More ships to rely on LNG as pollution rules tighten
Liquefied natural gas is already poised to power the world’s biggest economies as Asian countries increase their reliance on the cleaner-burning fuel, but there is yet another source that could drum up demand for LNG: the shipping industry.
A global shift to cleaner shipping fuels sparked by a change in international marine laws could create a big opportunity for the liquefied natural gas industry, said shipping industry executives speaking at S&P Global Platts conference in Houston Wednesday.
Liquefied natural gas – now an uncommon alternative to heavy, dirty fuel used by large vessels– is beginning to gain more traction as a fuel that meets increasingly strict emissions standards set by the International Maritime Organization.
“Environmental sells today. I don’t think there are any house wives around town … that don’t take some of these issues seriously,” said Peter I. Keller, executive vice president of Jacksonville-based shipping company Tote Inc. “The days of people saying, ‘Green doesn’t matter,’ those days are long gone and as a result LNG and fuels like LNG have a major place going forward.”
In less than a year the IMO will aim to dramatically cut pollution from the shipping industry by requiring vessels to burn fuel with a 0.5 percent sulfur content. Conventional analysis suggest that ships will either install expensive scrubbers to clean the sulfur content out of their traditional heavy bunker fuel, or else they will use ultra-low sulfur fuel.
But the availability of LNG is growing, said Keller. Now 9 out of 10 top refueling ports can provide ships with LNG. About 144 deep-sea large vessels are powered by LNG, but there is another 139 deep vessels on order that could come along in the coming months, said Keller who also serves as chairman of SEA/LNG, a cross industry group the aims to help vessels transition to LNG fuel.
With about 50,000 to 60,0000 deep sea vessels in the world, SEA/LNG anticipates that eventually 10 to 15 percent of those vessels will use liquefied natural gas in place of traditional bunker fuels, Keller said.
Other estimates are more modest. S&P Global Platts forecasts about 7 percent of the world’s fleet will be using LNG as a bunker fuel by 2030, up from less than 1 percent today, said Madeline Jowdy, senior director of Global Gas and LNG Analytics and S&P Global Platts.
Jowdy pointed out that it the gas is already used to power smaller vessels such as ferries, barges and tugboats. It’s the large deep sea voyage vessels where the fuel is less common.
The IMO rule change “isn’t a game changer” for the LNG industry, Jowdy said, but it certainly doesn’t hurt demand and could propel the adoption of LNG as a bunker fuel further,
Building a vessel with LNG capability comes with a hefty price tag though – up to $15 million to $16 million more than building a traditional fuel powered vessel. That compares to $8.5 million to install a scrubber. But Keller argues the long-term benefits could pay off as the International Maritime Organization further restricts nitrogen oxide and carbon dioxide emissions in the next decade.
Eventually emissions standards could include particulate matter too, he suggested. Liquefied natural gas offers a 20 percent reduction in carbon and a 99 percent reduction in particulate matter compared to existing bunker fuels, Keller noted.
Plus some scrubbers – called “open-loop scrubbers” – clean out sulfur from ships’ fuel only to d
He pointed to oil majors like Shell and Total that are “investing heavily in LNG as a marine fuel” as a sign that “LNG is here is to stay.”