Future of Energy Shipping: A Shifting Landscape

The Evolving World of Energy Product Transport by Sea

The way we transport energy products across the oceans is in a constant state of flux, heavily influenced by global economic activity and the overarching drive towards decarbonisation. Understanding these shifts is crucial for anyone involved in the maritime industry, from shipbuilders to logistics managers. DNV GL's Energy Transition Outlook (ETO) model provides a fascinating glimpse into the future, forecasting significant changes in the mix of energy products transported by sea, even as the total volume of some traditional energy shipments declines. This article delves into these projections, examining the factors driving these changes and their implications for the shipping sector.

Key Drivers of Change in Maritime Transport

At its core, maritime transport is a demand-driven industry. The volumes of goods transported by sea are primarily dictated by economic activity, population growth, and improvements in energy efficiency. DNV GL's modelling approach meticulously analyses key energy-consuming sectors such as buildings, manufacturing, and transport itself. The future energy supply, and consequently the demand for its maritime transport, will be significantly shaped by the global push for decarbonisation. This includes the implementation of regional energy policies that favour certain energy sources over others, advancements in technology that reduce the cost of all energy sources, and the potential for resource availability constraints to drive costs upwards. The interplay of these factors will ultimately determine the future energy mix and its impact on shipping.

How Crude Oil Production Affects Exports and Imports

The trade of crude oil is intrinsically linked to the balance between regional production capacity and regional demand. DNV GL models production capacity as a cost-driven global competition between different regions. The surplus of crude oil available for export or the deficit requiring imports is determined by the amount of crude oil a region produces versus the amount it needs for its refineries. The destinations for these crude oil imports are tracked using Automatic Identification System (AIS) data from crude oil tankers. Similarly, the trade in oil products is driven by the demand for these refined products and the output from regional refineries. For liquefied natural gas (LNG) and liquid petroleum gas (LPG), the model first accounts for the portion of gas transported via pipelines before determining the seaborne trade volumes. The analysis also considers coal usage, which is influenced by factors like building construction, manufacturing output, and power generation. A region's hard-coal supply is dependent on its mining capacity, which can expand with demand but is ultimately limited by available reserves. The study assumes a relatively stable pattern of trade partners for coal, with regions experiencing shortfalls importing from those with surpluses.

The Impact of the Energy Transition on Shipping Volumes

DNV GL forecasts that global final energy demand will peak in 2033, with a subsequent slow decline. This projection directly impacts the maritime transport of thermal fuels, with significant falls expected in the shipments of oil and coal. The growth in the transport of new fuels, such as LNG and potentially hydrogen or ammonia in the future, is not expected to fully offset the decline in traditional fuel shipments. Figure A (not provided here, but assumed to illustrate the scenario) would likely show a divergence in these trends. While total shipping of energy products might see a reduction, the composition of this trade will undergo a substantial transformation. The rise of new energy sources and the decline of fossil fuels will necessitate adaptations in fleet capabilities and trading routes.

Forecasting Maritime Trade: A Detailed Approach

DNV GL's modelling approach is comprehensive, looking beyond just energy commodities. The ETO model also incorporates non-energy trades, such as the regional manufacturing of finished goods like electronics, machinery, and textiles, as well as the trade in raw materials like iron ore, metals, and chemicals. The demand for these manufactured goods is a key driver for containerised shipping. Trade in iron ore, for instance, is closely tied to the production of base materials. Global minor bulk trade, which includes commodities like metals, paper, steel, and wood, is correlated with the worldwide production of these base materials. The model also anticipates that grain production dynamics will follow trends in population growth and per-capita GDP in importing regions. Emerging technologies and digitalisation are also expected to influence future trade volumes and distances. For example, robotisation could reduce labour costs, making the relocation of manufacturing less attractive and potentially leading to more regionalised trade with shorter average voyage distances.

