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Possible Expansion of Emission Control Areas (ECAs) to Propel LPG Bunkering Demand, reports TMR

Posted on Aug 18, 2016

The global LNG bunkering market is still in the initial phase of development. As a result, there are only a few notable players in this growing market. This market is capital intensive as building LNG bunkering terminals at trading ports requires significant capital investment. Moreover, port locations may act as an entry barrier for some companies, states a new report by Transparency Market Research (TMR). This is compounded by the fact that nearly all LNG suppliers offer standard fuel grades, leaving little room for achieving product differentiation. LNG bunkering companies usually enter into long-term LNG supply agreements with plant operators, thereby making it difficult for them to switch to any other LNG supplier for a fixed period of time. 

The consumption of LNG is restricted to a few ports. LNG producers are collaborating with ship operating companies to develop LNG bunkering facilities at major international ports. The bargaining power of suppliers is expected to be medium in the coming years owing to an increase in the supply of LNG as a bunker fuel in major shipping centers of the world. Some of the companies operating in the industry are: Harvey Gulf International Marine LLC, Gasnor AS, Korea Gas Corporation, Royal Dutch Shell plc, and Gazpromneft Marine Bunker LLC.

Emphasis on Lower Emissions Drives Demand for LNG Bunkering Fuel

LNG bunkering is the only feasible option available that not only complies with MARPOL regulations but also meets the NOx emission control area (NECA) and sulfur emission control area (SECA) requirements. LNG fuel offers lower ship emissions as compared to traditional bunker fuels. The International Maritime Organization (IMO) also assists international ports in building the infrastructure for LNG bunkering.

LNG is more economical than marine gas. Several new LNG plants are being constructed, which is creating a positive outlook for the market. The demand for LNG bunkering fuel is exceptionally high from offshore support vessels and ferries, says TMR. Since the exploration sector is growing, the consumption of LNG bunker fuel is also increasing.

Lack of Bunkering Infrastructure Restricts Market Growth

LNG is supplied as a bunker fuel in a limited number of ports. LNG bunkering facilities are not even available in major ports of the world. Thus, the inadequate bunkering infrastructure restricts the adoption of LNG bunker fuels. Additionally, the bunkering infrastructure required for using MDO/MGO as marine fuel is already present in all major ports of the world. The availability of these fuel grades in all the bunkering ports of the world is expected to threaten the global LNG bunkering market. The IMO has enforced the energy efficiency design index, which sets minimum energy efficiency requirements for ships constructed after 2013. Since these ships are specifically designed to consume less marine fuel, the demand for bunker fuel is expected to slow down.

The large bunker storage requirements in LNG fueled vessels require double the on-board space as compared to conventional diesel engine fuels. Many safety requirements need to be met while LNG bunkering is done. As LNG bunkering is still in its initial stages of development, companies have to spend significant amount of time and capital in training crew members. All these factors could considerably hamper the growth of the market.

Expansion of ECAs Create New Growth Opportunities in LNG Bunkering Market

The rising concerns regarding sulfur emissions are expected to result in a possible declaration of new ECAs. “The Gulf of Mexico, Turkish Straits, Sea of Japan, and Strait of Malacca are anticipated to be declared as ECAs in the near future,” states a TMR analyst. This is expected to propel the demand for LNG bunkering, creating new growth opportunities in the market.

According to the report, the global market opportunity in LNG bunkering is expected to rise to US$11.77 bn by 2025 in terms of revenue. In terms of volume, the global LNG bunkering market is projected to cross the 22,500 kilo tons mark by 2025. On the basis of end use, the tankers segment is expected to lead and account for 33.1% of the market by 2025. Europe, followed by Asia Pacific is expected to lead in the global LMG bunkering market by 2025.

This information is based on the findings of a report published by Transparency Market Research titled “LNG Bunkering Market - Global Industry Analysis, Size, Share, Growth, Trends, and Forecast 2014 - 2025.”

The global LNG bunkering market is segmented as follows:

End-Users:

  • Container Vessels
  • Tankers Vessels
  • Bulk & General Cargo Vessels
  • Ferries and OSV

Geography:

  • North America
  • Europe
  • Asia Pacific
  • Rest of the World

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