DECADE AHEAD: Decarbonisation push set to create opportunities for gas as a transition fuel
General manager of commercial and strategy, Shell Shipping & Maritime
Decarbonisation poses questions across the shipping sector. How do operators decarbonise shipping safely and sustainably? And how does the sector find commercially viable routes to decarbonisation?
The 2020s will be a critical time for answering these questions. Vessels built today will still be in service in 2030 — the first of the IMO’s decarbonisation milestones — and investments made over the next 10 years will still be having an impact in 2050, when shipping’s emissions need to have halved.
New technologies, new supply chains, and the requirements of different segments of the industry mean there will be many pathways to meeting the IMO’s decarbonisation targets and achieving a net-zero emissions industry in the future. But whichever pathway we choose, it will require a step change.
That means taking action today to research and develop tomorrow’s fuels and technologies, and ensuring customers can make a difference in their portfolios right now. That is why I believe that LNG is a crucial part of the decarbonisation pathway; it is cleaner burning, affordable and available now.
LNG can offer up to 21% lower well-to-wake CO2 emissions, when compared with heavy fuel oil, and significantly less particulates and NOx, according to a study by Thinkstep.
That is why we are investing in our chartered LNG carrier fleet and expanding the LNG marine fuel network with a safe supply chain, including for customers in North America and Singapore, starting this year. In 2018, we also agreed the long-term charter of six new energy-efficient LNG carriers.
As well as showing the benefits that LNG offers today, LNG shippers must demonstrate its potential over the longer term.
For example, further emissions reductions could be made through blending with bio-LNG or synthetic-LNG, using existing bunkering infrastructure. And, when combined with developing technologies like carbon capture and storage, even greater decarbonisation is possible. We also see opportunities for LNG-fuelled vessels to be adapted for other fuels, such as ammonia, providing more flexibility.
Achieving the IMO’s ambitions will require close collaboration between the shipping industry and energy providers. We must work together to develop and trial new technologies and fuels. And we need the support of policymakers to ensure that we can all make investment decisions with confidence.
The challenges facing the industry are significant. But, working together, we can find ways to tackle those challenges today, tomorrow and into the future.
Chief executive, Avenir LNG
A lack of clarity regarding environmental regulation will remain a key feature of the energy industry over the next decade.
While the shift away from traditional fuels to low-carbon solutions is inevitable, the path is not clear.
Owners of oil and gas resources will race to monetise their reserves, causing an extended period of oversupply, and gas will continue to trade at a discount to oil due to a lack of coordination of the gas market at a time when new entrants are competing for limited new customers.
Avenir LNG’s vision to be a quick-to-market global supplier of LNG to small-scale customers is well suited to this environment.
Leveraging the skills of an investor group that has a demonstrated ability to innovate across the energy sector, Avenir LNG will develop and rapidly deploy innovative solutions to stranded gas markets.
Underpinned by our growing fleet of bunker capable supply vessels, we will strengthen our presence in the Mediterranean and expand our geographic footprint to capture opportunities in Asia, the Caribbean and West Africa to build a global network of locally-focused LNG supply and bunkering businesses that compliment traditional LNG value chains.
Chief executive, Nakilat
The strong fundamentals of the LNG market in recent years has created an attractive environment for LNG shipping players to capture new business opportunities.
Mid-term contracts with flexibility built-in are gradually dominating the market, with preference for larger and more efficient propulsion vessels to reduce transport unit costs and emissions.
The global LNG carrier fleet has steadily grown alongside the increase in LNG production capacity to maintain supply-demand balance in the market.
With the expected delivery of many new vessels in the next decade, the sector is expected to face some challenges in terms of crewing and manning.
New environmental regulations also pose another interesting challenge for the industry.
The IMO’s 2050 decarbonisation goal must now be catered for by all newbuildings, furthering rapid technology advancement that may impact the competitiveness and efficiency of the current fleet.
With an overall positive market outlook for the LNG sector, Nakilat remains optimistic that this environment will propel our growth in the chartering businesses for the coming years.
We currently have one of the largest LNG shipping fleets in the industry and are continuously looking to expand our international fleet portfolio to maximise our shareholders’ return.
Chief financial officer, Epic Gas
Unquestionably, the next decade is going to be about how the shipping industry responds to climate change and decarbonisation. Not just the practical aspects of trading in volatile weather conditions, but the changing nature of the fleet and associated financing.
In the last few years, we have already seen tremendous change in the expectations of our stakeholders, whether customer, regulator, employee, financing bank or investor, and we fully expect this to accelerate over the next 10 years.
Building on IMO 2020, we will see radical new approaches to both vessel and engine design, including LPG as a fuel, which we believe has a valuable role to play as an easily transportable, lower-carbon, high-performance transition fuel.
We therefore see regulation not as an additional cost burden and pressure for the business, but as an opportunity to drive innovation (alongside digitalisation), create new business opportunities and get ready for the future.
We fully expect to see continued growth in demand for LPG around the world, as nearly three billion people do not have access to clean fuel for cooking.
The detrimental effects of dirty fuel on public health and ecosystems will continue to drive demand for efficient and effective fuels such as LPG.