Ship orderbook suggests more LNG bunker usage

The fleet of ships with the option to burn LNG as bunker fuel is set to expand significantly from 230 vessels - a fraction of the more than 50,000 merchant vessels on the water - as orderbook data shows shipowners' clear preference for that fuel over other alternative fuels.

Of the ships on order, about 30pc will be built with an option to burn LNG, according to data cited by TotalEnergies in its white paper The Drive for Cleaner Marine Fuels.

The car carrier orderbook has the highest LNG fuel uptake, with 98pc of the segment's orderbook by gross tonnage set to have the option of burning the fuel, per the data. That segment is followed by cruise ships with 49pc, dry bulkers (over 65,000dwt) at 32pc, containerships (over 12,000 TEU) at 26pc, and tankers (above 85,000dwt) at 28pc.

The shipping industry's looming environmental regulations, such as the International Maritime Organization's (IMO) carbon intensity indicator (CII) or energy efficiency design index (EEXI) that come into effect next year, are spurring shipowners to consider how to reduce their operations' carbon intensity.

The vast majority of the remainder of the ships on order have standard oil-burning engines. In August 2021, shipbroker BRS said LNG-fueled ships comprised 90pc of the total number of dual-fuel ships - meaning ships that have the option to burn oil or non-oil based fuels - on order.

From an environmental perspective, one benefit to ordering a ship capable of burning LNG, which still emits carbon, is its ability to burn carbon-free biomethane, also known as bioLNG, in the future, according to TotalEnergies.

"The expanding LNG-fueled fleet could utilize bioLNG without needing to undertake any modifications, and the existing infrastructure will still be fit for bunkering purposes with either fuel when bioLNG becomes scaled up," the company said.

Hydrogen still long-run winner

While TotalEnergies seees LNG-capable duel fuel vessels as the shipping industry's near-term solution to increasingly stringent environmental regulations, the company still expects shipping to favor hydrogen-based fuel in the longer term.

"The market's scaling up of hydrogen-based fuels is likely to materialize between 2030-2040, in line with the ramp up of electrolysis to commercial levels," said the company. It expects hydrogen-based fuels, including methanol and ammonia, to surpass LNG and account for 44pc of bunker demand by 2050.

The 44pc figure is slightly lower than the International Energy Agency's (IEA) projection that by 2050 hydrogen-based fuels will provide more than 60pc of fuel consumption for shipping.

By Nicholas Watt