Trade Projections Towards 2050

DNV GL forecasts a notable increase in seaborne trade, measured in tonnes, between 2016 and 2030, with a more modest rise projected between 2030 and 2050. However, this overall growth masks significant shifts within specific trade segments. Trade in crude oil and oil products is expected to peak around 2030 and then begin a downward trend. This means that while total seaborne trade might increase in the short to medium term, the demand for tankers carrying crude oil and refined products will eventually decline. The overall picture suggests that traded tonnes and related tonne-mile shipping demand will plateau within the next two to three decades. This plateau is a result of the anticipated decrease in oil and coal trade being balanced by the growth in other cargo segments, albeit at a decelerating pace in line with slowing global population and GDP growth.

Bulk Cargo: A Growing Segment

The ETO study categorises bulk cargo into energy commodities and other cargo. Non-coal bulk, which includes commodities like grain, iron ore, and minor bulk, is projected to be a dominant and growing segment. This category is expected to grow at a robust rate of 2.8% per year until 2030, and then continue to grow at a slower pace of 0.7% per year thereafter. The growth in iron ore and minor bulk trade is expected to be strong in the initial decades but will slow down after 2030, primarily due to the decelerating growth in base material output. Grain trade, on the other hand, is expected to continue its upward trajectory, although the rate of growth will diminish as the century progresses.

The Future of Oil and Gas Shipping

Oil demand is anticipated to peak in the 2020s, largely driven by the increasing adoption of electric vehicles, which are reducing oil consumption in the transport sector. Manufacturing, the second-largest consumer of oil, will see its demand for oil as feedstock peak in the late 2020s. Consequently, seaborne crude oil trade is projected to plateau at a level approximately 21% higher than current volumes within the next decade, before trending downwards after 2027, reaching around 6.5 trillion tonne-miles by 2050. Trade in oil products is expected to first level off and then subsequently decline. Natural gas, however, presents a different picture. While overall gas consumption is expected to peak in 2033, its use in manufacturing is projected to increase throughout the forecast period until 2050. China is set to become the leading gas importer, a position it is expected to maintain. Europe will continue to be a significant gas importer, with growing imports anticipated in the Indian Subcontinent and Sub-Saharan Africa. The trade in LNG and LPG is predicted to continue its upward trend. DNV GL further forecasts that the share of natural gas transported via pipelines will decrease to less than 50% by mid-century, underscoring the growing importance of LNG shipping.

Container Trade: Mimicking Manufacturing Growth

The trend towards containerising a wider range of commodities is expected to persist. Container trade tonnage is anticipated to closely mirror the growth in global manufacturing output. Projections indicate a growth rate of 3.4% per year until 2030, followed by a more moderate increase of 1.4% per year thereafter. The regions experiencing the most significant growth in manufacturing output will also see the highest growth in container trade. China is expected to dominate this growth for the next decade, after which the Indian Subcontinent is projected to become the main growth region. The increasing economic influence of Asian and African regions will lead to them playing a more substantial role in global container trade as economic growth shifts south and east.

Summary of Trade Projections

In summary, DNV GL's ETO model suggests a dynamic future for maritime transport of energy products. While the overall volume of some traditional fuels like oil and coal is set to decline, the trade in other commodities, particularly non-coal bulk and containerised goods, is expected to grow significantly. The transition to new energy sources will also reshape the energy shipping landscape. The key takeaway is that while total seaborne trade may plateau, the composition of this trade will undergo a profound transformation. This presents both challenges and opportunities for the maritime industry, requiring strategic planning and adaptation to navigate the evolving energy and trade landscape.

Frequently Asked Questions

What is the main driver of maritime transport?

The main driver of maritime transport is economic activity.

Which energy products are expected to see a decline in seaborne transport?

Seaborne transport of oil and coal is expected to decline.

What is DNV GL's Energy Transition Outlook (ETO) model?

The ETO model forecasts future volumes of goods transported by sea, focusing on energy products and other cargo, considering the impacts of the energy transition.

When is global final energy demand expected to peak?

Global final energy demand is expected to peak in 2033.

What is the projected trend for LNG and LPG trade?

Trade in LNG and LPG is predicted to continue increasing.

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