LNG Bunkering

ENGINE Q&A: LNG bunker market set for low prices and rapid demand growth

In an interview with ENGINE, Emma Richards of BMI Research argues that a global gas supply glut will weigh down on LNG prices and create fresh bunker demand from both new and existing vessels.

Published

7 months ago

March 11, 2024

Admin

After the LNG bunker market was shook by Russia’s invasion of Ukraine and skyward prices, it now faces a period of oversupply, low prices and soon a doubling of the global LNG-fuelled fleet.

The LNG bunkering market faces an upswing which will be driven by a notable increase in LNG-fuelled vessels in operation. With 509 operational LNG-fuelled vessels reported until now, and an additional 524 on order, the industry braces itself for significant expansion. Amidst this growth, the dynamics between sellers and buyers could change.

In an interview with ENGINE, Emma Richards argues that a global gas supply glut will weigh down on LNG prices and create fresh bunker demand from both new and existing vessels. She is an associate director of oil and gas at BMI Research and has over 10 years of experience as an analyst and researcher, with LNG as one of her specialisms.

How are industry players preparing themselves to tackle the expected growth of the LNG bunkering market in the coming years?

The LNG bunkering market is set for rapid expansion over the coming years, with DNV reporting 471 LNG-fuelled vessels operational as of 2023 and another 523 currently on order and set to begin commercial operations within the next five years.

Bunkering infrastructure is already fairly well-established along most major trade routes and industry players are ramping up their spending to cope with the expected increase in demand, via investment in bunkering terminals and ship-to-ship and truck-to-ship LNG bunkering capacity.

Traditional demand centres in North America, Europe and East Asia will continue to pull the lion’s share of capex, but we’re also seeing increased spending in other regions, such as MENA.

As well as individual investments in local facilities, some players are also partnering up, to build out global bunkering networks. This entails strengthening ties across existing hubs, as well as exploring new markets to penetrate along key shipping routes.

As with investments in the LNG sector more broadly, GHG emissions levels are growing in importance and measures to reduce carbon intensity are a common feature of many new projects under development.

Will the extra natural gas production and LNG export capacity that is set to come online in the US and Qatar over the coming years lead to an LNG glut?

Yes, it looks very likely to be the case. Qatar and the US are both set for significant export growth over the next five years, but there’s a whole host of other markets that are also ramping up their exports – Mozambique, Malaysia, Russia, Nigeria, Indonesia and Australia, to name just a few.

We don’t see underlying LNG demand growth being strong enough to absorb these exports in full, so – assuming liquefaction capacity comes online as planned – we’re looking at quite a loose market balance over the mid-to-late 2020s.

Based on our forecasts, 2026 and 2027 will represent the peak of the supply glut, with imports playing catch-up from there. To be clear, we’re very bullish on demand growth, it’s just a highly cyclical industry, and recurrent periods of surplus followed by scarcity are part and parcel of that.

If so, will that also permeate down to a glut on the LNG bunkering side and pressure prices down?

Yes, changes in LNG prices feed very directly into the bunkering market and prices will need to adjust downwards, to incentivise discretionary purchases and encourage fuel switching towards LNG. Sellers have generally had the upper hand over the past few years, but it’ll be the buyers’ turn soon.

Spiraling costs in the wake of Russia’s invasion of Ukraine in 2022 definitely took their toll on the LNG bunkering sector, pressuring demand to the downside and triggering the cancellation or delay of several LNG-fuelled vessels and bunkering projects. But the combination of lower LNG prices and tightening environmental regulations in the maritime sector paint a pretty bright picture for demand going forward.

By Debarati Bhattacharjee

Source: ENGINE
Photo credit: Shaah Shahidh on Unsplash
Published: 11 March, 2024

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Alternative Fuels

DNV: LNG headlining new alternative fuelled orders in Q3

LNG accounted for around 60% of all alternative fuelled new orders in the third quarter mainly thanks to a strong uptake in the container segment, says Jason Stefanatos of DNV.

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October 3, 2024

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DNV: LNG headlining new alternative fuelled orders in Q3

Latest figures from classification society DNV’s Alternative Fuels Insight (AFI) platform saw a total of 17 new orders for alternative fuelled vessels were placed in September 2024.

DNV said LNG was the biggest driver, accounting for nine vessels, with most of these coming from the container segment. The remaining eight orders were for methanol fuelled vessels.

DNV: LNG headlining new alternative fuelled orders in Q3

Although it was a relatively slow month for alternative fuelled vessel orders, it follows the two strongest months of the year in July and August, where 81 and 95 new orders were placed.

“In both months, LNG was the main fuel of choice, accounting for 53 and 55 new orders respectively. Order uptake continues to be dominated by the container segment, which accounted for around two-thirds of all orders in the third quarter of 2024,” it said.

Overall, the steady momentum in the alternative fuelled orderbook remains. A total of 370 alternative fuelled vessels were ordered in the first three quarters of 2024, representing year-on-year growth of 24%.

Jason Stefanatos, Global Decarbonization Director at DNV Maritime, said: “Despite a slow month in September, a broader view confirms that the momentum in the new order market towards alternative fuelled vessels remains strong.

“LNG is clearly the headline story since the summer, accounting for around 60% of all alternative fuelled new orders in the third quarter mainly thanks to a strong uptake in the container segment.

