LNG AS A BUNKER FUEL MARKET ANALYSIS

The LNG as a bunker fuel Market size is valued at US$ 483.1 Mn in 2024 and is expected to reach US$ 1,621.8 Mn by 2031, growing at a compound annual growth rate (CAGR) of 18.9% from 2024 to 2031.

LNG as a Bunker Fuel Market Regional Insights:

• Europe's LNG bunkering market has grown significantly in recent years. This expansion can be described to supportive government policies and an increase in LNG bunkering in the area because it is more environmentally friendly than other fuels. For instance, Gas LNG Europe (GLE) introduced the small-scale LNG map of Europe to aid interested market participants in getting a general overview of the upcoming and planned LNG infrastructure in the area.
• Asia Pacific accounted for 27.4% share of the global market in 2023 Singapore has been the world’s largest hub for conventional bunker fuels, with annual sales close to 50 million metric tons in 2020.  India is also a leading country of the LNG bunkering market due to ongoing projects for the construction of new ports. Some of these ports would be constructed with dedicated LNG bunkering facilities; for instance, Mangalore port LNG bunkering facility would be constructed by Singapore-based LNG Alliance.
•  North America dominated the largest-market share in 2023 with 40% presence. One of the primary drivers of LNG bunkering in North America is the regulatory framework. The implementation of strict emissions regulations, including the International Maritime Organization's (IMO) sulfur emissions limits, has prompted the maritime industry to seek cleaner fuel alternatives. LNG, with its substantially lower sulfur and nitrogen oxide emissions, has gained favor as a solution for compliance. Both the U.S. and Canadian governments have supported the adoption of LNG as a marine fuel through regulatory incentives and initiatives.

Figure 1. LNG as a Bunker Fuel Market Share (%), by Region, 2024

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LNG as a Bunker Fuel Market- Analyst’s Views:

The use of LNG as a bunker fuel for ships holds promising growth opportunities for the maritime industry in its transition towards cleaner fuels. One of the main drivers for the adoption of LNG is the tightening environmental regulations by the International Maritime Organization to reduce sulfur emissions and introduce emission control areas. Shipping companies are exploring various alternatives to comply with the upcoming rules in a cost-effective way. LNG presents itself as a viable option as it emits less nitrogen and particulate matter compared to other marine fuels.

Key European ports are at the forefront of developing infrastructure for LNG bunkering to service the needs of container vessels and tankers. Countries like Norway already have a mature LNG value chain for supplying fuel to vessels plying domestic routes. The availability of indigenous gas reserves and political will to replace existing bunker oils give Norway an early mover advantage in the region. Shipping companies operating on trade lanes to and from Northwest Europe are likely to be the initial adopters.

High investment requirements for bunkering infrastructure and retrofitting ships to run on LNG pose significant financial restraints. A limited tanker fleet specializing in LNG transportation for bunkering also constrains widespread availability.

LNG as a Bunker Fuel Market Drivers:

Cost competitiveness of LNG compared to conventional fuels: Cost competitiveness of LNG as a bunker fuel compared to conventional fuels like Heavy Fuel Oil (HFO) and Marine Gas Oil (MGO) is a major growth driver of LNG as a ship fuel. LNG offers significant economic benefits to ship owners and operators due to lower prices compared to other fuels. As per data from the International Energy Agency (IEA), the worldwide average spot price of LNG was around U.S$6-7/MMBtu in 2021-2022, while HFO was U.S$450-550/tonne in the same period. Considering an average LNG price of U.S$7/MMBtu and an energy conversion factor of 25 MJ/kg, the landed price of LNG as a bunker fuel works out to be around U.S$350-400/tonne. This is at least 25-30% lower than HFO prices currently.

The price advantage becomes more prominent in emission control areas like North America and Europe, where LNG prices ship owners to comply with stringent sulfur cap regulations at a lower total cost of ownership compared to compliant fuels like MGO or Very Low Sulfur Fuel Oil (VLSFO). For example, MGO prices in North West Europe reached above U.S$1000/tonne in early 2022 due to limited supplies, whereas delivered price of LNG as a bunker fuel would be less than half of that. This substantial price difference is incentivizing ship owners and operators to increasingly opt for LNG as a greener and more cost-effective alternative.

However, higher capital expenditures for installing onboard LNG tanks and associated setups remain a challenge for widespread adoption of the fuel. But with the growing number of LNG bunker vessels worldwide and the development of small scale and mobile bunkering infrastructure, the supply chain is expected to improve substantially over the next 3-5 years. This along side efforts through International Maritime Organization (IMO) to regularly lessen emissions from ships is projected to enhance LNG call for from international delivery enterprise significantly, setting up it because the number one transition gas till broader commercialization of zero-carbon fuels along with hydrogen and ammonia over the longer term.

