Demand for LNG for marine bunkering is expected to grow with the small-scale LNG (ssLNG) sector a key beneficiary, said Wood Mackenzie director of upstream supply chain Dr Wei Liu. Presenting an overview of where the market will be in 2025 and 2030 at the LNG Ship/Shore Interface Conference in London last week, Dr Liu outlined the main end-uses of small-scale LNG production as being fuelling LNG-powered trucks, bunkering and power generation.
Currently, truck fuel makes up about two-thirds of ssLNG demand, with power generation taking up about a quarter and the remainder being in marine bunkering, chiefly in Europe and North America. Looking ahead to 2030, marine bunkering demand is set to grow to just over a quarter of ssLNG output, Dr Liu said.
LNG truck fuel demand comes mainly from China, where there is an active fleet of some 220,000 trucks. Power demand comes largely from developing and island regions, with LNG a strong standalone option to replace oil-based generation which has previously been the go-to solution. Looking ahead to 2025, Dr Liu noted that LNG is expected to remain largely competitive in terms of levelised cost of energy.
In the marine sector, a big driver of demand is IMO’s implementation of the 0.5% sulphur cap in 2020. Dr Liu said: “This will force the marine sector to rethink fuelling options,” adding that LNG is especially suitable for long-haul and regular transit.
He also noted that while LNG demand is often viewed as being driven by environmental reasons, it holds appeal for economic reasons too, especially in the US, China and parts of Europe. He cited the example of LNG-fuelled trucks in China, which over the course of their working life can potentially work out to be 30% cheaper than diesel-powered vehicles. He also noted that private equity in the US is expressing interest in LNG-fuelled trains based solely on investment and economic rationale.
Current global production capacity for ssLNG is about 25M metric tonnes per annum (mtpa) said Dr Liu, and this is expected to reach 30M mtpa by 2020 and 80M mtpa by 2030. “Based on strong demand prospects, ssLNG is attractive for investment,” he added.
However, the fragmented supply chain is one limiting factor. Simultaneous development of upstream, downstream and midstream as well as development of the end-user market is needed but so far only a few companies have developed the infrastructure required to cover the full supply chain, said Dr Liu. He noted that some companies in Asia have found a potential solution in working with small players to share the risks and profits involved in developing ssLNG.
Looking at the prospect of exporting Chinese LNG-fuelled trucks to Europe, Dr Liu said that currently the vehicles would not be compliant with EU regulations, which are more stringent than those in China. However it could be a possibility in future, he added.