probably be last in line, especially if we don't continue to collaborate across the
energy value chain.

"So how long this is going to take, I think, is one of the questions of the century."

In the nearer term, Keller believes blending small quantities of bio-LNG into conventional LNG will be a good start in delivering the carbon intensity cuts required by current regulations.

"One of the beauties of natural gas, of methane and the LNG pathway, is that you can take 5-10% of bio products, or in the future e-methane, and use that to reduce your emissions profile and work through the regulatory process and be compliant.

"For example, right now when you look at the FuelEU Maritime, we project that LNG ships burning standard LNG without input of any secondary fuel, are going to be good until about 2039, at least in terms of the current regulatory structure.

"If you then add 5-10% of a bio product, or by that time an e-methane product, you're likely going to be good through 2050."