Japan, the world’s largest LNG importer and accounting for about 35% of global demand, is set to play a significant role in LNG bunkering as the marine industry turns to cleaner fuel options to comply with stricter environmental regulations.

In October 2016, the International Maritime Organization decided to cut global sulfur emission limits for marine fuels from 3.5% to 0.5% by 2020.

Currently, the demand for heavy fuel oils as marine fuel is about 250 million mt/year. Ship operators will have to switch to cleaner, more expensive fuels or invest in emissions cleaning systems. LNG is another option.

Major impediments to the widespread adoption of LNG bunkering have been high infrastructure costs, lack of sufficient enforcement as well as current low crude oil prices.

Another problem is matching the expectations of the buyers and sellers. While sellers are keen to lock in long-term contracts, ship operators, who are already facing challenging market conditions, prefer to buy spot cargoes.

LNG could be a viable and cheaper alternative as the price for middle distillates rises, sources said.

Besides tackling sulfur emissions, LNG addresses other environmental aspects too.

It has no detectable sulfur, and LNG-fueled vessels emit lower particle and nitrogen oxide than those using marine fuels.

“The volume of fuel oil bunkering, which has to be replaced by low sulfur fuel oil is huge. It is 2 million b/d. Almost equal to… or a little bit less than Iran’s oil production. But it is huge. How can it be replaced in three years?” Fereidun Fesharaki, chairman of Facts Global Energy, said at an energy event in Tokyo on February 9.

Blending diesel and fuel oil to create 5,000 ppm sulfur fuel was extremely difficult, he said, adding that compliance would be impossible.

“Not in 2020, not in 2023, 2024, 2025. In that process, there will be more LNG bunkering definitely … it is a very, very big challenge,” Fesharaki said.

Demand from LNG will also be boosted by the lower prices of natural gas in the future, Robin Meech, managing director at Marine & Energy Consulting, said, adding that global annual demand for LNG bunkers could rise from less than 1 million mt currently to as high as 8 million mt by 2025.

source: http://www.hellenicshippingnews.com/japan-readies-for-lng-bunkering-as-marine-industry-turns-to-cleaner-fuels/