Time to get past the LNG 'Chicken & Egg' conundrum
13th December 2013 10:52 GMT

We’ve heard a lot about the ‘Chicken & Egg’ conundrum when it comes to liquefied natural gas (LNG) as a fuel for ships. Owners say they won’t invest in LNG-fuelled ships until they are reassured that LNG supply infrastructure will be in place. The supply-side wants to see evidence of demand before providing the infrastructure.

Doesn’t this scenario remind you of something? Supply and demand for low sulphur fuel oil prior to emission control areas coming into force had also been likened to a chicken and egg situation. With some exceptions, that worked out. Much further back, shipowners took a gamble when the first vessels made the change from coal to fuel oil and we know that transition was successful.

Let’s take a closer look at where we are with the LNG situation right now. If we consider LNG-fuelled ships as ‘chickens’ and LNG supply points as ‘eggs’, we already have some mature markets where this conundrum has been resolved. Norway has a number of LNG-fuelled ferries and offshore supply vessels, Stockholm has a cruise ferry, Viking Grace, fuelled by an LNG bunker tanker. Rotterdam and Antwerp are able to refuel inland barges that are running on LNG by truck. Actually, because LNG can be supplied by truck, it can be made available almost anywhere where port authorities allow it.

We also have a number of eggs in the form of companies and ports that have clear plans to provide LNG bunkering. Once we have more ‘chickens’ - or LNG-fuelled ships - we will have an increasing likelihood that more ‘eggs’ will be successfully hatched. In Norway, a small company took just three years to establish a network of LNG supply terminals. This company has said LNG bunker facilities can be made available throughout Europe within a shorter time than it takes to plan and build new LNG- fuelled vessels. Once there is a market, supply infrastructure, including terminals, will come quickly. Oil major Shell, for one, has said it will make LNG available where needed.

This should reassure owners considering LNG-fuelled ships. Besides, their assets are ships, which can be moved to somewhere with reliable supply. Suppliers potentially take a bigger risk in setting up land-based supply infrastructure. LNG supply vessels, however, can be moved to a better market if necessary.

So isn’t it time to stop fretting about eggs and chickens, and take comfort in proven market forces? Orderbooks show that several new LNG-fuelled vessels are being built. And if demand is there, even just the promise of demand (and if LNG deliveries are allowed by local authorities), someone will find a way to supply it.

Initially, it may be limited to truck deliveries and LNG may be expensive because of a fragmented and inefficient supply infrastructure. But as the market matures, suppliers will gain confidence to invest in better LNG supply facilities, providing efficiencies and economies of scale, which will benefit end users.

This text first appeared as a Commentary in the September/October 2013 issue of the Bunker Bulletin, the bi-monthly Bunkerworld magazine.

Unni Einemo,
13th December 2013 10:52 GMT

Comments on this Blog
Stephen James Weedon
3rd February 2014
New developments in emulsion fuels ( Quadrise International ) and Exhasut Gas Cleaning systems may make the LNG argument partially redundant. If ship owners can use existing handling and storage technologies on ship and Fuel suppliers can work with similar fuels to those already bunkered. With the advantage of meeting the more stringent 2020/25 MARPOL and a fuel cost saving of 10-20% why change to LNG

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