Even as liquefied natural gas (LNG) is seen as a key transitionary fuel for bunkering, soaring prices of the super-chilled fuel have led to higher demand for ships with dual-fuel tankers, said an industry executive.

The global shipping industry is seeking to reduce its reliance on oil as it tries to meet carbon emission reduction targets set out by the U.N.’s International Maritime Organization. These include cutting carbon emissions by 40% from 2008 levels by 2030, and overall greenhouse gas emissions by 50% by 2050.

“We believe that LNG will be one of the major fuels for bunkering. (But) at prices of $35-$40 per million British thermal units (mmBtu), it is challenging for ship owners to continue to subscribe to LNG bunker. Many of them have actually dialed back LNG bunkering and gone to diesel, because diesel is cheaper,” said Alan Heng, chief executive officer of Pavilion Energy.

Once LNG prices ease “back to a more normal price level”, the uptake for LNG as bunker fuel will resume, said Heng, who was speaking at the Singapore International Energy Week conference.

He added that ammonia might be the next bunker fuel to become economically viable.

“What we have noticed in the last quarter, with the high LNG prices, is that there are a higher number of order books for ammonia dual fuel use. It’s gaining traction … People want to have an alternative,” said Heng.

“With the energy transition, it’s not about one winning fuel. It’s about having a range of fuels that will give us the diversity we need.”

LNG, methanol and biofuel are among the more popular alternative fuel options. But global gas prices rose to record highs this year as Russia cut supplies to Europe following its invasion of Ukraine, leading to a surge in Asian spot LNG prices as well.

Pavilion Energy, alongside Mitsui O.S.K Lines (MOL), is set to launch a Singapore-flagged LNG bunker vessel in the first quarter of 2023. It will be Singapore’s largest LNG bunker vessel.
Source: Reuters (Reporting by Emily Chow; Editing by Sherry Jacob-Phillips)

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