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FLEET FOR THE FUTURE GAS FLEETS • WITH DEMAND STRONG AND THE POTENTIAL THAT NEW TRADES WILL EMERGE FROM THE ENERGY TRANSITION, GAS SHIP OWNERS ARE SITTING PRETTY AND SITTING TIGHT THERE WAS A TIME, around thirty years ago, when LPG was being touted as the fuel of the future. Comparatively low in emissions, with a well established supply chain, LPG could offer a cleaner way of fuelling the future. To some extent that vision paid off, with domestic use of LPG for cooking and home heating still increasing in many developing countries in Asia. But those forecasts of growth in LPG demand did not take account of other developments, that only emerged this century. In particular, the use of LPG as an alternative to naphtha as a petrochemical feedstock was already in the market, but the emergence of shale gas fracking, particularly in North
America, generated significant new volumes of LPG for the world market, bringing down the price and making it a more attractive alternative. Also in the petrochemical area, the growth of propane dehydrogenation (PDH) as a relatively easy route to the production of polypropylene added hugely to propane demand – and continues to do so – especially in China. Additionally, and as a result of the shale gas boom, the emergence of ethane as a stand-alone product has driven more long-haul trade, with US ethane moving by ship to Europe, India and China. That emerging ethane trade has necessitated the development of new types
of gas carrier, with containment systems based on LNG rather than LPG transport, given the low cryogenic temperatures required, and ships of rather larger capacity than typical very large gas carriers (VLGCs) used for propane and butane. These very large ethane carriers (VLECs) are also generally configured to use ethane as fuel and there are an increasing number of VLGCs now being built to use LPG as fuel, with some operators, notably BW LPG, retrofitting their existing vessels. Gas tanker operators are also well placed to take advantage of changing trades as the energy transition develops. For instance, ammonia is being touted as one alternative fuel that will be easy to adopt, either for direct consumption as fuel or via fuel cells to generate electric power. There are several plans in place to move ‘green’ ammonia from production sites around the world to northern Europe, a task for which medium-sized LPG tankers are well suited, since they are already involved in the trade. PLAYING WITH THE BIG BOYS The growth of US LPG exports has been remarkable. In 2015, total US production of LPG was 66m tonnes, of which 18m tonnes was exported; by 2020, production had grown 36 per cent to 90m tonnes but, with domestic consumption essentially flat, exports had surged by more than 250 per cent to 46m tonnes. According to the US Energy Information Administration (EIA), 2023 projections show a further 17 per cent growth in production to 105m tonnes with exports rising 28 per cent to 59m tonnes. Some of that additional output from the US (as well as from Canada, at a lower level) has been used to fill a gap caused by a shortfall in Middle East exports, particularly at those points in recent years when oil production has been curtailed to support the oil price, leaving less associated gas available for fractionation. But with Opec+ recently upping output to
OPERATORS ARE STILL INVESTING IN NEW CONSTRUCTION IN THE VLGC SECTOR, WHERE ADDITIONAL LPG VOLUMES ON LONG-HAUL TRADES ARE ADDING SIGNIFICANTLY TO DEMAND
HCB MONTHLY | JULY-AUGUST 2022
