The LNG-powered boat market is expected to experience stable growth over the next 1-2 years, with a potential breakthrough in the following 3-5 years. Compared to LNG-powered vehicles, the ship market has a larger scale and greater potential. Industry experts are actively investing and preparing for this opportunity. A senior manager from an investment banking firm specializing in clean energy investments shared this optimism.
According to a report by the China Securities Journal, policy barriers that once limited the development of the LNG-powered boat industry are expected to be lifted this year. The technical standards for LNG-powered boats will be introduced in the second half of the year, and the Ministry of Communications has included LNG-powered vessels in its energy-saving and emission-reduction subsidy program, which could allocate up to 200 million yuan annually.
Market participants believe that as policy support gradually expands, the LNG-powered boat industry will see rapid development. It is estimated that the market size could reach between 30 billion and 60 billion yuan in the near future. If new ships are built, the market potential could reach hundreds of billions of yuan. This growth will significantly expand the LNG industry's market share, benefiting companies involved in shipbuilding, engine manufacturing, refueling stations, and storage and transportation equipment.
**Policy Doors Are Opening**
A survey conducted by the Institute of Water Transport Science revealed that 70% of shipowners would consider switching to LNG engines if government subsidies were available. Only 16% of owners planned to continue using diesel regardless of subsidies. According to Gao Huijun, deputy chief engineer at the Ministry of Transport’s Institute of Water Transport Science, this indicates a strong willingness among shipowners to adopt LNG if supported by policy.
LNG-powered boats use either full or hybrid power systems. As of June 2013, there were 40 LNG-powered ships and nearly 40 LNG-diesel hybrid vessels in operation globally, with another 35 under construction. The Norwegian Classification Society expects the number of LNG-powered ships to rise to 63 in 2014 and potentially reach 1,000 by 2020.
China's LNG-powered boat market started later, mainly through retrofitting existing vessels. According to the Ministry of Communications' Institute of Water Transport Science, there are currently 14 approved LNG-powered vessels in China, mostly using hybrid technology.
Previously, the lack of policy attention and technical standards hindered the growth of the LNG boat industry. However, recent policy developments signal a shift. In 2011, the Ministry of Transport launched a pilot program for inland LNG-diesel hybrid ships. A year later, it encouraged the use of LNG in ports and mobile machinery, initiating research on LNG fueling technologies and terminal layouts.
Standards for LNG-powered boats are now being developed. The Ministry of Communications is working on LNG filling station design specifications, while the National Energy Administration and Maritime Bureau are researching safety protocols. The Ministry of Industry and Information Technology is also conducting research on LNG gas supply systems and risk design for LNG-powered ships.
In terms of financial support, the Ministry of Finance announced in 2012 that energy-efficient ships would receive reduced taxes, and new energy vessels would be exempt. The Ministry of Communications’ energy-saving fund of 1.5 billion yuan now includes LNG-powered vessels, with potential annual subsidies reaching 200 million yuan.
The Ministry of Transport’s “Guiding Opinions on Accelerating the Application of LNG Fuel in the Water Transportation Industry†is expected to be released this year, along with the long-awaited LNG-powered ship technical standards.
**A Ten Billion Market to Open**
Over the past three years, the Chinese government has piloted LNG-powered vessels in several river basins. Gao Huijun noted that about 30,000 domestic river vessels meet the criteria for retrofitting based on age and condition. According to Professor Tang Limin from Dalian Maritime University, the cost of retrofitting varies depending on the vessel’s size, age, and operating range, with minimum costs ranging from 1 to 2 million yuan.
If 70% of the 1.2-1.4 million new inland vessels built from 2017 to 2020 use LNG, the market could grow significantly. Additionally, 300-400 coastal vessels are expected to be powered by LNG by 2020.
Analysts from UBS Securities highlighted that the longer lifespan of ships and higher refueling volume make the LNG market particularly promising. Once policies allow for broader adoption, the market could see substantial growth.
Industry experts believe that the opening of the LNG-powered boat market will greatly benefit the entire LNG industry chain. Companies such as Kunlun Energy, CNOOC, and Xinao Energy are involved in ship ownership, while *ST Ji Chai and Weichai Heavy Machinery focus on engine transformation. CIMC Enric and related companies supply LNG cylinders, and Furui Te and other firms are involved in building refueling stations.
**Natural Gas Price Increases**
While policies are favorable, rising natural gas prices remain a concern. Like LNG cars, LNG-powered boats may become less economical if gas prices increase too much. Nantong An Engineer from CIMC Enric acknowledged this issue, noting that economic viability is key to widespread adoption.
Experts suggest that maintaining a balanced oil-gas price ratio is crucial to ensure sustainable development of the LNG industry. Infrastructure challenges, such as the lack of approved land for refueling stations, also pose obstacles. Some companies have faced delays due to land-use restrictions.
Gao Huijun identified five main challenges: lack of safety standards, limited funding for retrofits, a sluggish shipping market, high reform costs, and incomplete infrastructure. He recommended that China introduce economic incentives similar to those in northern Europe to promote LNG use in the maritime sector.
Author: Wang Jun
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