LNG business model viable says Lloyd's, but prices must fall
Lloyd's Register has published a report on the viability of LNG as a future marine fuel, and the conditions that will need to exist in order for it to succeed. For the superyacht industry however, the perpetual lack of infrastructure remains prohibitive.…
Lloyd’s Register has published ‘LNG fuelled deep-sea shipping – Outlook for LNG bunker and fuelled newbuilding demand up to 2025’, its viability report into the future of LNG as a marine fuel.
The sticking point for its future adoption, the study concludes, will depend on pricing and its competitiveness when pitted against alternatives. Only if this issue is negotiated will the infrastructure be established to make it a viable fuel option.
“The obstacles to adoption of LNG as a marine fuel are practical factors, but they are not technical, they are commercial”, explained Hector Sewell, head of marine business development for Lloyd’s Register. “Establishing safe, reliable global LNG bunkering capability is feasible. But it will require considerable investment and risk management, and it will have to cover significant operational costs to challenge existing fuel-oil delivery systems”, he added.
The report also includes a dynamic business model for the future that plots a route to market for LNG. By extrapolating circumstances as they stand, the model predicts a LNG fleet of 653 by 2025, but with a price reduction of 25 per cent on the cost of LNG the number rises dramatically to 1,960 vessels. If the price were to rise by 25 per cent this figure would be close to zero, demonstrating the crucial role that a competitive cost per unit will plat in the fuel’s future uptake.
Latifat Ajala, Lloyd’s senior market analyst and the leader of the study, admitted that it is difficult to reconcile various speculative theories to arrive at a conclusion. Therefore, her practical recommendation was the adoption of dual-fuel technology, something that has already been explored by the superyacht industry, the culmination of which was an innovative presentation by Wartsila and Stefano Pastrovich at the 2011 Global Superyacht Forum.
“The difficulty for those looking to make decisions is that forecasting energy prices has always been a dangerous business”, Ajala conceded. “For shipowners looking to make these decisions, flexibility may be the key”, she continued. “Choosing engines that can burn both gas and fuel oil, or that can be converted, may be one way to manage the regulatory and commercial issues involved with fuel choices.”
However, for the fuel oil sector, there are cheaper and less dramatic fuel solutions already available. Mauro Agostini is heading the newly launched superyacht division of KPI Bridge Oil, which was established to cope with growing demand and an increased global market share. Agostini believes that superyacht uptake of the fuel is unlikely to occur in anything but the very largest vessels.
“I don’t see the infrastructure being established to introduce LNG to superyachts – it would be a nightmare to get hold of LNG for a yacht”, Agostini explained. “Maybe one or two really big yachts, with huge tanks that can run for a year without the need to refuel, will be able to [run on LNG].”
“But even Eclipse,” he added, “which is the biggest at the moment, takes 1.5 million litres and that doesn’t last long. They already need to refuel three or four times a year and it would require an even greater amount of LNG.” Therefore an infrastructure that would incentivise a superyacht owner to ‘go LNG’ is, in Agostini’s view, “at least 10 or 15 years away”.
The 2012 edition of the Global Superyacht Forum will be staged in Amsterdam between 12 and 14 November. And there will be a host of similarly game-changing ideas being presented and debated again this year.
To register your interest for this event, or reserve your place today, please click here! Or contact your account manager on +44 (0) 207 924 4004.
For any programme queries, please contact Emma Tower: emma@thesuperyachtgroup.com.
Related Links
Lloyd's Register Profile | Lloyd's Register Website
KPI Bridge Oil Profile | KPI Bridge Oil Website
The sticking point for its future adoption, the study concludes, will depend on pricing and its competitiveness when pitted against alternatives. Only if this issue is negotiated will the infrastructure be established to make it a viable fuel option.
“The obstacles to adoption of LNG as a marine fuel are practical factors, but they are not technical, they are commercial”, explained Hector Sewell, head of marine business development for Lloyd’s Register. “Establishing safe, reliable global LNG bunkering capability is feasible. But it will require considerable investment and risk management, and it will have to cover significant operational costs to challenge existing fuel-oil delivery systems”, he added.
The report also includes a dynamic business model for the future that plots a route to market for LNG. By extrapolating circumstances as they stand, the model predicts a LNG fleet of 653 by 2025, but with a price reduction of 25 per cent on the cost of LNG the number rises dramatically to 1,960 vessels. If the price were to rise by 25 per cent this figure would be close to zero, demonstrating the crucial role that a competitive cost per unit will plat in the fuel’s future uptake.
Latifat Ajala, Lloyd’s senior market analyst and the leader of the study, admitted that it is difficult to reconcile various speculative theories to arrive at a conclusion. Therefore, her practical recommendation was the adoption of dual-fuel technology, something that has already been explored by the superyacht industry, the culmination of which was an innovative presentation by Wartsila and Stefano Pastrovich at the 2011 Global Superyacht Forum.
Stefano Pastrovich presents his Xvintage concept.
“The difficulty for those looking to make decisions is that forecasting energy prices has always been a dangerous business”, Ajala conceded. “For shipowners looking to make these decisions, flexibility may be the key”, she continued. “Choosing engines that can burn both gas and fuel oil, or that can be converted, may be one way to manage the regulatory and commercial issues involved with fuel choices.”
However, for the fuel oil sector, there are cheaper and less dramatic fuel solutions already available. Mauro Agostini is heading the newly launched superyacht division of KPI Bridge Oil, which was established to cope with growing demand and an increased global market share. Agostini believes that superyacht uptake of the fuel is unlikely to occur in anything but the very largest vessels.
“I don’t see the infrastructure being established to introduce LNG to superyachts – it would be a nightmare to get hold of LNG for a yacht”, Agostini explained. “Maybe one or two really big yachts, with huge tanks that can run for a year without the need to refuel, will be able to [run on LNG].”
“But even Eclipse,” he added, “which is the biggest at the moment, takes 1.5 million litres and that doesn’t last long. They already need to refuel three or four times a year and it would require an even greater amount of LNG.” Therefore an infrastructure that would incentivise a superyacht owner to ‘go LNG’ is, in Agostini’s view, “at least 10 or 15 years away”.
The 2012 edition of the Global Superyacht Forum will be staged in Amsterdam between 12 and 14 November. And there will be a host of similarly game-changing ideas being presented and debated again this year.
To register your interest for this event, or reserve your place today, please click here! Or contact your account manager on +44 (0) 207 924 4004.
For any programme queries, please contact Emma Tower: emma@thesuperyachtgroup.com.
Related Links
Lloyd's Register Profile | Lloyd's Register Website
KPI Bridge Oil Profile | KPI Bridge Oil Website
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