A plan to ease the global gas glut

Sovcomflot’s Aframax ships, capable of shifting 600 000 barrels of oil through the icy waters of the Baltic Sea to the port of Rotterdam, will be the first tankers run on LNG.

That is great news for fuel supplier Royal Dutch Shell Plc and the other energy companies that have invested more than US$700 billion in LNG projects over the past decade. Although Energy Aspects Ltd. estimates that LNG as a marine fuel will account for less than 2% of total demand by 2025, Russian tankers and Mediterranean cruise liners will still help ease a global glut.

Since 2014, the spot price of LNG has dropped by two-thirds to US$5.4 per million British thermal units as supply swelled, crude slumped and large buyers such as Japan and Korea slowed purchases. That is pushing the industry to look beyond long-term contracts with power utilities to find other sources of demand.

At the same time, stricter environmental standards are pushing shipowners to consider cleaner fuels such as LNG, which contains virtually no sulfur. The International Maritime Organisation will from 2020 impose a sulfur cap of 0.5% on marine fuel, down from the current global limit of 3.5%.

Against that favourable backdrop, the number of LNG-fuelled ships will more than double to 200 by 2020 from 77 last year and just five in 2005.

That will boost LNG bunkering demand, excluding fuel burned by LNG carriers, to 1 million t in three years and as much as 5 million to 7 million t by 2025.

Read the article online at: https://www.lngindustry.com/liquid-natural-gas/26042017/a-plan-to-ease-the-global-gas-glut/