Bunkering is the process of transferring fuel from vessel or ship or truck to another ship, which is used for its machinery to work. Liquefied natural gas is used in various applications from maritime shipping industry such as container fleet, cargo fleet, tanker fleet, ferries, inland vessels, and others. Owing to the IMO regulations imposed to reduce greenhouse gas emissions by at least 50% by 2050, the shipping industry is heading toward LNG for strong alternative solution to conventional bunker fuels. The COVID-19 outbreak has increased the importance and awareness toward increasing environmental pollution from various industries such as transport, manufacturing, marine, and others.
Impact of COVID-19
The outbreak of #COVID_19 has led to disruption in value chain in numerous industries such as transportation, manufacturing, processing, and others, which requires transportation media for their goods transfer from region to region. Therefore, the demand for bunker fuels has been negatively impacted. Maritime trade operations and transportation are either forced to close due to government regulations or because of lack of demand for bunker fuels from the shipping industry.
Industry participants active in the market were facing problems in natural gas procurement for production of liquefied natural gas, owing to tightness in supply chain. Export activities were also being hindered, owing to the spread of COVID-19 across the globe. Eventually, transportation through land, water, and air was suspended for almost six months across the globe and still suspended in some regions.
Demand for LNG bunkering
The major contributor to LNG bunkering industry is marine shipping industry. It is one of the largest users of LNG bunkering. Shipping industry is wholly depending on the maritime trade activities and transportation of passengers from one region to another. There has been disruption in manufacturing of various goods owing to lockdown. Because of disruption in manufacturing activities and reduced demand for various goods or components, the shipping industry witnessed disruption in maritime trade activities from the first quarter of 2020. In addition, bunkering infrastructure development projects and other construction projects across the globe are delayed or cancelled, owing to outbreak of COVID-19. This consequently hindered the demand for LNG bunkering from the shipping industry.
Some regions or countries that were less impacted by COVID-19, faced problems such as raw material procurement owing to lockdown in manufacturing or supplying countries such as China, India, and others. Moreover, the outbreak of COVID-19 has resulted in increase in R&D activities for development of bunker vessels or bunkering infrastructure. In addition, the trade activities have resumed in some of the countries, owing to removal of lockdown. It is expected that sales of LNG bunker fuelmay increase in first half of 2021.
The shipping industry is the largest consumer of LNG as bunker fuel. During the pandemic the demand for bunker fuel has decreased, which resulted in supply and demand gap. On the contrary, there is rise in investment toward development of LNG-driven vessels or shipsand LNG bunkering infrastructure to cope up with increase in demand for green fuels from the shipping industry in the near future.
Expectations
LNG bunker fuel consumer base is expected to increase as the marine industry is now heading its attention toward implementation and accommodation of International Maritime Organization’s (IMO) greenhouse gas (GHG) strategy. Economies across the globe are adopting this change toward LNG utilization in marine or shipping applications and thus developing their LNG bunkering infrastructure to promote LNG bunkering. For the growth of the LNG bunkering industry, key industry players in the industry should focus toward increasing the number of bunker vessels in the LNG bunker fleet.
Ship-to-Ship LNG bunkering is the key investment area in the LNG bunkering industry. This type of LNG bunkering allows key players to flexibly transfer LNG fuel from one ship to another. As soon as the LNG bunkering infrastructure grows rapidly across the globe or the ports that ensure LNG bunkering, there will be a rise in bunker vessel traffic and volume of trade at that location. In the upcoming years, there will be increase in LNG driven vessels across the globe. Economies like South Korea are planning to order nearly 150 LNG driven vessels to strengthen the position of country in the shipbuilding industry.
Post COVID-19 scenario
The demand for LNG bunkering is expected to increase post COVID-19 from developed and developing countries across the globe. This is attributed to IMO regulations imposed on reducing greenhouse gas emissions from the marine industry. The LNG bunkering industry is already engaged in infrastructure development, during the pandemic. The key players have been launching bunkering vessels, business expansion, and other developments in the industry. Post COVID-19 will witness a continuing of investment by these key players and various governments across the globe to provide suitable bunkering infrastructure ahead of increasing LNG demand from the marine industry.
