LNG remains the top choice for dual fuel vessels [Gas in Transition]
Despite an increase in orders for vessels equipped with dual-fuel methanol and ammonia engines, LNG continues to be the preferred fuel for lower-carbon shipping, according to a recent report by Rystad Energy.
While there are ongoing debates about the environmental friendliness of LNG as a shipping fuel, its price competitiveness, abundant supply, and well-developed infrastructure provide it with a significant advantage over alternatives, the report stated. This is particularly evident in LNG bunkering – fuelling ships with LNG.
More than 2,400 vessels worldwide are equipped to operate on LNG, with an additional 1,000 vessels on order. Notably, half of these operational LNG-fuelled vessels are LNG carriers that utilise boil-off gas as fuel, reducing their reliance on external LNG bunkering. Excluding LNG carriers, LNG remains the most common choice for dual-fuel ships globally, according to Rystad Energy.
Car carriers have emerged as significant adopters of LNG, alongside container ships and LNG carriers. Over 75% of new car carrier orders in 2023 were for dual-fuel LNG engines. Many of these ships can be adapted to use alternative clean fuels, such as ammonia or methanol.
“We see an increasing number of LNG-fuelled vessels in both the container and car carrier segments. These segments are closer to end consumers, which results in a higher willingness to pay for low-carbon fuels and greater initiatives to opt for such fuels. We also see these segments taking actions in opting for other alternative fuels, such as ammonia and methanol,” Junlin Yu, senior analyst at Rystad Energy, told NGW.
Yu highlighted several reasons for the preference for LNG, including significant reductions in SOx emissions (around 80%), near elimination of NOx and particulate matter (PM), effective methane slip management resulting in lower carbon intensity compared to conventional fuel oil, cost advantages over alternative fuels like e-ammonia and e-methanol, and mature LNG bunkering infrastructure.
Despite the growth in LNG-fuelled fleets and bunkering, methane slip – unburned methane emissions – remains a significant challenge for the maritime sector. Addressing this issue is crucial for realising the full environmental benefits of LNG.
LNG bunkering shows strong growth
LNG bunkering is performed using three main methods: truck-to-ship (TTS), pipeline-to-ship (PTS), and ship-to-ship (STS). In 2023, LNG bunkering reached a record high of 4.7mn m³ globally, up 62% compared to 2022. This surge was primarily driven by a strong increase in STS deliveries, which doubled in 2022. By contrast, PTS and TTS volumes saw modest year-on-year growth.
STS bunkering is expected to accelerate, particularly in Europe, which has 85 LNG bunkering ports and an increasing number of ports offering STS capabilities. In Asia, China, Japan, and South Korea lead with 26 ports offering LNG bunkering. While LNG bunkering facilities exist in Africa and South America, these regions have yet to see significant activity.
Ro-Ro/passenger vessels and container ships have consistently held the top two positions in STS LNG bunkering. In 2023, passenger vessels saw 632 STS LNG bunker operations, closely followed by container ships with 201 operations. This dominance can be attributed to their regular refuelling needs and the growing presence of LNG-powered vessels within their fleets. For example, in 2023, a Ro-Ro/passenger vessel operating between Finland and Sweden led with 240 bunkering events.
“STS will still remain the most popular method for deep sea vessels at least. The main reason why STS is becoming increasingly popular is because it offers great flexibility with bunker locations and bunker capacity, which improves operational efficiency for both vessels and ports. This is especially important for container vessels and car carriers when they want to load/unload cargo and bunker simultaneously,” Yu said.
Factors driving LNG bunkering demand
Several factors are fuelling the surge in LNG bunkering demand, including stricter regulations, economic benefits, and expanding infrastructure. As of the end of March, LNG bunkering sales in 2024 are off to a strong start, with 1.9mn m³ already sold—nearly matching the total volume sold in 2022, the Rystad report said. This trend suggests the potential for a significant increase by year-end, with total LNG bunker sales possibly surpassing 7mn m³ by the end of 2024.
The growing number of LNG-powered vessels in the global fleet, attractive pricing relative to conventional marine fuels such as very low-sulfur fuel oil (VLSFO), and the continued push for cleaner fuel alternatives from regulatory bodies are expected to drive further growth.
“By the end of 2024, it is expected that around 1,500 LNG vessels will be in operation, with over 200 vessels delivered in 2024 alone,” Yu said.
Expanding LNG infrastructure
Given the increasing number of LNG-powered vessels, there is a growing demand for LNG bunkering infrastructure, particularly LNG bunker vessels. Europe currently leads in LNG bunkering infrastructure, followed by the US and Asia.
“We do not expect the expansion level to be as significant as in the past years. LNG still faces controversy over its purported emission reduction effect, particularly regarding its life cycle emissions compared to conventional fuel oil,” Yu said. “The shipping industry is also working on establishing a greenhouse gas (GHG) fuel intensity standard, which will assess LNG's lifecycle emissions. The assessment result might impact the competitiveness of LNG and the development of LNG bunkering infrastructure.”