The liquefied natural gas (LNG) bunkering market in Asia is gearing up for growth in the next two to three years. This is largely due to the implementation of stricter environmental regulations across the globe to improve the emissions performance of shipping companies.
In particular, the International Maritime Organisation’s (IMO) 2020 deadline for a fuel sulphur cap of 0.5 per cent means there is growing impetus for the industry to resolve the structural and commercial obstacles that have been hindering the widespread adoption of LNG as a marine fuel.
Although there are several compliant solutions for the industry, such as the use of exhaust gas cleaning systems (also known as scrubbers) and low sulphur marine fuels, LNG provides a more future-fit solution that is able to meet the new regulations because of its better emissions performance.
Its zero sulphur content and relatively low levels of nitrogen oxides emitted mean that LNG outperforms any other conventional marine fuel on a local emissions basis, allowing the industry to be future-proofed against more demanding environmental regulations.
The abundance in natural gas supply also makes LNG a more sustainable alternative fuel – according to some estimates, the reserves for natural gas can last much longer than the world’s oil reserves, which is only expected to last for another 50 years.
The relative benefits of using LNG as a marine fuel, coupled with the approaching IMO deadline, has seen increased momentum among Asian countries to further establish an LNG bunkering market. Several projects are already underway to capitalise on this rising demand.
For example, the first phase to develop an LNG bunkering base at the Port of Yokohama in Japan has already started with the introduction of truck-to-ship bunkering. The three-phase roadmap aims to launch ship-to-ship bunkering in 2020 and position the Port of Yokohama as a regional LNG bunkering hub.
The Maritime and Port Authority of Singapore (MPA) has also commenced the LNG bunkering pilot programme as a platform to test operational procedures and safety protocols for LNG bunkering. The aim is to prepare the port of Singapore to be ready to service a range of vessels when LNG becomes widely adopted as part of the marine fuel mix. MPA has awarded LNG bunkering licenses to Pavilion Gas and FueLNG, a joint venture between Shell and Keppel.
At the same time, South Korea is already offering LNG bunkering services in the port of Incheon, with a second facility in Busan being considered; while China is extending LNG bunkering infrastructure from inland waterways to coastal areas.
The number of LNG-fuelled and LNG-ready ships in the industry is also on the rise – as of December 2016, 91 LNG-fuelled ships and another 70 LNG-ready ships are either in service or on order. The existing order book also shows a growing number of deep-sea vessels including container vessels and bulk carriers being built to LNG dual-fuel standards, illustrating how the industry is gearing up for a growth in the LNG bunkering market.
On the demand side, MPA is seeding initial demand for the LNG bunkering business in Singapore with a S$2 million grant which was taken up by Keppel Smit Towage and Maju Maritime to procure dual-fuel harbour tugs.
Two organisations – the Society for Gas as a Marine Fuel (SGMF) and SEA\LNG – have also been formed to promote LNG as the fuel of choice for the industry and to further develop the LNG bunkering market.
While the SGMF was established to focus on the safety, operational, and technical aspects in the development of natural gas as a sustainable marine fuel, SEA\LNG concentrates on breaking down the commercial barriers to the uptake of LNG as a marine fuel. It does so through a strong coalition of industry players from LNG suppliers, bunkering companies to port authorities and many more.
In line with this, different ports around the world have also been working closely with one another to strengthen the understanding and knowledge of LNG. Singapore, for instance, has been collaborating with ports such as the ports of Rotterdam, Antwerp and Zeebrugge in Europe to develop common standards and rules for LNG bunkering.
This collective effort is important to deepen information sharing on LNG bunkering so as to ensure that every aspect of the market including the procedures of LNG bunkering, as well as storage and usage of the fuel, is understood by all stakeholders.
Further opportunities await
While the move to LNG in shipping is gaining momentum in Asia, the region has had a slow start in adopting LNG and growing the LNG bunkering market when compared to the maritime and shipping industries in the U.S. and Europe.
However, the 2020 deadline set by the IMO has forced all stakeholders to look further into the use of LNG, creating more opportunities for all players involved along the LNG value chain.
In particular, one sector where there will be strong benefits is the vessel development sector. There will be an increased need for LNG-fuelled ships and for bunker vessels fitted with the proper equipment for LNG bunkering; while existing ships that are not LNG-ready will also need to be redesigned or retrofitted such that they can allow for a streamlined conversion from conventional fuels to LNG when the time is right.
As an incentive to get operators to switch to using LNG, the industry should work together to make LNG bunker more attractive by lowering the supply chain costs. For example, incremental reductions made by infrastructure operators on their terminal fees, shipyards on the costs of new builds, and bunkering service providers on charter fees, among other things, can culminate in a significant cost difference for the end users.
Another opportunity for the LNG bunkering market lies in the training of manpower. As LNG is increasingly adopted as a marine fuel, new skill sets will be needed in the industry to not only refuel ships but to also ensure safe practices and proper use of new bunkering equipment. There will potentially be a demand for manpower to specifically train crew members in this field.
These opportunities were explored among industry players and stakeholders during the Sea Asia conference that took place last month. Providing a common platform for discussions and debates on significant industry trends, the Sea Asia conferences were key in creating the collaborative environment needed to drive Asia’s LNG bunkering market further.
As the LNG bunkering market in Asia continues to grow in line with the rise in demand for LNG as a marine fuel, it is important that all industry stakeholders in the region work together to ensure sustained success. Only with a collaborative approach among industry players and stakeholders from different sectors will all barriers and gaps in LNG bunkering be well-addressed.
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Source: Keppel Offshore & Marine (By Michael Chia, Managing Director (Marine & Technology) of Keppel Offshore & Marine Ltd)