Sumitomo, Petronas partner on LNG bunkering

Japanese trading house Sumitomo and Malaysia's state-owned oil firm Petronas have signed an initial deal to jointly market and supply LNG as a bunker fuel in Tokyo bay in Japan and Malaysia, paving the way to leverage off each other's LNG bunkering assets and infrastructure as demand for cleaner marine fuels grows.

The collaboration will mean that Sumitomo will provide LNG bunkering and related services to Petronas' shipping customers that call at the ports located within Tokyo bay, while Petronas will offer the same services to Sumitomo's customers that call at the ports of Johor and Malacca.

The rationale behind the agreement is the desire to expand the firms' LNG bunkering reach beyond their respective markets without investing in additional bunkering assets or infrastructure. Malaysia's southern ports and Tokyo bay are strategically important marine hubs for Sumitomo and Petronas as they look to build a comprehensive LNG bunkering network in Asia. The firms aim to supply cost-competitive LNG bunkering services in these targeted regions, with the market for LNG bunker supplies in Asia still in the early phase of development.

Sumitomo sees LNG bunker demand, among Japanese shipowners in particular, growing in the coming years as shipowners strive to comply with the International Maritime Organisation's goal for carbon emissions in the marine sector to reduce by 40pc by 2030 and by at least 50pc by 2050 against 2008 levels. It expects car carriers and bulk carriers that ply inter-regional routes to form the core of its LNG bunkering customer base and use services from a widened LNG bunkering network.

Japan's commitment to reach net-zero carbon emissions by 2050, as well as its transport ministry's revised fuel efficiency rating system for coastal vessels, could see more shipowners switching to LNG as a marine fuel as part of efforts to reduce carbon dioxide emissions. Japanese shipping firm NYK Line has said it aims to gradually replace its massive fleet of car carriers with more environmentally friendly vessels, with plans to use alternative fuels such as LNG in all its newbuilds.

Sumitomo is targeting to begin ship-to-ship LNG bunkering operations in Tokyo bay from around mid-2021, which is when it expects its Ecobunker Tokyo Bay LNG bunker vessel to be fully commissioned. The Ecobunker Tokyo Bay has a storage of 2,500m³ and 1,500m³ for LNG and low-sulphur fuel oil respectively.Sumitomo will be responsible for sourcing LNG and marketing it to shipowners under the Ecobunker Shipping venture that it formed in 2018 with maritime logistics firm Uyeno Transtech, Yokohama-Kawasaki International port and the Development Bank of Japan.

Petronas completed its first domestic LNG bunkering operation at Pasir Gudang port in November last year, after taking delivery a month earlier of the 7,500m³ Avenir Advantage LNG bunkering vessel.

The agreement with Sumitomo is the second agreement relating to LNG bunkering that Petronas has signed this week. It announced an initial agreement with Japan's Jera on 9 February to work on the development of a green ammonia and hydrogen supply chain, which also covered collaboration on setting up a global LNG bunkering supply network. These agreements tie in with Petronas target to achieve operational net-zero emissions by 2050, with it seeking to employ more low-carbon and renewables-based solutions and advance emissions-reduction technology.

Malaysia is a major LNG exporter and Petronas, its sole exporter, has access to LNG supplies from its 30mn t/yr Bintulu LNG andits 1.2mn t/yr Petronas Floating LNG 1 in Malaysia, as well through its 27.5pc stake and equity offtake arrangements with the 7.8mn t/yr Gladstone LNG in Australia. Japan is the world's largest LNG importer, with imports totalling 74.3mn t in 2020.

By Camille Klass