Over nine million tonnes per annum of LNG could be required for bunkering by the end of 2025 based on the recent surge in dual-fuel newbuildings ordered, according to energy advisors LansdowneMoritz.

Ed Glossop, who is an advisor on small scale LNG and alternative marine fuels for LansdowneMoritz told TradeWinds that the company's bottom-up assessment of aggregated LNG demand from vessels ordered during 2021 now stands at around 3.3 mtpa of LNG.

Glossop said the figure is equal to around 400% of the entire global LNG bunker market at the end of 2019, when the demand was just over 780,000 tonnes per annum.

Based on firm orders placed, LansdowneMoritz — formerly Fearnley LNG Advisors until a management buyout in the first half of 2021 — anticipates that demand for LNG as a bunker fuel will grow to 5.2 mtpa in 2023 as vessels deliver, and to 7.2 mtpa a year later before topping 9 mtpa in 2025.

"In anyone's assessment that is exponential growth," Glossop said.

The LansdowneMoritz team said 227 LNG-fuelled vessels have been ordered so far in 2021.

Boxship bonanza

Some 635 LNG-fuelled vessels are now either in operation or on order, with the year-to-date newbuilding contracts accounting for almost 36% of the total.

Glossop highlighted that the biggest driver bumping up LNG bunker demand has been large container ship newbuildings, around 100 of which will deliver in 2024 and 2025.

He said ultimately around 25% of the vessels will account for 45% of LNG bunker demand.

LansdowneMoritz advisor on small scale LNG and alternative marine fuels Ed Glossop says this is an interesting moment for LNG as a marine fuel. Photo: LansdowneMoritz

Glossop believes this is an "interesting moment" for LNG as a marine fuel.

Until now, energy majors Shell and TotalEnergies plus niche regional players have been the key suppliers in a market where demand was less than 1 mtpa.

Big moves

LansdowneMoritz managing consultant Gary Regan said those that entered early have lost money with their LNG bunker vessels (LNGBVs) experiencing low utilisation.

Regan said the charter rates on the LNGBVs are the big cost in the supply chain and the issue has previously been securing sufficient demand to cover this.

But he said the LNG bunker market is now at a tipping point, where LNG companies, traders and traditional bunker players see it as a growth sector where they can make a profit.

"I think we're going to see big moves in the next couple of years," he said.

The current rash of LNG bunker supply tenders may be where these are focused. But few are prepared to give details. And the LansdowneMoritz duo is no exception.

Glossop, however, confided that there are companies with LNG-fuelled newbuildings delivering in 12 to 18 months that have not yet contracted their volumes.

Bunker hubs

A new factor in tenders is offering LNG bunker providers optionality on supply points along a trade route, the consultants said. This has allowed suppliers to submit their own offers for different geographical locations, Glossop added.

He revealed that there are now more people looking at China as a bunkering location for LNG.

The stability of the US Henry Hub gas price is also proving attractive.

Crowley Maritime said the 12,000-cbm LNG bunker barge it ordered for Shell this year will be the largest Jones Act-compliant vessel of its kind. Photo: Crowley

Players had previously seen the provision of a US Jones Act LNGBV as a major barrier to LNG bunkering taking off in the US since the additional vessel cost adds to the delivered price. But Glossop said they are now "revisiting that conversation".

Regan highlighted moves to look at the Caribbean, Mexico and Vancouver as alternatives where buyers can get price stability without the Jones Act.

He said the team sees LNG bunker hubs developing both where traditional fuels are bunkered but also in other locations where LNG has a price advantage or there is existing infrastructure.

And those pricey LNGBVs?

Regan said LNGBV newbuilding prices are up around 15% on 2020 levels with shipyards indicating they will rise again in 2022. But 2024 deliveries are still possible, he added.

He said the preferred size of LNGBVs will follow the type of energy tonnage being ordered.

Glossop said that for the 15,000-teu container ships a 12,500-cbm LNGBV makes sense. But he believes the 18,600-cbm to 20,000-cbm LNGBVs that have been ordered for some of the ultra-large container ships are going to be "quite niche".

For the slew of pure car/truck carriers, a 7,500-cbm LNGBV may suit, as it would likely be able to bunker three vessels on one cargo stem.

"We don't see a perfect size but we don't see a trend getting bigger and bigger," Regan said.