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Shell charters LNG bunker barge to serve US East Coast

Highlights

LNG operating expenses currently above fuel oil levels

Shell to take delivery of a number of LNG-powered ships

Sustainably-produced LNG may extend its lifespan as marine fuel

Shell has signed a long-term agreement with maritime engineering and services company Crowley Maritime Corp. to charter an LNG bunker barge amid growing interest in the fuel as International Maritime Organization-mandated climate deadlines draw nearer.

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The move also comes as LNG bunker prices, which traditionally offer lower operational costs than oil-based fuel while demanding high capital expenditure costs, have risen.

LNG bunker prices have shown tremendous gains in recent weeks following spikes in global gas and LNG market levels, and amid shortages of LNG into Asia.

As a result, the S&P Global Platts LNG Bunker Rotterdam price hit a record high of $778.416/mt on Aug. 31 -- the highest since the assessment started in September 2019. Platts does not have a US LNG bunker assessment.

This compares with an assessment of $519/mt on Aug. 31 for delivered 0.5% sulfur fuel oil at Rotterdam.

Shell's new LNG barge will be the largest Jones Act-compliant ship of its kind with a capacity of 12,000 cu m, it said in a statement Sept. 2.

It is expected to be deployed to serve LNG-fueled ships that call on ports on the US East Coast starting in 2024, Shell said.

"The shipping sector is making progress toward decarbonization, and LNG offers immediate emissions reduction with the potential to become a net zero emission marine fuel given the possible roles of bio-LNG and synthetic LNG," Tahir Faruqui, general manager for global downstream LNG at Shell, said in the statement.

The IMO is targeting a 40% reduction in CO2 intensity in the global shipping fleet by 2030 compared with 2008 levels, and market observers say LNG will be helpful as a bunker fuel to meet this target. However, the IMO is also targeting a 50% reduction in greenhouse gases, which is understood to include methane, by 2050, and so LNG may have a limited timespan as a transitional fuel unless it can be produced sustainably.

Shell has significantly invested in LNG for its long-term charter fleet. The company, which produces natural gas, expects to take delivery of 16 dual-fuel LNG carriers, 10 LNG dual-fuel Aframax crude oil tankers, and four new LNG dual-fuel oil products tankers from 2021.

Shell continues to expand its global network for LNG bunkering, with 10 LNG bunker ships currently under contract, and plans to add further to its growing global fleet.

Earlier this year, Shell completed its 500th marine LNG ship-to-ship operation to date.