LR Sees Rising LNG Retrofit Demand but Warns of Shipyard Capacity Shortage

An LNG carrier operated by TotalEnergies. Image Credit: TotalEnergies

As LNG technology advances and fuel availability expands across global ports, more shipowners are steering towards investing in LNG-capable vessels and retrofit solutions, according to Lloyd's Register (LR).

While methanol conversions are poised to dominate over the next four years, supply concerns around methanol and ammonia could shift momentum toward LNG, LR said in its latest report.

It notes that incentives for accelerating alternative fuel adoption are lagging. Despite regulatory pressures like the EU's FuelEU Maritime and ETS, which penalise carbon emissions, demand remains low due to weak incentives for fuel producers.

"A surprising development in 2024 was the resurgence of LNG retrofits as shipowners sought immediate carbon reductions to navigate regulatory requirements," the report mentions.

With fuel availability still uncertain and emissions regulations tightening, an LNG retrofit market could gain traction to bridge the gap.

As carbon costs rise and zero- or near-zero emission fuels remain scarce, the financial and technical challenges of LNG retrofits may become less of a deterrent for shipowners, LR argues.

Nonetheless, LR warns that while the current yard retrofitting capacity of 465 ships/year may be sufficient for early demand, it will be inadequate in the coming years when the need surpasses 1,000 retrofits annually.

It also cautions shipowners against overcommitting to LNG, as deeper emissions reductions will be necessary to address methane emissions.

To view the LR report in full, click here.