Case made for LNG-fuelled VLCC newbuilds

Lobby group SEA\LNG has released the results of its latest investment study, which makes the case for LNG as a “compelling investment solution” for VLCCs on the Arabian Gulf to China trade route.

Conducted by independent simulation and analytics expert Opsiana, the study demonstrates the benefits of LNG as a marine fuel for a newbuild 300,000 dwt VLCC on the Arabian Gulf to China trade route, in comparison with other alternatives currently available and scalable to the shipping industry across three fuel pricing scenarios.

The business case compares the relative investment performance of four propulsion alternatives: a conventional VLCC sailing with very low sulphur fuel oil; a scrubber-equipped VLCC sailing mostly with heavy fuel oil; and two LNG powered VLCCs, one with a high-pressure two-stoke engine, the other a low-pressure two-stroke engine.

The study indicates that LNG as a marine fuel delivers a return on investment on a net present value (NPV) basis over a conservative 10-year horizon despite LNG-fuelled newbuilds costing up to $20m more than conventional tankers. The analysis is bolstered by paybacks from three to five years.

Peter Keller, chairman of SEA\LNG, commented: “As convincing, qualified evidence supporting the environmental, operational and commercial benefits of LNG continues to emerge, acceptance of its credibility is becoming increasingly widespread and concrete. LNG is the only safe, mature, commercially viable marine fuel that offers superior local emissions performance, significant greenhouse gas reduction benefits today, and a pragmatic pathway to a zero-emissions shipping industry.”

At the Maritime CEO Forum in Hong Kong last month delegates were told the next phase of tanker ordering would be dual fuelled, a costly endeavour that will require newbuilds to have long term charters attached.

Last month, Cosco upgraded a VLCC newbuilding under construction at Dalian Shipbuilding Industry (DSIC) to be LNG-powered, paying an extra $12m for the ship it had originally ordered in 2017.

Recent analysis from Maritime Strategic International (MSI) carried by Splash maintained LNG-fuelled newbuildings will remain a minor component not only of the global fleet but also the newbuilding market going forward.

“It is difficult to see LNG as fuel taking more than a marginal share of the world fleet, given the barriers of cost and technology it requires owners to overcome, as well as the incentives apparently needed to make adoption attractive,” MSI’s Stuart Nicoll wrote last month.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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