Industry experts took part in LQM's recent webinar, 'Offshore bunkers post COVID-19', to discuss the state of play amid continued uncertainty in the global economy. In partnership with Geos and Inchcape Shipping Services, the panel examined the offshore bunker supply chain, oil price volatility and renewable fuels for the future.
Ruben Block, Bunker Risk Manager at LQM, kicked off proceedings with an overview of current market conditions. He claimed an oil-price peak might be on the cards:
“In terms of volatility one should be very wary that supportive information - some real information about the demand and supply - might have an opposite effect on the oil price in the short term," explained Block.
"If the demand data comes out with substantial, more reliable, data we might see a slingshot for crude going into the $50s (per barrel).
"In terms of Marine gasoil [MGO], the market is even more volatile as we are dealing with a refined product, which is a direct demand related product where refinery economics have a share."
"This is why we see steeper slips, due to fear of demand slumps, compared to crude."
"We should be very wary about a price peak for oil, which could easily occur, because we have had some really drastic changes in the supply landscape in the past few months."
Offshore operators are expected to start seriously eyeing alternative fuels sooner rather than later and Daniel Rose, chief executive at LQM, believes the current pandemic is speeding up change:
"Offshore has always been interesting and it's often feast or famine," Rose told guests on the webinar.
"I've had long-standing relationships with offshore operators that have weathered many storms. But, then I've had short relationships with other companies that we've supplied to and then they've gone bust. The pandemic has forced the offshore sector to look inwardly and think about how they can approach things. Many of them - and not just because of the pandemic - have been retooling and pushing towards renewables instead of oil and gas. That transition is ongoing and will remain for quite some time...
"The government can offer incentives, but one small problem is shipping companies very often are not incorporated in the country that they operate. That can make it a tricky puzzle to incentivise via the tax route."
Research and development into alternative fuels from industry big hitters is ongoing. James 'JD' Hoffman - a broker with LQM – gave an overview of the most talked about alternatives and the IMO’s goal of net-zero carbon emissions by 2050:
"The shipping industry is going to be one of the most difficult to fully de-carbonise," he said. "Research shows it's going to be quite expensive and right now there isn't a clear answer. We are seeing the rise of Bio-fuel and LNG as the leading alternatives right now. I think the future will be a combination of green-tech and alternative fuels. There's no definitive silver bullet to this problem, rather more of a silver buckshot.
"Ammonia is on the future fuel outlook... it is little bit early for anyone to give an answer on whether or not it will become a major future fuel. I think it's right alongside Hydrogen, and if we can get costs down and make it economically viable to build vessels with propulsion systems based on Hydrogen or Ammonia, it could very well be one of the solutions to take us to net-zero (Carbon)."
But despite a growing appetite for change when it comes to fuels, progress is gradual. Neil Lamerton, sales manager at LQM, say offshore outfits are sticking to what they know:
"There's more talk about bio-diesel and LNG but there is not a vast demand for it in the international sector. Lots of talk but not much happening," Lamerton said. "Ammonia is very much at the stage LNG was 5-8 years ago. It looks good but one of the big problems is that will it replace oil and bunkers? The answer to all of them is not in the short term. There just isn't the physical availability around the world to replace 300million tonnes oil which is used as bunkers."
To view a recording of the session, head over to our webinars page to find out more.