Diversification of fuel supplies: The shipping industry has traditionally relied heavily on heavy fuel oil as the primary bunker fuel to power vessels. However, stricter emission regulations aimed at reducing sulfur oxide and particulate emissions from ships have forced the industry to explore cleaner alternatives. Liquefied natural gas (LNG) is emerging as one of the most viable options as it produces less pollution and carbon emissions than conventional marine fuels when combusted. The International Maritime Organization's low sulfur regulation, implemented in 2020, has accelerated the need for cleaner fuels. Shipping companies are actively investing in LNG-fueled vessels and bunkering facilities to comply with the new rules and future emission standards.

Diversifying fuel supplies is a logical strategy for shipping companies to insulate themselves from price volatility and uncertain availability of single fuels like heavy fuel oil. Many ports and shipping routes now offer LNG as a bunker option alongside traditional fuels. For example, Rotterdam became the largest bunkering port for LNG in Europe in 2021, according to data from Port of Rotterdam, with over 150 LNG bunkering operations conducted. Growth in the number of LNG-fueled ships, coupled with expanding global LNG infrastructure, is driving further demand for LNG as a marine fuel. Countries and companies are investing heavily in new import terminals, ships, and bunkering facilities, which will help establish LNG as a widely used and globally available bunker fuel in the coming years. This creates opportunities for established oil and gas firms as well as new players focused specifically on LNG as a marine fuel.

LNG as a Bunker Fuel Market Opportunities:  

Increasing LNG production: As the global focus shifts towards reducing carbon emissions from the shipping industry, LNG is increasingly being seen as a viable alternative to conventional marine fuels. Producing LNG requires significant capital investments and infrastructure build-out. However, many governments now see increased LNG production and its use as a bunker fuel as aligned with their energy transition and decarbonization goals. For instance, a recent report from the International Energy Agency states that global LNG trade reached record high levels in 2021 and may continue significant growth through 2025 as countries look for less polluting sources of energy.

As worldwide LNG infrastructure continues to expand to meet growing demand from other sectors like power generation and land transportation, there is potential to leverage that infrastructure for wider availability of LNG bunkering sites and supply routes. Shipping companies are recognizing the cost benefits of switching to LNG compared to other low-carbon alternatives currently in development. The savings would be amplified if LNG supply and distribution networks intensify to serve more ports strategically located along key global trade routes. This could help LNG emerge as a true drop-in solution for ship owners looking to future proof their fleets against impending emissions regulations. Some forecasts from the International Group of Liquefied Natural Gas Importers project LNG demand for bunkering could rise fivefold over the next decade if production and delivery investments are made to accommodate the shipping sector’s needs. 

Growing adoption of gas powered ships: The maritime shipping industry has been facing increasing pressure to reduce emissions and adopt more environmentally friendly fuel options. With stricter emission regulations coming into effect, such as IMO 2020, there is a growing need for fuels that can provide comparable energy while emitting less pollution. Liquefied natural gas, or LNG, is emerging as one of the leading alternative fuels for ships seeking to comply with these new mandates. The use of LNG as a marine bunker fuel produces significantly fewer sulfur oxides and particulate matter compared to conventional heavy fuel oil. It also generates lower carbon dioxide emissions on a well-to-wheel basis.

As ship owners respond to regulations by exploring cleaner fuel technologies, many vessel operators have been turning to LNG as a realistic and commercially viable option. Major ship classification societies like DNV now approve the use of LNG propulsion systems on various vessel classes. Shipbuilding yards are also gaining experience in constructing LNG-fueled ships. For example, South Korea built 86 LNG-powered ships in 2021, according to data from the Korean Statistical Information Service, representing a clear shift in new builds toward gas-fueled designs. The number of ships equipped or designated to use LNG as a marine fuel has nearly doubled since 2019, based on data from the Society for Gas as a Marine Fuel. If this trend of adoption continues, it could dramatically increase the global demand for LNG as a bunker fuel by 2030. This growing demand potential presents a major market opportunity for LNG suppliers and bunkering infrastructure developers to scale up services in ports worldwide.

LNG as a Bunker Fuel Market Trends:

Rising investments in bunkering facilities: The rising investments in bunkering facilities are having a significant impact on the adoption of LNG as a bunker fuel in the shipping industry. As more ports and terminals are developing infrastructure and retrofitting vessels to enable in-port LNG bunkering, ship operators are finding it easier to utilize natural gas over conventional fuels. Several ports across major shipping hubs like Northern Europe, Asia Pacific, and North America have launched LNG bunkering operations over the past couple of years.

