Bunker Industry To De-commoditize Amid Shipping Decarbonization

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  • Bunker industry moving to a cost-plus model
  • Biofuel bunkering to be around 5% of marine fuel mix by end-decade
  • Carbon capture with scrubbers seen as the next big development

The bunker industry is set to undergo de-commoditization as it transitions toward a cost-plus model, fundamentally altering market relationships and putting more focus on cleaner energy solutions than ever before as the shipping industry adapts to a multi-fuel future, reports Platts quoting an industry consultant.

Different fuels for different ships and different routes

Shipowners will seek different fuels for different ships and different routes, with ships being designed and built more specifically to cater to the routes on which they can find that fuel, BLUE Insight director Adrian Tolson told S&P Global Commodity Insights in an interview.

This was already happening with LNG dual-fueled carriers but will become more commonplace in future with, for example, green methanol bunker supply operations supported by demand just like LNG bunker operations, he said.

LNG supply is usually done on a five- to 10-year term contract, which is almost inconceivable in the minds of a bunker person. That’s going to be the model for all the alternatives moving forward,” Tolson said.

There will be an underlying commodity price, and then infrastructure and logistics costs will need to be covered by the full contract price, giving the new alternative fuel supplier and their investors a reasonable return,” he added.

LNG as a bunker fuel remains relevant

Tolson also noted that LNG as a bunker fuel remains relevant with numerous shipowners fitting LNG dual-fueled engines, particularly containerships and car carriers, with the option to reduce CO2 emissions.

According to Tolson, who believes issues over LNG’s methane slip can be overcome and while recognizing the economic issues of current high prices due to the Russia-Ukraine war, still estimates that LNG could potentially account for 10% of the marine fuel mix by 2030.

Even with the recent series of black swan events it’s still an achievable target,” he said.

Meanwhile, energy — bunker fuel — which has long been an afterthought for shipping is now no longer that, Tolson said.

Shipowners have major decisions to make on future vessel newbuild energy choices, and this can only be done with support from a charterer or shipper when this commitment is made. Tramp and spot-chartered ships will tend to become a thing of the past as owners will look for longer-term shipper commitments and contract of affreightments. All this leads to the de-commoditization of shipping. Energy transition is going to fundamentally alter commercial shipping as it is also doing with marine fuel supply,” he said.

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Source: Platts

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