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LNG bunkering cooperation enhances partnership between Singapore and Japan

JAPAN and Singapore are currently jointly working on liquefied natural gas (LNG) bunkering - the process of transferring LNG to a ship for use as fuel. I believe that this cooperation not only further enhances the close partnership between Japan and Singapore in the field of international shipping, but also has the potential to greatly strengthen the two countries' positions as major maritime hubs in the future.

In accordance with the agreement reached at the Japan-Singapore Summit Meeting of 2016, the first-ever Bilateral High-level Comprehensive Talks on Land-Sea-Air Transport and Infrastructure Collaboration was launched last year between the two governments. This marks a new epoch in further advancing cooperation by addressing and discussing in a comprehensive manner transport and infrastructure-related issues in all three areas - land, sea and air. An important pillar in the "sea" area is LNG bunkering. Our idea is that Japan and Singapore - being the "hub of North-east Asia" and "hub of South-east Asia" respectively - can cooperate and become what we can call "Asia's Twin Hubs".

LNG bunkering is a relatively new sector, and the possibility of its wider commercial use is gaining attention from the maritime community, against the backdrop that international regulations on vessel emissions have been tightened due to environmental considerations. It is expected that the industry will likely see a shift from traditional heavy oil to LNG for ship fuel in the coming years. Therefore, while LNG bunkering is still at a nascent stage, I believe that now is probably the time for major maritime nations to intensively allocate due resources to this important and promising sector. In this sense, I think that Japan and Singapore are natural partners.

Historically speaking, Singapore has long realised and tactfully cultivated the strategic geographical position of its port, situated at the south-eastern end of the Malacca Straits connecting the Pacific Ocean and Indian Ocean. By developing efficiency and providing top-level service in various aspects, Singapore has established its port to be one of the world's leading harbours and a top-notch bunkering hub.

Some observers might point out that Singapore cannot be too optimistic about the future status of its port, partly because neighbouring countries are also trying to follow suit and planning construction of new large-scale ports and even channels connecting separate seas. It is no wonder that, under these circumstances, Singapore is now proceeding with the project of developing a mega port on the western end of Tuas district by large-scale land reclamation, and all the container port functions of Singapore will be strategically consolidated there in around 10 years. This "Tuas mega port" project, in which a series of Japanese businesses are deeply involved, is attracting more and more world attention. My own observation is that, once completed, it will dramatically boost the status of Singapore further as a major base for international shipping.

REGULATORY TRENDS

Under the International Maritime Organization (IMO) initiative, regulations on sulphur oxide (Sox) and other emissions from vessels will be strengthened globally in 2020. As a response to these regulatory trends, it has been pointed out that there could be a shift from heavy oil to LNG fuel as the latter has less environmental impact. This would have a major impact on the existing vessel fuel supply system - hence the world, including Singapore, is keeping watch. It is observed that there are already many LNG-fuelled vessels in Europe, so it can be said that a shift from heavy oil-fuelled vessels to LNG-fuelled vessels would hit Asia or even globally sooner or later. Ahead of the world, supplying LNG to LNG-fuelled vessels by LNG bunkering ships, also known as the "ship-to-ship" type of bunkering service, has already started operation since last year at European locations such as the Port of Zeebrugge in Belgium.

And herein lies the problem: Currently, the network of bases - in other words, the global network - that supplies LNG fuel to LNG-fuelled vessels is not well-developed. One could say that the connection between LNG-fuelled vessels and LNG bunkering bases is parallel to the connection between cars and gas stations. Therefore, if the bunkering base network is not well developed globally, then there will be little incentive to build LNG-fuelled vessels; and conversely, if the LNG-fuelled vessels are not commonly used, then bunkering services may continue to remain irrelevant. This is a typical example of a chicken and egg situation.

