Navigating the Complexities of LNG Bunkering Infrastructure Development
The Rising Opportunity: LNG Bunkering Infrastructure Gaining Momentum
The shipping industry has been pushing to adopt cleaner fuels to reduce environmental impacts. As one of the cleaner burning alternatives to conventional bunker fuels like heavy fuel oil, liquefied natural gas (LNG) is gaining significant traction in the marine fuel market. LNG as a marine fuel produces virtually no sulphur oxides and around 20% less carbon dioxide emissions compared to heavy fuel oil. Several ports and ship owners across major trade routes are investing in developing infrastructure for LNG Bunkering to support the growing LNG-fuelled fleet.
Many key bunkering hubs are introducing refueling operations facilities. Rotterdam has established multiple small-scale refueling operations terminals to serve the large LNG-fuelled ferry and tanker traffic in North West Europe. The Port of Antwerp-Bruges is developing an refueling operations terminal with an annual capacity of 100,000 cubic meters by 2022. Singapore, the world's busiest bunkering port, launched its first refueling operations vessel in 2019 to supply LNG to marine vessels. More recently, the Port of Los Angeles began LNG Bunkering operations leveraging on-dock pipelines. With infrastructure developments gaining pace, ship owners have greater access to LNG fuel across key trade routes.
LNG-Fuelled Newbuilds Drive Demand
An increasing number of new container ships, ferries, and tankers are being built LNG ready or dual-fuel capable to futureproof compliance with stringent emission norms. Major container lines like Maersk, CMA CGM, and MSC have incorporated LNG propulsion in a part of their new orders to switch to cleaner marine fuels. Finnish ferry operator Viking Line took delivery of the world's largest LNG-powered fast ferry in 2021. Tanker owners are also retrofitting some of their existing oil and chemical tankers to run on LNG.
Leading Norway-based shipping companies have been particularly aggressive in adding LNG dual-fuel tonnage to their fleet. As demand rises from new LNG-fuelled ships, ports are establishing bunkering infrastructure to supply the marine fuel along their trade routes. This virtuous cycle of newbuild orders and bunkering infrastructure development is expected to drive exponential growth in LNG Bunkering volumes over the next decade. Major classification societies have classed over 200 vessels LNG-fuel capable thus far.
Opportunities Across Markets
While short-sea shipping routes in Northwest Europe and domestic Chinese ferry networks have led initial adoption, new opportunities are emerging across markets. Australia has ambitious plans to develop a domestic LNG Bunkering industry to support LNG-fuelled vessels plying coastal trade lanes and offshore oil and gas sectors. North America is witnessing a ramp up with refueling operations gaining traction amongst ferries in Puget Sound and container ships calling LA/Long Beach ports.
LNG Bunkering is well-positioned to grow on long-haul routes also. Deep-sea containerships are considering dual-fuel propulsion for transpacific and Asia-Europe routes given the economics of LNG fuel compared to lower sulphur marine fuels or costly scrubber installations. Tanker operators transporting LNG cargoes are assessing loading bunkers from dedicated LNG bunker vessels during port calls to tankers instead of conventional fuels. Overall, marine LNG demand is forecast to increase nearly five-fold over the next decade across geographies.
Mid-Scale Solutions Emerge
While smaller scale truck-to-ship solutions have been useful to kickstart LNG Bunkering, mid-scale infrastructure is gathering momentum. Larger capacity bunkering vessels in the 5,000-15,000 cbm range are being deployed in ports with established or developing LNG terminals to achieve economies of scale. Technology companies like ENGIE, Wärtsilä, and Mitsubishi are introducing standardized mid-scale refueling operations solutions suited for both hub and regional ports.
The commissioning of dedicated mid-scale refueling operations terminals is enhancing supply visibility for ship owners. Malaysia launched its first mid-scale LNG Bunkering terminal this year leveraging offshore regasification capacity while Finland is developing a centralized mid-scale LNG import facility for distribution via bunker vessels. Such capacity additions will improve the feasibility of LNG as a marine fuel across deep-sea shipping segments.
Conclusion
With global decarbonization goals driving the shipping industry's energy transition, LNG Bunkering is poised for strong long-term growth underpinned by cleaner fuel regulations. Investments in infrastructure are synchronizing with increasing LNG-fuelled newbuild orders across a variety of vessel types. Regions beyond initial markets like Northwest Europe and domestic China are now adopting LNG to cut emissions. Mid-scale bunkering infrastructure solutions are emerging as a robust means to optimally supply growing demand. Overall, investments in LNG as a marine fuel present significant commercial opportunities across the marine and energy value chain.
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