Demand prospects rise for LNG as marine fuel

The growing level of interest displayed in LNG as a marine fuel, driven by both environmental restrictions and economic attractiveness means usage is certain to grow, according to a new paper from the Oxford Institute for Energy Studies (OIES). There is, however, less certainty over the pace and scale of demand growth. This in part is due to the relatively poor data quality on marine fuel usage, but primarily a reflection on the still early nature of market development and uncertainties over alternative fuel options, suggests the study.

The shipping sectors that are likely to be more promising for LNG include ro–ro ferries, cruise ships, bulk carriers, large container vessels, and, perhaps unsurprisingly, LNG tankers.

It would also appear that because of the costs of retrofitting, most LNG-fuelled ships will be new-built and owners/operators are unlikely to commit without concluding a long-term supply contract covering both pricing and physical delivery. LNG suppliers which are prepared to conclude such contracts will provide an important stimulus to the market, says the report. The lead times involved and the relatively low capital cost of infrastructure suggest that refuelling capacity is unlikely to be a constraint.

A review of recent forecasts suggest that global demand will be in the range of 25mn to 30mn t/y of LNG by 2030. The paper describes how many new or converted vessels fuelled by LNG would be required to reach this level, how it might be achieved and where the main obstacles to uptake are likely to occur. It concludes, that on balance, a demand level of around 15mn t/y (excluding LNG tankers) by 2030 is a more realistic prospect at present.

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