Doha: The Doha-headquartered Gas Exporting Countries Forum (GECF) has said that its member-countries have great potential to emerge as international LNG bunkering hubs.
As LNG is all set to become a significant fuel in marine transport in long term, the GECF countries should consider becoming first movers instead of just taking a wait-and-see position, said Aydar Shakirov, Gas Transportation & Storage Analyst, Gas Market Analysis Department at GECF.
With International Maritime Organization (IMO) introducing the new sulphur cap of 0.5 percent from 2020, demand for LNG bunker fuel is expected to rise, Shakirov said in an ‘expert commentary’ released by GECF.
LNG Bunkering is the practice of providing liquefied natural gas fuel to a ship for its own consumption. The key advantage of LNG as a fuel is the vast reduction in pollutant caused by the more traditional method of fuelling ships such as heavy fuel oil, marine diesel fuel (MDO) and marine gas oil (MGO).
Shakirov said LNG has served as a bunker fuel for many decades, but predominantly on LNG carriers as boil-off gas. However, the recent years have witnessed the growing consumption of LNG bunker fuel by non-LNG carriers.
Today, LNG is becoming a technically and economically feasible option as an alternative fuel for shipping. Numerous ships have been adopting it, with an increasing number of new-builds on order.
Currently, LNG-fueled vessels represent a marginal share of the global fleet. There are only over 120 LNG-fueled vessels on the global market which is less than 0.2 percent of the market. However, the number is expected at least to double by 2020, if we take into account vessels on order.
According to GECF, global consumption of bunker fuels will reach 319 mtoe (million tonnes of oil equivalent) in 2040, with global LNG bunker fuel consumption increasing to 41 mtoe (or 33 mtpa, or 45 bcm). Thus, in 2040 LNG bunker fuel share is expected to reach 13 percent of the bunker fuel market, while its share in the global natural gas market is anticipated to be at around 1 percent.
According to Shakirov, as of now, only a small number of major shipping operators have made a clear commitment to new build LNG-fueled ships. Many ship owners and operators are reluctant to risk significant investments in this climate and have adopted a wait-and see approach to see how technology and prices evolve.
In this regard, various recent developments in the industry could serve as a trigger. These developments include the commissioning of the first LNG bunkering vessels in Europe, the first large order of 9 LNG-fueled container ships by CMA CGM, large orders for cruise ships and oil tankers.
If other major companies start to follow the suit, this will be a key indication that LNG will be a significant fuel in marine transport in the long term.
GECF countries should consider becoming first movers. These countries have great potential to become international LNG bunkering hubs. Moreover, LNG bunker fuel allows GECF countries not only to export LNG, but also to develop national LNG market and stimulate demand in their own countries, Shakirov said.
He said the GECF countries have various competitive advantages. First, GECF as a whole is the largest producer and exporter of LNG. It implies that the economics of their LNG bunkering projects may differ from many non-GECF countries. Various non-GECF European and Asian countries, which have ambitions to become major LNG bunkering hubs, are dependent on LNG imports. In this regard, GECF countries may be more competitive.
Second, many GECF countries already have the relevant LNG infrastructure, developed first of all for large scale LNG exports. Third, many GECF countries have high maritime trade volumes which paves the way for building LNG bunkering hubs in their respective countries.
Moreover, some of the countries are notable for favorable geographic location in their respective regions (Middle East and North Africa, Latin America and the Caribbean, Sub-Saharan Africa, Europe) close to the major global trading routes.
That may facilitate the usage of their LNG bunkering infrastructure by the largest global shipping companies.
