Carnival sees LNG rising to 20% of its bunker mix by 2030
Carnival Corp., the world’s largest cruise line, could increase the proportion of LNG in its bunker fuel mix to 20% by 2030, according to a group executive, suggesting the fuel would play a “major” transitional role in the company’s decarbonization.
The Miami-based company, which aims for net-zero emissions by 2050, reported marine fuel use of 2.9 million mt in 2023 — making it one of the top bunker consumers on an individual company basis.
Tom Strang, Carnival’s senior vice-president for maritime affairs, said LNG makes up 11% of Carnival’s bunker consumption volumes currently while high sulfur fuel oil accounts for over 55% and marine gasoil 30%. The remainder is covered by very low sulfur fuel oil.
In terms of energy content, a gauge more relevant for decarbonization and adopted by regulators at the EU and International Maritime Organization, LNG accounts for 15%, and that share could rise to 20% within this decade as more LNG-capable newbuilds are delivered, Strang added.
“We continue to believe that LNG has a major role to play in the transition pathway to net zero,” Strang told S&P Global Commodity Insights in an interview, adding that Carnival’s LNG-capable fleet could switch to low-carbon fuels like biomethane and e-methane later.
The company has a fleet of 95 cruise ships in operation across the globe — of which 10 are dual-fuel vessels that can run on LNG and conventional oil-based fuels. Its order book comprises six LNG-capable ships due to be delivered from 2025 through 2033.
“These will be some of the largest ships we have built. We will have four more by the end of 2030,” Strang said. “Of course, the percentage of LNG [in our bunker mix] is going to increase.”
Market dynamics
Commodity Insights data shows LNG bunker demand reached 110 petajoules in 2023, or 1.2% of the total marine fuel demand, a share forecast to rise to 5.6% in 2030 before a further hike to 15.6% in 2050 as ship operators shift to a multi-fuel future.
While LNG can only reduce greenhouse gas emissions by 20%-30% compared with conventional fuels, shipping industry participants said the fuel has become the most popular alterative as it is available in many bunker hubs and sufficient to meet EU regulations for the coming years.
Strang said the majority of Carnival’s LNG-powered fleet currently operates in European waters, with the rest allocated to the south Florida and Caribbean area, the US Gulf and the Persian Gulf depending on seasonality.
“We would look to deploy those ships in areas where we can get LNG,” said Strang, adding that Carnival ships frequently refuel with LNG at Spain’s Barcelona, the UK’s Southampton, and Miami and Port Canaveral in Florida, with bunker volumes reaching 3,000 cubic meters per transaction.
Looking forward, Strang said Carnival could also source LNG bunkers in Panama and the Bahamas, where the company has some private islands.
“Hopefully we’ll be able to bunker in the Bahamas in the future, and also in some of the other Caribbean islands, as we begin to see the supply chain build out,” said Strang, suggesting that those locations could become competitive against US ports without the requirements to use more expensive Jones Act bunker barges.
Cheaper options
Shipping professionals have attributed LNG’s popularity in recent quarters to its competitive prices in some markets — for example, Platts pricing data suggests LNG bunker prices are lowest on the US Southeast Coast, and can be cheaper than VLSFO in Rotterdam and Singapore at times.
“In certain locations, LNG is very competitive, but it’s not the same price [everywhere],” Strang said. “Price in South Florida is very competitive, but the pricing structure in other parts of the US is nowhere near as competitive… There’s still a challenge in getting bunker vessels into the main export terminals in the [US] Gulf.”
Public announcements suggest Shell and Titan are among Carnival’s LNG bunker suppliers, and Strang said Carnival holds 10-year supply contracts and sees “plenty of opportunities” in securing one to three years of supplies.
While some market participants, including TotalEnergies, have observed increased spot LNG bunker trades in recent years, Strang suggests term contracts could gain popularity again due to tightening demand-supply balances.
Up to 36 LNG bunker vessels are due to be delivered by the end of 2028, compared with 499 ships capable of running on LNG, according to data from classification society DNV.
“With the growth of the LNG fleet, we may see a squeeze on bunker vessel capacity in the future… the amount of spot availability may reduce,” Strang said.
Challenges ahead
Some analysts said the consumers of LNG and other methane-related products could face tighter regulations in the future, as a growing number of environmentalist groups are focusing on the leakage issues of methane — a much more potent greenhouse gas than CO2.
“We have to address methane slips… We’re looking at new technologies,” Strang said.
Among other future fuels, ammonia may be too dangerous for the cruise sector, while retrofitting a cruise ship to run on methanol would be “challenging” and sustainable methanol is hard to obtain, according to Strang. Carnival has completed several biobunker trials, including bioblends and 100% biofuel, but their high costs and low availability are obstacles for further uptake.
The IMO, tasked with regulating maritime transportation, has set targets to reduce life-cycle GHG from international shipping by 20%-30% by 2030 and by 70%-80% by 2040 against 2008 levels before transitioning to net-zero shipping close to 2050.
“It looks very, very challenging to meet the checkpoints,” Strang said. “Without the fuels being made available, we won’t meet the checkpoints… it’s as simple as that.”
Source: Platts