Demand for liquefied natural gas (LNG) as a shipping fuel could soar over the next 10-15 years if authorities this week agree a global cap on sulphur dioxide emissions, a senior executive of French energy firm Engie said.
If the cap is approved, LNG demand for the ship fuel sector could climb to 30 million tonnes a year (mtpa) by 2025-30, said Denis Bonhomme, Engie’s senior vice president of business development in Asia, up from marginal volumes. That would be around 6 percent of expected 2025 total global consumption.
Suffering from large oversupply following new production and export capacity, especially in Australia and the United States, the LNG industry is looking to create new demand in order to find a home for the surplus gas.
Previously dominated by deals between major producers and large utilities that import LNG for use in big power stations, alternatives include developing smaller electricity projects for use in more remote regions, such as southeast Asia’s many islands, or using LNG as a transport fuel.
Using LNG as shipping fuel, known as bunkering, would be more effective in reducing oversupply than investing in small-scale LNG power projects, given the high fixed costs of such facilities, Bonhomme told Reuters during the Singapore International Energy Week.
Shippers, who face new regulations to curb emissions, should invest in LNG when they renew their fleet, he added.
“If you have to invest into new ships, why go in-between when you know in (a few) years you will anyway have to switch to LNG,” Bonhomme said.
“A lot of the shipping lines do not have a very young fleet so they have to renew it anyway, so that is a good opportunity.”
So far, shipping fuel is dominated by diesel and bunker fuels, which are cheaper than LNG.
That could change if the International Maritime Organization (IMO) supports a switch toward less polluting sources.
The IMO will meet in London this week to decide whether to impose a global cap on sulphur dioxide emissions from 2020 or 2025.
There are currently around 790 LNG-fuelled ships operating and on order, ship brokers have said. That compares with nearly 97,000 merchant and passenger ships in service or on order.
LNG would face competition from marine gas and diesel oil, and the use of scrubbers which would allow ships to continue to use high-sulphur diesel. Other alternatives to LNG include methanol, hydrogen and biofuels.
(Reporting by Mark Tay; Additional reporting by Keith Wallis; Editing by Richard Pullin)
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