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Leading Greek shipowners see LNG as having a massive future in shipping both as a cargo and as a fuel for ships. But they warn the lack of infrastructure development is holding back the switch from oil to gas when coming out strongly in favour of LNG as a marine fuel.

GasLog chairman Peter Livanos told the ABS event on the future of LNG shipping, “it’s inevitable that LNG becomes the primary source of fuel for marine transportation". “The train has left the station, and it will dominate marine fuels,” he said.

There are two issues the industry is going to have to address, he said. The lack of LNG infrastructure today is acting as a brake against early adoption of LNG as marine fuel, but that should accelerate. “And then there is the lifecycle of the existing assets and to what extent you replace existing assets with LNG ready or LNG capable, and its coming.”

John Angelicoussis, chairman Angelicoussis Shipping Group, also highlighted the lack of bunkering infrastructure. He said: “You cannot yet find bunkering stations for LNG so you need dual fuel vessel, which is quite expensive right now even for smaller vessels. Definitely LNG is much cheaper than any other type of hydrocarbon but is still a hydrocarbon.”

Christopher Wiernicki, chairman, president and ceo ABS, was also positive on the future of LNG as a marine fuel and sees infrastructure developments starting to make headway. “I agree LNG as fuel is a very viable option, it will probably be the most sustainable option going forward. If you look there are 140 (LNG powered newbuildings) on order, 70% of those are deepsea or blue water, there are some very well thought out designs; here in Greece there is Project Forward,” he said. Angelicoussis was optimistic about the LNG market trend. “I personally feel the bottom of the market in a cyclical sense was in early 2016 when we hit the bottom for energy prices, at that time it was the lowest rates for LNG. I think from there on for every year we see higher rates depending on the season.”

Livanos was also positive although saw a maximum as to how much rates could rise. “We’re definitely in a short term tightening cycle although I do believe in the medium to long term rates will be capped in terms of the economic value of the ability to buy and sell gas in different locations around the world,” said Livanos, adding "I don’t see medium / long term rates developing as a continuous basis as an upward trend, but rather reaching a steady state situation".

Similarly George Procopiou, chairman of Dynacom Tankers Management, did not expect rates to soar but to reach sustainable levels. “I do believe the rates of today are low so if you add the running cost of an organisation they don’t add up. Nobody can subside somebody else’s business so they have to rise to levels that are sustainable. I don’t believe in extremes, it’s a steady business with high capital, but low returns.”

Asked by session moderator Michael Tusiani, chairman emeritus of Poten & Partners, about the shift by some charterers to a tender process and shorter terms there were concerns it was starting to commoditise the market. Angelicoussis said: “With the tender process charterers use the tender process to bring rates. Liquefaction plants are not built for five to seven years, why are we getting five to seven years deals with option periods? We take all the risk for the vessel and basically no return on our capital sometimes.”

Livanos took aim at asset based owners who do not run their own vessels in LNG and other shipping sectors as “irresponsible”. Indeed, Angelicoussis and Procopiou, agreed.

“It’s probably the single largest differentiator about the three of us here, the fact that we’ve invested in our own internal systems and continue to drive their quality going forward, and I have very little respect for someone who doesn’t feel it’s worthwhile to run their own ships whether it be in LNG or any other sector,” according to Livanos. Angelicoussis said: “I entirely agree with you, our charterers think so at least”. While Procopiou said, “It was a must to run your own vessels.”

When Tusiani commented: “Newcomers come in and use third parties and it seems very acceptable to charterers," Livanos bounced back: “We have an accident and we kill someone it’s unbelievable costly morally and financially, and the only way you can legitimately guard against that is to take full responsibility in the way you run your assets." Livanos continued: “To give that out to someone on a financial basis because they can do it cheaper or because you can’t do and they can do it so that gives you the right to own that asset is irresponsible, because at the end of the day the accountability you have in your own operations is fundamentally critical to the asset integrity you want to maintain and use."

Filed: 2018-06-05