For instance, Rotterdam opened its first dedicated LNG bunker vessel in 2021. This facility allows oceangoing vessels to load LNG while docked and has facilitated a smoother transition for Dutch and Belgian flagged ships operating on shorter European routes. Similarly, the Singapore Maritime and Port Authority invested in building an LNG bunker vessel that commenced commercial operations in 2020. It has supported LNG-fueled vessels plying between Southeast Asian countries.

Increasing liquefaction capacity additions: The liquefaction capacity additions trend has been significantly influencing the LNG as a bunker fuel market in recent years. As more LNG liquefaction terminals have come online globally, particularly in the U.S., Australia, and Russia, it has substantially boosted available LNG supply volumes that can be utilized for bunkering. The increased supplies have benefited the bunkering market by easing supply tightness and reducing price volatility risks compared to earlier times when LNG availability was more limited. With larger liquefaction capacities, suppliers now have greater output to allocate for bunkering demands as the sector grows.

This growing supply availability has helped further reduce the price differential that previously existed between LNG and conventional marine fuels. The increased supply option has also encouraged more shippers and port authorities to include LNG bunkering in their long-term fuel strategies, given confidence in consistent supply sources. Rising global LNG supplies through capacity additions are hence positively enabling greater growth of the bunker fuel market over the coming years.

LNG as a Bunker Fuel Market Restraints:

Storage challenges and safety issues of LNG: The storage and safety challenges associated with liquefied natural gas (LNG) pose considerable restraints on the adoption of LNG as a viable shipping fuel alternative. LNG, which is natural gas cooled to liquid form for ease of transportation and storage, requires cryogenic tanks that can withstand temperatures of around -162°C. This makes the storage of large volumes of LNG onboard ships quite technologically challenging and expensive. Common steel tanks cannot be used to store LNG, as the liquefied gas could cause the steel to become extremely brittle at low temperatures. Specialized and well-insulated cryogenic storage tanks made of thick aluminum alloys or 9% nickel steel are needed instead. Such cryogenic tanks require sophisticated refrigeration and insulation systems to prevent the LNG from boiling off and vaporizing, which significantly drives up capital costs for ship owners and operators.

In addition, the handling and storage of such an extremely cold liquid fuel raises serious safety issues. Any leakage of LNG could result in rapid evaporation and vapor cloud formation, leading to risks of asphyxiation, fire, or explosion if the flammable vapor comes into contact with an ignition source. Strict safety regulations and cryogenic equipment significantly increases operational complexity and maintenance costs for LNG-fueled ships.

Counterbalance: Invest in the expansion and improvement of LNG bunkering infrastructure, such as dedicated terminals, bunker barges, and ship-to-ship transfer systems, to provide more accessible and safer bunkering options.

 Infrastructure limitations: Infrastructure limitations pose a significant challenge for the growth of LNG as a bunker fuel market. Developing infrastructure for LNG requires huge investments in terms of building storage facilities, distribution pipelines, and transportation assets like LNG tankers. This becomes a major restraining factor, especially for regions and countries that do not have existing natural gas pipelines and LNG receiving terminals. Developing storage facilities and distribution networks from the scratch involves large capital expenditure and a long duration for for project completion. In addition, integrating LNG refueling infrastructure with existing diesel supply chains also poses technical and operational challenges. Retrofitting current diesel storage and bunkering facilities to accommodate LNG requires expertise as well as substantial changes in the design of facilities. This further delays the transition process. The 2020 report by the United Nations Conference on Trade and Development found that a lack of technical standards was a key non-tariff measure limiting LNG bunkering developments in various countries. The absence of common technical standards increased uncertainty and made infrastructure investments more risky.

Thus, in summary, massive financial outlays required to build new LNG infrastructure from the start and integration challenges with current fuel supply systems have significantly restrained the growth momentum of LNG as a bunker fuel market globally. Widespread availability of supporting infrastructure is critical for large scale adoption of LNG powered ships, but infrastructure gaps continue to persist across many port locations.

Counter balance: Promote international collaboration to create a network of LNG refueling points that span key maritime routes. This can ensure consistency and reliability of supply for vessels operating in international waters.

