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High cost of retrofit slows LNG bunkering uptake

High cost of retrofit slows LNG bunkering uptake
The economics of retrofitting ships to burn LNG could be a dampener to the uptake of LNG bunkering, considering the costs and many prerequisites that operators need to meet, according to shipbrokers Poten & Partners.

The retrofitting of ships to consume the clean fuel LNG, when feasible, is a sophisticated, complex operation that require modification of existing engines or addition of gas tanks, as well as the major cost of fitting LNG tanks and gas piping systems, said Manon Dumontier, natural gas and LNG consultant at Poten & Partners.

She added that safety control systems also need to be upgraded during the retrofitting process.

“I’m not saying that retrofit is not a good idea, but a number of prerequisites need to be met before the industry can expect changes,” she told delegates at the Gastech conference held in Singapore on Thursday.

“We think that oil prices will have to increase, and the industry needs an easier process to duplicate the retrofits on ships,” she explained. “The LNG bunkering industry also needs the shipping industry generally to be in a better market as owners have no deep pockets now.”

Global LNG bunkering infrastructure is considered to be at an infant stage now, as most LNG-powered ships are mainly coastal vessels limited to European waters, and major bunkering ports in the world have yet to develop full-scale LNG bunkering facilities.

However, the world’s largest bunkering port Singapore and the second largest Rotterdam have pledged to build up LNG bunkering infrastructure, with Singapore leading in terms of construction already underway.

Apart from infrastructure, one of the obvious factors that have held back the development of LNG bunkering, according to Dumontier, has been the “converging” of LNG prices and fuel oil prices since the start of the oil slump in mid-2014.

While LNG prices still look significantly cheaper than its competing fuels on the basis of straight fuel costs, the competitiveness would not seem so obvious after factoring in the infrastructure investment and logistics costs.

Dumontier outlined that additional costs include the delivery of LNG to the import terminal, breakbulk charges, the need for shuttle vessels delivering to LNG bunker tankers, and the fee of bunker tanker delivering LNG fuel ship-to-ship.

“W should always keep in mind to add in all the additional costs and it [LNG fuel] will not be very cheap,” she said.