Increasing doubts about the future of LNG as a marine fuel against a backdrop of rising gas prices has led to the cancellation of some orders for LNG-fueled vessels, according to an OPEC report.
The oil producers’ cartel’s World Oil Outlook 2021-2045 (WOO) report states that the maritime sector is “at a technological crossroads” in its search for alternative fuels.
“The future of LNG in marine bunkers remains uncertain at the moment, as some have expressed doubts about its long-term sustainability in view of CO2 emission reduction targets, and have called for increasing use of renewable hydrogen or ammonia instead,” it says.
“Some orders for LNG-fueled vessels have been cancelled amid these concerns,” it says.
Nevertheless, the report admits that LNG “could become the dominant fuel, especially for large ocean-going vessels,” adding, “The advantage of LNG would be a significant reduction in carbon dioxide emissions, compared to liquid fuels,” and notes that the availability of LNG bunkering facilities “has increased considerably in recent years.”
It predicts, “Demand for marine bunkers is expected to remain stable after 2030. During this period, LNG carriers are expected to achieve sufficient penetration.”
However, the rising cost of LNG bunker is becoming a concern, as gas is now the equivalent of about $300 per tonne more expensive than fuel oil in the Rotterdam and Singapore marine hubs.
The rise in LNG prices was considered “temporary”, but some in the energy sector suggest there could be further increases and it is reported that even LNG tankers, which generally consume a combination of marine gas oil and “boil-off” gas from their cargo, are now fully bunkering, due to the price disparity.
A pickup in economic activity following a cold winter in the northern hemisphere has caused storage levels to be at multi-year lows, which has sent gas prices soaring, and there are fears that another cold winter will send prices through the roof.
According to Ship & Bunker, LNG bunker prices in Rotterdam have this week seen a rise of more than $200 to $1,425 a tonne, and brokers expect further rises in the coming days.
Despite the OPEC report’s comments, it is unknown whether any of the current orders for LNG containership construction have had changes in fuel specifications.
However, carriers have assured that their company was not “overly concerned” about the LNG price increase, given that the vessels ordered were designed as dual-fuel and could run on low-sulfur fuel oil.