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Sinanju orders first dual-fuel LNG-powered bunker tanker

Hong Kong

LICENSED marine fuel supplier Sinanju Tankers Holdings has placed a newbuild order with a unit of Keppel Offshore & Marine (O&M) for Singapore's first dual-fuel bunker tanker to be powered by liquefied natural gas (LNG).

Valued at more than US$10 million by industry estimates, the order is for a 7,990-deadweight tonne tanker to be flagged and built in Singapore; it is scheduled for delivery from Keppel Singmarine in the second half of next year.

Sinanju confirmed the order with Keppel Singmarine through its partner and co-financier of the project, Mitsui & Co. (Asia Pacific), the Singapore subsidiary of Japan-based trading and investment firm, Mitsui & Co.

The co-partners in the project have an option with Keppel Singmarine to order a second similar vessel.

Sinanju has tapped a grant of up to S$2 million per ship from the Maritime and Port Authority of Singapore (MPA) to part-finance the cost.

Managing director Ju Kai Meng said the order placed with Keppel Singmarine fits in with "a green initiative" of the bunker player to cut emissions while "boosting the local use of LNG" as a marine fuel.

He added: "We see a trend in oil companies encouraging and promoting the use of LNG in the shipping industry as a clean alternative fuel. We thus believe that such a vessel would also be aligned with the requirements of our clients - the oil majors and independent suppliers."

Mr Ju was referring to a new regulation that could bolster LNG's standing as a marine fuel option; the International Maritime Organization (IMO) in October 2016 reached a decision to impose a global cap that will restrict sulphur content in marine fuels to no more than 0.5 per cent by 2020.

Proponents of LNG have thus far touted the use of this cleaner-burning fossil fuel as an option for shipowners looking to comply with the IMO global sulphur cap.

The MPA raised the total co-funding allocated for construction of LNG-fuelled ships to S$18 million last December, up from some S$12 million initially announced in 2015.

Some S$14 million in co-funding has gone to Sinanju and four other ship owner-operators - Keppel SMIT Towage, Maju Maritime, PSA Marine and GEA-India. Harley Marine Asia, named as a sixth successful applicant for the same incentive, decided against proceeding with its LNG-fuelled newbuilding project.

At least three recipients of the MPA co-funding have commissioned their newbuilding orders with Singapore-based yard groups.

Abu Bakar, Keppel O&M's managing director for Gas & Specialised Vessels, noted that the dual-fuel bunker tanker placed by Sinanju and Mitsui "will be the third (LNG-fuelled) vessel to be built by Keppel Singmarine under the MPA LNG bunkering pilot programme".

Besides the order from Sinanju, Keppel Singmarine previously clinched newbuild contracts from Keppel SMIT Towage and Maju Maritime; each order was for an LNG-fuelled vessel.

All in, Keppel O&M has won orders for seven LNG dual-fuel vessels to date.

Mitsui AP's chief executive, Taku Morimoto said of the Japanese's trading company's role as a financier of this project: "Singapore, as the world's largest bunkering hub, is initiating the reduction of greenhouse gas emissions by boosting the use of LNG as a marine fuel, and we, as a company which has been serving the LNG industry for decades, would like to contribute further to Singapore's green initiative."

For its first LNG-powered bunker vessel, Sinanju roped in Singapore-based SeaTech Solutions International to come up with the ship's design.

Last December, MPA set aside another S$6 million in co-funding for the building of vessels and infrastructure designed to supply LNG as marine fuel. This extra S$6 million in MPA co-funding will go towards the building of, at most, two more LNG bunkering vessels if each ship makes use of the maximum S$3 million grant.

Sinanju's general manager Desmond Chong welcomed the MPA's grant as a way to bolster ship-to-ship bunkering infrastructure development.

He said, however, that other considerations may weigh against such investments. One is that the price of LNG bunkering vessels range between two and three times that of Sinanju's standard bunker tankers, and so is "simply too huge an investment hurdle for a small enterprise like ourselves to undertake".

Uncertainty in demand for LNG as marine fuel also does not help. There is still no clear direction from shipowners on their LNG bunker requirements from 2020, and whether those LNG-powered ships on their fleet will call at Singapore for refuelling.

Under these circumstances, Mr Chong said that Sinanju "has been forced to take a hard look at the commercial justification of investing in LNG bunkering vessels".