The LNG shift in global shipping is on – and here’s why Synertec is in prime position to benefit
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Synertec’s Custody Transfer System is a market-ready technology which provides an absolutely crucial component in modern LNG ship construction.
In heavy industry – from mining to shipping – a global shift is underway as multinational companies with multinational budgets look to cut their carbon footprints.
As part of that transition, companies are almost wholesale going for LNG as their fuel source of choice.
For evidence of what’s happening on the ground, local investors need look no further than mining giant BHP, which earlier this month took delivery of its first LNG-powered bulk carrier ship, with a further 4 to be chartered. These ships will transport iron ore to China, via Singapore for re-fuelling.
As LNG-powered shipping becomes more prevalent, which it is already doing so in the cruise industry, so will the technology that allows for efficient fuel transfers and monitoring.
And that’s where ASX-listed technology and engineering firm Synertec (ASX:SOP) is in prime position to benefit.
Last December, Synertec advised the market its proprietary LNG marine Custody Transfer System (CTS) technology had received regulatory approval from Det Norske Veritas (DNV).
DNV is the world’s largest classification society providing certification for more than 13,000 vessels and offshore units.
Speaking with Stockhead, Synertec Executive Director David Harris highlighted how that puts the company way out ahead when it comes to benefitting from the favourable sea change in LNG demand.
“What’s happening now is more ships are becoming powered by LNG, mainly as a result of legislative environmental changes across the world which favour the more environmentally-friendly LNG as a fuel source. These LNG-fuelled vessels are expected to reduce GHG emissions intensity by more than 30 per cent on a per voyage basis compared to a conventional fuelled voyage. This is in turn driving a growing market for LNG bunkers and other LNG floating storage vessels.
“In addition to these changes, the advent of LNG trading between ships and ports, particularly in the Asia Pacific region, sees ships get a load of LNG from Australia for example, and then go on to three or four different sites within the region to offload portions of that,” Harris explained.
Previously, ships would pick up a load then travel from point A to point B and drop it all off at once.
“So the need for accurate and fast metering for what’s going on and off a ship which is fuelled by, or carrying a load of, LNG, has become critical,” he said.
“So between these developments, what that recent BHP announcement highlighted is that this is a major market opportunity for Synertec’s Custody Transfer System that we’ve developed, and it has application right here in the Asia Pacific region.”
“So it’s a good example of the tailwinds that have been building for the last couple of years in this space.”
In that context, Synertec isn’t just in the development phase – it has product-market fit, regulatory-approved technology that’s ready to be deployed.
On average, revenue from the installation of its CTS technology is estimated at around $1m per ship (or more depending on specification), with additional ongoing maintenance fees over the life of the vessel.
And already, the company’s partnership with GasLog – a global LNG carrier fleet owner and operator – is giving it an advantage in converting its technology into long-term revenues.
As an example, Harris flagged the Outer Harbour LNG project in Adelaide, South Australia, which recently received Government approvals.
As part of that project, GasLog has been awarded the preferred supplier as charter party for the supply of a floating storage and regasification unit (FSRU).
“Our CTS technology is well positioned for this opportunity with Gaslog, given GasLog is already our CTS technology partner and is the company providing the vessel,” Harris said.
In fact, Synertec is already participating in front-end engineering design work for the Outer Harbour project.
Other opportunities in Synertec’s global CTS pipeline are also being progressed.
In 2018, the company developed key distribution pathways for its LNG CTS with Swedish marine infrastructure company Trelleborg Marine.
“Trelleborg liked our CTS technology and the way we were honing it for marine application. Typically, Trelleborg may package it up with some of their marine systems when they’re submitting a tender to a major ship builder for certain componentry,” Harris said.
So along with the Outer Harbour project, the company is also targeting opportunities across global ship construction.
It adds up to a major market opportunity that has been years in the making for Synertec, with market-ready technology that forms a crucial component of modern LNG ship construction.
“This is an exciting period right now, and we’re looking forward to updating the market on further projects through the course of this year,” Harris said.
This article was developed in collaboration with Synertec, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.