BCG: LNG Could Have 27% of Bunker Market by 2025

Tuesday March 24, 2015

Boston Consulting Group (BCG) says Liquefied Natural Gas (LNG) is likely to become the marine fuel of the future, commanding up to 27 percent of the bunker market by 2025.

"That much is clear to stakeholders in the commercial-shipping industry," said BGC, adding "the important question is when will LNG become the dominant bunker?"

An analysis of market dynamics conducted by the consultants suggests LNG's share of the global bunker market by 2025 could range between 5 percent and 27 percent.

Under a "base case" scenario LNG's market penetration in 2025 would be approximately 20 percent, said BCG.

Such a base case assumes that price differentials between heavy fuel oil (HFO), distillates and LNG will remain constant and that the proposed International Maritime Organization (IMO) global sulfur emissions cap will take effect from 2020.

But LNG's slice of the bunker market could rise to about 27 percent if the fuel becomes more competitively priced, while market penetration would fall to 18 percent if IMO decides to delay implementation of the global sulfur cap until 2025.

But the timing of such a surge in the use of LNG as a marine fuel could be influenced by multiple factors, conceded BCG.

For example, if governments offer subsidies to shipping companies for capital expenditure on new ships and retrofits, LNG's market penetration could rise to about 25 percent.

Container Segment Most Ripe for LNG

Alternatively, if HFO prices decline to pre-2008 levels, the economics of continuing to use HFO with the addition of scrubbers would improve, with LNG's market share dropping to 5 percent.

BCG said some shipping companies will employ a wait-and-see approach to investments in LNG and other low-sulfur fuels, particularly as oil prices have fallen dramatically in recent months.

But certain segments of the shipping market are likely to embrace LNG more readily than others, said BCG.

"The container segment's stable routes make it easier for companies to target investments in LNG, given that specific vessels may operate exclusively in ECAs or in locations where LNG infrastructure exists or is being developed," it said.

In the same analysis BCG concluded that if investments to comply with environmental regulations are made properly, they should pay for themselves.