Investments surge on strong demand outlook for LNG bunkering

We expect over 1,000 LNG-fuelled vessels to be in service by end 2027. LNG will face competition from other ‘cleaner’ alternative fuels but the high LNG capacity addition and expected stability in prices in the coming years will boost LNG consumption in the maritime sector. Furthermore, investments in bio-LNG and synthetic LNG production have been rising with these fuels likely to be used as drop-in fuel in LNG dual-fuel engines, increasing their popularity for vessel propulsion.

* Till end April 2024.

Source: Drewry Maritime Research

Revival in investment for bunkering infrastructure

The FID approval for Oman’s Marsa LNG project and Avenir’s order for two LNG bunkering vessels (LNGBVs) marks the return of investors’ interest in the bunkering sector.  However, massive investment in LNG bunkering infrastructure will be required to facilitate the use of LNG as a marine fuel.

Although the sector has been facing the brunt of rising LNG prices since end 2021, which further escalated amid the Russia-Ukraine war in 2022, the fall in LNG prices in 2023 and projections for low prices till 2028-30 will boost LNG bunkering demand. The growing demand will be catered to by a sizeable LNG-fuelled fleet, becoming serviceable by 2028.

Middle East introduced its first LNG bunkering facility – the Marsa LNG project

The recent FID by TotalEnergies and Oman National Oil (OQ) on the Marsa LNG bunkering project highlights the growth in this sector. The Marsa LNG project is a 1 mtpa low-carbon LNG project with electric turbines, majorly targeting the maritime sector. The project will be the first such bunkering hub in the Middle East that will further boost LNG’s availability and popularity as a marine fuel. The geographic location for the project is well-suited as it can cater to all vessels transiting the Strait of Hormuz which facilitates 30% of global crude flow, 25% of LNG and 40% of LPG among other commodities.

Frequently hailed as the ‘low-carbon’ bunkering hub, the project is scheduled to commence in 1Q28. It is poised to fuel LNG consumption in the maritime sector if started on time. LNG bunkering capacity has the potential to surge fivefold by 2027, indicating an estimated deployment of 1,077 LNG-powered vessels by the close of 2027, surpassing the current fleet size of 523 (excluding LNG carriers), which is less than half the projected figure.

Europe continues to lead the global bunkering market – Avenir expands its LNG bunkering capabilities 

Avenir LNG, a UK-based midstream LNG and BioLNG company, has placed an order for two 20 kcbm LNG bunkering vessels at China’s Nantong CIMC Sinopacific Offshore & Engineering (SOE) at an undisclosed price. The vessels will be delivered in 4Q26 and 1Q27, offering maximum compatibility and adaptability for loading and discharging LNG and bioLNG to a variety of vessels and terminals. With the latest order, Avenir will increase its fleet from 40% to 80% (in terms of capacity) by 2027, solidifying its position as a leading provider of LNG bunker vessels and expanding its bunkering capabilities.

As we remain optimistic about the rising bunker demand over the next five years, LNG bunkering vessels will likely play a pivotal role in decarbonising global shipping. We believe the ordered vessels will be deployed for European bunkering facilities as the region’s proactive approach towards decarbonisation has positioned it as the global leader in the LNG bunkering market.

* As of 9 May 2024.

Source: Drewry AIS