Global ports expect to see LNG account for 13% of the bunker fuel market supply come 2020 and 24% by 2025, according to a Lloyd's Register report Monday.
Lloyd's global marketing manager Luis Benito shared the observations at a media briefing in Singapore, and these were based on the body's LNG Bunkering Infrastructural Survey conducted this year.
Approximately 50 ports around the globe were surveyed, with 22 ports responding to the questionnaire. Of the respondents, 15 ports were based in Europe, four in North America and three in Asia, said Benito.
The ports were presented with a list of 18 questions on their views of challenges and their plans for LNG bunkering, with key bunkering ports like Singapore and Amsterdam participating. Notably absent were Rotterdam and Houston.
The results showed that some 59% of ports surveyed have "specific plans for developing the LNG bunkering infrastructure, and 76% of them "believe that LNG bunkering will commence at their port within five years," said Benito.
By 2020, key European ports will be able to support deepsea bunkering operations as well, the results showed.
However, around 90% of ports agreed that port and land safety issues would "need to be harmonized."
The handling of LNG as a bunker fuel involves more safety risks than fuel oil grades as it is a completely different type of product, said market sources previously.
Singapore is expected to pioneer the drive for LNG bunkering in Asia since it has already built facilities such as storage and jetties for LNG bunkering barges, said Benito, adding that it is already being seen as the gas hub of Southeast Asia by South Korean and Japanese LNG buyers.
LNG bunkering has found impetus in Europe mainly due to shipowners pushing for it and asking port authorities there to encourage the setting up of infrastructure for supplying marine gas fuel.
While Europe is in the forefront of LNG bunkering, the US and Canada are fast catching up by setting up facilities and infrastructure rapidly.
DEMAND & PRICE
Some 86% of ports indicated that it was likely or very likely demand for LNG as a bunker fuel would come from deepsea ships within a three to 10 year timeframe, said Benito.
Benito said that while Singapore is ready to be an LNG bunkering center, the business would only really take off if shipowners drive up demand, as is happening in Europe currently.
This demand will likely stem from how competitive the price of LNG as a bunker fuel is, and also its availability of supply, said Benito.
Pricing however remains an unknown variable at this point and the market is rather opaque for LNG trading, with buyers and sellers dealing directly with each other for cargo trades, said Douglas Raitt, global manager for Lloyd's Register's fuel oil bunker analysis and advisory service.
Current LNG bunkering operations are limited to short-sea vessels.
As demand evolves for LNG as a bunker fuel, port authorities are paying more attention to the economics and supply availability of LNG, two of the largest challenges for market.
Particularly challenging is how the disparity in LNG prices between North America, Europe, and Asia would factor into shipping economics.
Asian LNG prices for May delivery are currently $15.40/MMBtu, a steep premium compared to natural gas prices at $47.69 pence/therm ($7.908/MMBtu) at the UK's National Balancing Point, and $4.436/MMBtu for Louisiana's Henry Hub on Friday.
Europe is already far ahead of others for LNG bunkering, as it is already developing the infrastructure and studies for LNG bunkering, but there is a very high potential for gas to play a larger role in Asia, if the major Asian buyers are successful in lowering their LNG procurement costs, Benito said.
In addition, the cost of highly trained crew to handle LNG bunkering will also have an impact on bunkering operations costs and LNG bunker prices. These costs are not yet known since there is no deepsea bunkering for LNG at the moment, said the Lloyd's team.
In a Lloyd's Register report issued earlier this year, the body projected that by 2030, LNG would make up 11% of the deepsea fuel mix for bunker purposes, up from zero currently.
That figure included demand from container, bulker and tanker vessels, and did not include LNG tankers which already use some LNG to power the vessels, said Benito.
Also, the experts at Lloyd said they don't see the conventional bunker suppliers getting into the LNG bunkering space.
"The current crop of wet bunker suppliers will not move into LNG bunkering. You can expect [to see] the oil majors dominating LNG bunkering. The level of sophistication coming into LNG bunkering is unprecedented. The entire bunker supply chain will see a sea-change," Raitt said, adding market participants want to see LNG bunker cargoes being traded on a spot basis for its price discovery.