“Although 49 new orders for methanol fuelled vessels were registered in the third quarter, only eight of these were placed in September, demonstrating a slight stagnation.”

Photo credit: DNV
Published: 3 October, 2024

Bunker Fuel

CPG Bunkering to deploy extra bunker tanker at Port of Maputo

Firm signed an extension to their bunkering operating deal with Maputo Port Development Company, agreeing to add another tanker, “CPG Alma”, in addition to existing bunker tanker “CPG Alix”.

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October 1, 2024

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CPG Bunkering to deploy extra bunker tanker at Port of Maputo

CPG Bunkering on Monday (30 September) said it signed an extension to their bunkering operating agreement with Maputo Port Development Company (MPDC).

As part of this agreement, CPG Bunkering has agreed to deploy an additional bunker tanker, CPG Alma, to the Port of Maputo in addition to its existing bunker tanker CPG Alix.

“With two bunker barges operating at the port of Maputo, the expanded service will be able to cater for reliable at-berth supplies during cargo operations and an increasing volume of bunker-only calls at anchorage,” CPG Bunkering said in a social media post.

Signed on 26 September, the extension to the exclusive agreement between the parties covers all grades of marine fuels, lubricants and ship-to-ship transfer services.

Furthermore, during the extension period, CPG Bunkering has agreed to evaluate the possible supply of alternative bunker fuels such as biofuels, LNG, methanol and ammonia at the port of Maputo.

Both CPG Alma (IMO 9326677) and CPG Alix (IMO 9418406) are presently in the Port of Maputo and have commenced the provision of this service.

Photo credit: CPG Bunkering
Published: 1 October, 2024

Alternative Fuels

ENGINE on Fuel Switch Snapshot: Rotterdam LNG premium over LSMGO widens

VLSFO availability remains tight in Singapore; LNG prices soar above VLSFO and LSMGO; Dutch HBE rebates become more attractive.

Published

4 days ago

October 1, 2024

Admin

ENGINE on Fuel Switch Snapshot: Rotterdam LNG premium over LSMGO widens

Once a week, bunker intelligence platform ENGINE will publish a snapshot of alternative and conventional bunker fuel prices in the world’s two biggest bunkering hubs. The following is the latest snapshot:

30 September 2024

VLSFO availability remains tight in Singapore
LNG prices soar above VLSFO and LSMGO
Dutch HBE rebates become more attractive

LNG bunker prices have risen in both Singapore and Rotterdam and moved to wider premiums over conventional fuels.

Rotterdam's LNG premium over LSMGO has shot up from $5/mt to $35/mt, and $22-28/mt with estimated EU Allowances (EUAs) included in the prices.

LNG bunker suppliers in the ARA have been seeing some switching from LNG to conventional fuels lately, especially for smaller stems.

In Singapore, LNG's premium over its LSMGO has widened by $21/mt to $88/mt without estimated EUAs, and to $81/mt with.

Rotterdam’s B24-VLSFO HBE remains at a $63/mt price discount to its B24-LSMGO HBE. In Singapore, B24-VLSFO UCOME is only $14/mt cheaper than B24-LSMGO UCOME.

VLSFO

Rotterdam’s VLSFO has been unchanged in the past week despite a $2.41/bbl ($18/mt) decline in front-month Brent futures.

Prompt availability of VLSFO is still good in Rotterdam, a trader told ENGINE. Demand for the grade has been muted, a source added. These countering factors seem to have kept prices stable without significant movements in either direction.

Singapore’s VLSFO benchmark has also remained rather steady, with only a $5/mt decline amid persistently tight availability.

Biofuels

Rotterdam’s B24-VLSFO HBE and B24-LSMGO HBE prices have declined by $8-9/mt in the past week, partly because of a $15/mt drop in the underlying PRIMA POMEME CIF ARA price.

The estimated Dutch HBE rebate for B30-VLSFO HBE has now risen to $90/mt, a level last seen in April. This makes POMEME-based biofuel blends even more attractive in Dutch ports as these blends qualify for Dutch advanced HBE rebates.

Singapore’s B24-VLSFO UCOME price has shed $9/mt and its B24-LSMGO UCOME price has declined by a greater $13/mt, amid a drop in the underlying UCOME FOB China price.

Despite a falling UCOME FOB China price, buying interest has been tepid. “The Chinese waste-based biodiesel market declined on Friday, as fresh offers indicated faltering confidence amongst sellers, especially as overseas demand remains limited lately,” PRIMA said.

LNG

Rotterdam's VLSFO-equivalent LNG bunker price has soared by $29/mt in the past week.

Europe's gas market is facing supply concerns due to planned outages in Norway and maintenance at Medgaz, a key gas pipeline between Algeria and Spain. Medgaz has a capacity of 10.16 billion cbm/year.

Singapore's LNG bunker price has increased by $10/mt. This increase has been driven by a higher NYMEX Japan/Korea Marker (JKM) price.

Asia's gas inventories are under pressure from demand for air conditioning in the region, though spot buying has been limited. Japan's power company Jera has reportedly secured spot deliveries for the upcoming winter months, Rystad Energy added.

By Konica Bhatt

Photo credit and source: ENGINE
Published: 1 October, 2024