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A quicker uptake of LNG as a fuel for shipping is thus clearly visible: DNV GL

DNV GL says that uptake of LNG as fuel for shipping has almost become a certainty, though earlier there were doubts because of poor bunkering facilities and slower than expected development of bunkering infrastructure. The situation has not grown more favourable for LNG as fuel for shipping. To support the view, DNV GL details facts of the vessels now using LNG and also the vessels which are LNG ready on order.  Today, there are 117 vessels burning LNG, of which more than two-thirds are operating in Europe. A confirmed order book of 111 vessels will see that figure double. In addition, there are 114 vessels that are classified as LNG-ready. A quicker uptake of LNG as a fuel for shipping is thus clearly visible.

 As for bunkering, bunkering options are expanding on a global scale. Today, there are 60 supply locations worldwide, including Singapore, the Middle East, the Caribbean as well as Europe, according to the latest data in DNV GL’s LNGi business intelligence portal. A further 28 facilities have been decided and at least 36 are under discussion.

By the beginning of 2018, six LNG bunker vessels will be in operation globally, and four more projects are confirmed. Major players including Total, Shell, Gas Natural Fenosa, ENN and Statoil have announced plans for new LNG bunker vessels, which, according to DNV GL’s Senior Consultant for Environmental Advisory, Martin Christian Wold, are likely to materialize in the near future at key locations in northern Europe, the Middle East, the Gulf of Mexico, Singapore, and the Mediterranean.

 Countries like China, Korea and Japan are striving to meet the targets combating local pollution and reducing greenhouse gases (GHGs).

Wold explains: “For suppliers, it’s very much a question of timing. They won’t bring these facilities online until they see sufficient confirmed orders for LNG-fuelled tonnage to justify the investment. Yet, they are also jostling to secure an anchor customer and gain first-mover advantage to deter their rivals from setting up nearby.”

Shell, for example, has just signed a long-term charter agreement for a 4,000m3 bunker barge to supply LNG bunkers along the U.S. east coast. Meeting growing demand for LNG from cruise lines was cited as the major impetus behind the decision.

Another factor that works in favour of LNG is IMO’s decision to introduce its global cap on fuel sulphur content and any softening of the regulation or significant slippage is regarded as unlikely.

 “Evaluating whether LNG as a fuel will provide a competitive edge is difficult enough for ship owners. Having to anticipate various regulatory scenarios on top of that complicated matters further. IMO’s decision brings much-needed clarity to owners considering switching to LNG and other alternative fuels,” says Wold.

 Both SEA\LNG, a multi-sector industry coalition working to facilitate and accelerate the widespread adoption of LNG as a marine fuel, and the Society for Gas as a Marine Fuel (SGMF), a non-governmental organisation dedicated to promoting the safe handling of LNG as a fuel, have watched the developments and they are sure that LNG fuel for ships will become a mainstream option within the next five to seven years.

 SEA\LNG General Manager Steve Esau says that the pivot will hinge on global availability of bunkering infrastructure close to traditional bunkering ports. “Nine of the top ten oil bunkering ports already offer LNG or have firm plans to do so by 2020,” he says. Slicing the statistics another way, there are already large scale terminals nearby 24 of the world’s top 25 ports ranked by trade volume. With a little more investment in the ‘last mile’ to bring LNG from the bulk infrastructure to ships, he believes the foundations are in place for a wider switch to LNG from 2020.

SGMF’s main objective is to provide guidance for safe and responsible use of LNG as fuel, and General Manager Mark Bell has been watching the development from the start: “Right now just 0.2% of the addressable global fleet is running on LNG. But with regulatory clarity and established standards for safe handling of gas as a marine fuel, I believe we will see LNG fuel for ships become a mainstream option within the next five to seven years.”

Major operators like Maersk and CMA CGM have made it clear that they prefer to use LNG as their ‘fuel’. Maersk said that it views ‘ alternative fuels’ as a better long-term solution to meet tougher environmental regulation that exhaust gas scrubbers.

 Just recently, CMA CGM made an announcement timed to coincide with the COP23 talks in Bonn, Germany, that it will equip nine 22,000 TEU vessels with engines burning LNG, thereby improving their EEDI by some 20% over comparable HFO fuelled tonnage.

Endorsements for LNG by such major operators could serve as the catalyst that triggers a stampede. DNV GL’s Wold comments: “While speculation about orders for large LNG fuelled container ships on the Far East-Europe route had been mounting, few had expected a breakthrough contract to arrive this year. It marks a significant turning point for LNG as a fuel and the shipping business more generally.”

 LNG fuel as a solution to curb harmful emissions is indisputable. It emits zero sulphur oxides (SOx) and virtually zero particulate matter (PM). Compared to HFO, it emits up to 90% less nitrogen oxides (NOx).

The environmental agenda is today shifting to focus more on greenhouse gases. Employing current best practices and appropriate technologies to minimize methane leakage, gas offers the potential for up to a 25% reduction. “Gas is not a silver-bullet, but it is a step in the right direction when it comes to reducing carbon emissions,” says SGMF’s Bell.

 SEA\LNG’s Esau believes that there is considerable scope for refinements and improvements to be made and engineering manufacturers with engineering ingenuity could achieve major advancements for engines operating on LNG.

 While conventional LNG alone cannot cut CO2 to the extent required by the COP21 agreement, it remains the best commercially available and proven technology to reduce CO2 emissions for most ship types and trades, states Wold: “With no definitive zero-emissions solutions yet on the horizon, it makes sense to do what you can today to improve air quality and lessen the carbon entering the atmosphere.”

 Industry associations SGMF and SEA\LNG are engaging with shipping companies, LNG suppliers, industry regulators and other stakeholders to promote a safe and accelerated uptake for LNG as a marine fuel. They aim to instil investor confidence for its adoption through a combination of education and outreach.

“Our work must be based on objective data, as it may feed into investment decisions running into the tens of millions dollars,” remarks SEA\LNG’s Steve Esau. To this end, both are capitalizing on DNV GL’s LNGi business intelligence portal, which provides comprehensive insights on worldwide bunkering availability and keeps a close eye on fleet development.

It is now supported by LNG Fuel Finder, an online tool that lets ship owners and charterers register their interest in using LNG as a ship fuel, and alerting LNG suppliers to the fact. Esau believes this digital marketplace will boost transparency and raise confidence in the availability of LNG as a bunker fuel. “It could provide an effective channel for buyers to meet sellers.” Mark Bell of SGMF echoes this sentiment: “As a consolidated source of credible data, LNG Fuel Finder could remove the suppositions from the equation.”


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