Singapore was fast in noticing this problem and highlighting the importance of establishing a global network of LNG bunkering bases, and then began to take initiative. I applaud Singapore's forward-looking perspective. Specifically, Singapore's Maritime and Port Authority (MPA) has been implementing a series of useful programmes to accumulate knowledge and experience for the elevation of Singapore's capabilities in the field of LNG bunkering. I understand that they consist of wide-ranging technical, commercial and international efforts and measures.

Among them, Singapore's initiative to create an environment for increased international cooperation particularly deserves appreciation. As a global leading bunkering base, Singapore had already been organising large international conferences on bunkering. Based on that, since a couple of years ago, Singapore has been bringing up the subject of LNG bunkering, appealing for recognition of the importance of developing hubs and its global network, and calling for partnerships with other ports that have similar ideas. In October 2016, with the aims of forming an international network of LNG bunkering ports that are keen on the harmonisation of LNG bunkering standards and to promote the shift from heavy oil to LNG, a Memorandum of Understanding (MOU) was signed among like-minded governments and port authorities of Asia, Europe and North America.

Under these circumstances, by my own observation, Japan's response has been equally speedy. In the first place, as the world's largest LNG importer, Japan is very close to practical implementation of LNG bunkering. Thanks to the efforts of relevant authorities and private companies, including and in particular the Ports and Harbors Bureau of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), "truck-to-ship" LNG bunkering has already been implemented at Yokohama Port for a considerable period of time. If the "truck-to-ship" method is considered as the first phase of LNG fuel supply, then it could be said that the "ship-to-ship" method is the next phase. And, now, we are witnessing the start-up of two full-fledged government-private sector collaborations in the next phase. At two locations - Yokohama and Nagoya port areas - new consortiums have been created by leading shipping, port, trading and power companies and, with solid government support, such ship-to-ship bunkering projects are now getting started simultaneously and at full throttle.

The Pacific coast of Japan, where ports such as Yokohama and Nagoya are located, can be said to be a most strategic and geo-economic key location, where the world's three major maritime routes merge. They are, first, the traditional route through the Straits of Malacca and Singapore; second, the Pacific Ocean route, which will become more important through the expansion of the Panama Canal; and, third, the Northern Sea Route through the Arctic Ocean, which will possibly be used more frequently in the future. There is good reason to believe that Japan's ports on the Pacific Coast are likely to become established as one of the world's biggest LNG bunkering hubs.

GLOBAL SCALE

However, a hub on its own will not make sense. As with petrol stations in the case of cars, bases must be located at regular intervals. It is necessary to have an LNG bunkering hub network on a global scale. This, I think, is what makes our Japan-Singapore partnership really meaningful. As already mentioned above, both Japan and Singapore have embarked energetically on this undertaking. The two countries seem to be geographically neither too far from nor too close to each other, and that the distance between them is just nice and proper. As for the Asia portion of the global LNG bunkering hub network, we could say that a Japan-Singapore partnership really makes sense. I think that it is a win-win situation, when the port of Singapore - as the hub for South-east Asia - and the ports of Japan - as the hub for North-east Asia - form a close partnership. We could call this the "Japan-Singapore Twin Hub Concept". In other words, "Asia's Twin Hubs".

Actual cooperation between Japan and Singapore is already in progress. A joint survey is underway, looking into aspects such as LNG bunkering infrastructure requirements and issues to be addressed by port authorities. While Japan and Singapore are proceeding to form such a twin-hub cooperation, for further promotion in forming a global LNG bunkering hub network, it may be worthwhile for both countries to try to find additional partner ports in the so-called "missing areas", where there could be future possible additional bunkering bases. For example, the Middle East, which is located between Europe and Singapore, could be considered. In that sense, there might be room for the Suez Canal region. Also, let us keep in mind the northern coast of Russia, which is along the Northern Sea Route that could be of more commercial use for international shipping sooner or later.

In conclusion, I would like to say that the "Japan-Singapore LNG Bunkering Twin Hub Concept", which will see Japan and Singapore cooperating with each other in this promising new field, is an important pillar of the already excellent and mutually beneficial partnership between the two countries.

  • The writer is Ambassador of Japan to Singapore