INTERVIEW: LNG, biofuels immediate solutions for shipping’s decarbonization pathway: Sing Fuels MD

LNG and biofuels are immediate solutions to drive GHG emissions cuts for shipping, with LNG potentially able to meet as much as 30% of the global bunker fuel mix by 2030, Sing Fuels' managing director Sanket Sudhakar Naik said in an interview.

The International Maritime Organization has given the industry a "very clear mandate", Naik told S&P Global Commodity Insights.

Member states of the IMO, a UN agency with responsibility for the safety and security of shipping, are aiming to cut life-cycle greenhouse gas emissions from international shipping by 20%-30% by 2030 and 70%-80% by 2040, against 2008 levels, before reaching net-zero emissions close to 2050.

Among the cleaner fuels available presently, the LNG ecosystem is already well established, with the fuel also offering a long-term pathway for energy transition in the form of bio-LNG or synthetic LNG as other alternative fuels such as hydrogen, ammonia, and methanol develop, Naik said.

LNG markets faced unprecedented volatility in 2022, when Russia invaded Ukraine, and prices soared to record highs amid restricted availability. However, global LNG prices have come down since then, prompting many shipowners to burn the fuel again, he said.

Platts, part of Commodity Insights, assessed the JKM, the benchmark price for LNG cargoes delivered to Northeast Asia, for February at $13.275/MMBtu on Jan. 10, down 24.5 cents/MMBtu from Jan. 9. LNG bunker fuel in Singapore was assessed at $794.30/mt on Jan. 10 more or less steady compared with $788.32/mt on Jan. 10, 2024 but down from a peak of $3,627.624/mt on March 7, 2022, following Russia's invasion of Ukraine.

According to the latest data from DNV's Alternative Fuels Insights (AFI) platform released last week, the number of LNG vessel orders placed in 2024 was 264, more than doubling from 130 in 2023.

While LNG as a marine fuel offers numerous benefits, storage of the fuel presents a slight challenge, Naik said. "To burn LNG on a dual-fueled vessel, you need a different tank, which is costlier than that of conventional fossil fuels," he continued.

Among alternative fuels, biofuels are attractive because they are a drop-in fuel, easy to use, and are competitively priced, Naik said.

Although economics has always played a vital role in ship owners' fuel choices, there is an increasing awareness about the urgency and necessity to switch from traditional fuels to cleaner ones, Naik said.

"Despite some industry concerns around ammonia's toxicity and accelerated development of ammonia-powered engines, we are very positive about the potential of ammonia as a marine fuel because of its ready availability and storage infrastructure," Naik said.

"So, if we are talking about 2050, I see majority of ships powered by LNG followed by ammonia," Naik added.

Sing Fuels established an LNG trading desk some years ago, but it does not plan to become a physical supplier for LNG or other marine fuels, according to Naik. "We want to go beyond that ecosystem."

"Plans include establishing joint ventures with companies that produce biofuels -- palm oil and other feedstocks -- and some of those partnerships are expected to materialize by early 2025," Naik continued.

Fueling future growth

Global bunker fuel sales are expected to grow 3%-5% year on year, with the share of alternative fuels increasing given the stricter environmental regulations in global shipping, Naik said.

Sing Fuels, for its part, has also seen its sales align with changing rules. Before the IMO's 0.5% global sulfur limit rule that was implemented in January 2020, Sing Fuels' product sales consisted of as much as 90% HSFO. After 2020, with the increased adoption of LSMGO, LSFO and other alternatives, HSFO now comprises only 20% of the company's product sales.

"We don't want to be on the sunset side of the industry. The company also wants to be lean and quick in capturing any new opportunity," Naik said.

The company has already diversified into base oils, petrochemicals, and lubricants for automotive and industrial uses.

Starting out from Singapore, Sing Fuels has expanded geographically with offices located in the US, London, Greece and Dubai. It operates in over 350 ports globally.

Going forward, India will be certainly a focus area for the company, Naik said. Strengthening infrastructure, potential development of new transshipment ports, and other initiatives under the Sagar Mala project to enhance the country's logistics sector are positive to boost India's bunkering prospects, he said.

In addition to India, Sing Fuels also wants to expand its trading operations in Europe and in the Asia Pacific region including in Shanghai, China by 2025, Naik shared.

"As a trading outfit, our core strength is an understanding of credit. In addition to traditional customer information, we also assess the most recent market condition for that customer and that domain," he said.

"Complexities related to credit decisioning do usually drive costs up. However, detailed checks are vital to avoid counterparty risks and wrong decision-making," Naik said.

He highlighted digitalization as a vital tool to aid transparency and efficiency in operations and noted that the company's 3.0 vision encompasses its commitment to sustainability, technological innovation and strategic expansion.

The company is also establishing an Energy Transition-as-a-Service model, which is an integrated asset-backed approach to decarbonize maritime operations.

Sing Fuels is also exploring investments in carbon management services including carbon trading, carbon compliance, facilitation of carbon credit generation and carbon contracts to support customers in their sustainability efforts, Naik added.