Oil companies see their future in Liquid Natural Gas

Posted by PortVision

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At present, natural gas has a market advantage over other types of fossil fuels – global environmental standards are less rigorous for this fuel. Due to this advantage, the market is seeing big oil companies turn their focus to natural gas.

According to the Wall Street Journal, approximately half of the production total for the largest oil companies is now natural gas, and it is expected to grow significantly. By 2020, France's Total SA will increase LNG (liquid natural gas) capacity 50%; Britain's BP PLC will devote 60% to LNG; Italy's Eni SpA will ramp up LNG production to 70% of its output; Shell is now the world's largest independent producer of LNG.

This move to increase natural gas production could be considered risky, since natural gas prices are low and the LNG market is over-supplied. The obvious move is to develop new markets for this product.

World wide, global investment in renewable energy sources like wind and solar is beating fossil fuels 2 to 1, states Bloomberg Businessweek. Noting this trend, big oil companies are turning their gazes to the cleaner burning natural gas to buoy their businesses and to stay competitive.

France's Total is working on infrastructure development in developing countries such as Ivory Coast, Morocco and Indonesia. Shell is working with Jordan and Gibraltar to construct new LNG facilities. In 2016, according to the Wall Street Journal article, Jordan, Pakistan and Egypt were responsible for the largest increases in LNG demand.

LNG suppliers are also targeting shipping lines. New regulations for cleaner fuel emissions by the International Maritime Organization are expected to become even more stringent by 2020. LNG reduces carbon dioxide emissions by 20 percent while also eliminating sulfur dioxide emissions. Shell is active in establishing Rotterdam and Singapore hubs for LNG refueling and has signed a contract with Carnival Corporation to provide LNG at certain ports.

According to an article in the Miami Herald, Carnival announced this year that it has agreements in place to build seven LNG-powered vessels for four of its cruise brands. Geneva based MSC Cruises is building two LNG-powered ships. LNG has already become a popular fuel for barges, tugs, ferries, tankers and the like.

A 2015 Bloomberg article states that the number of natural-gas powered vessels could increase 15-fold by 2020 due to environmental and financial concerns. Worldwide, 70 vessels were using LNG in 2015, an increase of 28 in two years, according to DNV GL. Bloomberg estimates that by 2020 that number will grow to 1000 or more. Travel Weekly cites Lloyd's Register as predicting that there will be 653 LNG-powered ships built by 2025. LNG-powered ships can cost 10-25% more to build due to the need for insulated storage tanks.

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Posted on Dec 21, 2016, 6:07:00 AM

Topics: Tankers, oil, LNG