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One of the main obstacles to the accelerated uptake of LNG is the uncertainty regarding future market volumes, says DNV GL. In a market study on the future liquefied gas market in the Iberian Peninsula, the classification society has found huge potential for the alternative fuel.

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DNV GL conducted the study on behalf of the six-year CORE LNGas hive project1, which aims to provide an investment plan for LNG fuelling in Spain and Portugal. The 33 mill. € project is coordinated by Enagas, and co-funded by the European Commission.

CORE LNGas Hive dnv gl credit Inea
Source: Inea

The market study has forecast the potential future demand for LNG as a ship fuel and the required future infrastructure for the areas around Spain and Portugal, covering the Mediterranean, Atlantic and Gibraltar Strait peripherical regions. The results of DNV GL’s analyses have now contributed to the CORE LNGas Hive project’s recommendations for the development of the LNG supply chain infrastructure, involving over 40 ports in the project area.

Fernando Impuesto, project coordinator from Enagas, says: »Through this market study we now have a strong decision basis to prepare the supply side on the Iberian Peninsula in meeting future demand for LNG bunkering at competitive conditions.«

Drivers are changing

Despite LNG fuelled shipping being high on the agenda in the maritime industry, the market drivers are seen to change. From previously being encouraged by a lower price of LNG compensating for the added cost for installation of the LNG fuel equipment, results from interviews conducted by DNV GL indicate a shift towards compliance with emissions regulations to be the main motivation.

The study has revealed a huge potential for liquefied natural gas as a marine fuel that will utilize the current spare capacity of the existing import terminals. The consolidated quantitative results show that by 2030 up to 2 million m³/y of LNG is to be bunkered by ships (with Algeciras, Las Palmas and Barcelona as most important ports) and by 2050 approximately 8 million m³/y of gas.

On the logistical side, the study concludes that existing LNG terminals will need to develop break bulk capacity to allow for loading LNG to small carriers and bunker vessels. In most ports, development of local intermediate storage capacity needs to be synchronized with increasing demand by larger vessels. Besides bunker stations and local storage facilities, small carriers for delivering batches of liquefied natural gas to ports over sea will play an important role for the times ahead.

3,7 bn € investment needed until 2050

However, in order to realize the predicted supply chain in 2030, about 1 bn € of capital expenditures (CAPEX) investment will be needed, adding up to a total cost of 3,7 bn € in 2050.

Liv Hovem, Senior Vice President, DNV GL – Oil & Gas, adds: »DNV GL’s market study has clearly shown the major potential LNG has as a fuel in the region. We hope that the conclusions from our study will help ship owners, natural gas suppliers, bunker companies, port authorities and LNG terminal operators gain the confidence they need to move forward with LNG as a fuel for a more sustainable shipping industry.«