Recent Developments:

• In December 2021, global shipping companies CMA CGM Compagnie Maritime d'Affrètement - Compagnie Générale Maritime and Shell Plc. jointly performed the first bio-LNG bunkering trial in Rotterdam to achieve the target of net zero carbon by 2050. CMA CGM is a major container shipping group, while Shell is a global energy company. They have collaborated on various initiatives to decarbonize the marine sector. This includes agreements on the use of sustainable marine bio-fuel oil, LNG supply, and decarbonization efforts. The collaboration aims to accelerate the transition to more sustainable shipping practices, such as the use of low carbon Bio-LNG and other decarbonization efforts. The partnership involves the supply of LNG, biofuels, and the development of new fuels to support the shipping company's target of achieving net zero carbon by 2050. The agreements cover LNG bunkering and future joint efforts on decarbonization and new fuels.
• In January 2022, Total Energies and its partner CMA CGM launched ship to containership LNG bunkering operation in the Port of Marseille Fos in Southern France Total Energies is a French multinational integrated energy and petroleum company founded in 1924. It is one of the seven major oil companies. The company operates on a global scale, producing and marketing various forms of energy, including oil, biofuels, natural gas, green gases, and renewables. Total Energies has been actively expanding its renewable energy portfolio, with investments in solar, wind, and hydropower. The company has also been involved in strategic agreements, such as the one with CMA CGM on liquefied natural gas (LNG) fuel supply for CMA CGM's new build container ships. Total Energies is committed to meeting the growing demand for energy while reducing emissions and transitioning to a more sustainable energy mix.

Mergers and Acquisition

• In June 2022, The Royal Caribbean Group and Eagle LNG Partners LLC ("Eagle LNG") announced their partnership to provide liquefied natural gas (LNG) bunkering for the cruise line's LNG ships, including the first ship, Icon of the Seas, which will make its debut in 2023 and be the first ship in the Icon Class for the company's Royal Caribbean International brand. Eagle LNG will introduce a number of LNG ships that were specifically designed for maritime bunkering and gas transportation throughout the Caribbean.
•  The Royal Caribbean Group, formerly known as Royal Caribbean Cruises Ltd., is a global cruise holding company incorporated in Liberia and based in Miami, Florida. It is the world's second-largest cruise line operator, after Carnival Corporation & plc. As of 2023, Royal Caribbean Group fully owns three cruise lines: Royal Caribbean International, Celebrity Cruises, and Silversea Cruises.
• Eagle LNG Partners LLC is a privately held project development company headquartered in Houston, Texas. The company was founded in 2013 and is focused on providing affordable, efficient, and clean-burning liquefied natural gas (LNG) for the marine, power generation, export, rail, and mining markets. Eagle LNG's gas assets are located throughout the Caribbean basin, creating jobs and enhancing economic growth while contributing to the environmental health of the planet. The company's LNG fueling projects cover all scales and scopes, providing a powerful partnership that puts customers on the path toward a lower cost, smarter, safer, and cleaner energy future.
• In February 2021, Sumitomo and Petronas  signed an initial deal to jointly market and supply LNG bunker fuel in Japan and Malaysia. Sumitomo Corporation is a leading integrated trading company engaged in diverse businesses based on its global network. The company conducts business activities in a wide range of industries on a global scale, with its business units, initiatives, and regional organizations all over the world working closely together. The company's business activities include commodity transactions in all industries utilizing worldwide networks, providing related customers with various financing, serving as an organizer and a coordinator for various projects, and investing in companies to promote greater growth potential.
• Petronas, short for Petroliam Nasional Berhad, is a Malaysian state-owned oil and gas company. It was established in August 1974 and operates under the terms of the Petroleum Development Act passed in October 1974. The company is headquartered at the PETRONAS Twin Towers in Kuala Lumpur, Malaysia. PETRONAS is a dynamic global energy group with a presence in over 100 countries, producing and delivering energy and solutions that power society's progress responsibly. The company's portfolio includes oil and gas, renewable sources, and a range of advanced products and adaptive solutions. PETRONAS is a significant source of income for the Malaysian government, accounting for more than 15% of the government’s revenue from 2015 to 2020.

Figure 2. LNG as a Bunker Fuel Market Share (%), by Type, 2024

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Top Companies in the LNG as a bunker fuel market :

• BP P.L.C.
• Conocophillips Corporation
• Chevron Corporation
• China National Petroleum Corporation
• ENI S.P.A.
• Equinor ASA
• Exxon Mobil Corporation
• PJSC GAZPROM
• Petronas
• Rosneft Oil Company
• Royal Dutch Shell PLC
• Total S.A.

Definition: LNG bunkering is the process of transferring liquefied natural gas (LNG) to a ship for use as fuel. It is a less polluting method compared to other traditional marine fuels, and it is becoming increasingly popular due to environmental regulatory pressure to reduce emissions caused by ship transportation. The bunkering process involves transferring LNG from a distribution source to an LNG-fueled vessel. The process can be carried out in different ways, including truck-to-ship, shore-to-ship, and ship-to-ship. The safe refueling of LNG-powered ships and the safe evacuation of LNG fuel from ships are critical aspects of LNG bunkering. The risks associated with extreme cold temperatures and heat transfer must be assessed and managed to ensure the integrity and safety of the bunkering process.