While the potential for the use of LNG as a marine fuel is increasingly being recognised, progress to date has been slow. Those pioneering ship owners who invested in LNG fuel systems for their vessels, expecting that their example would lead to a surge in newbuilding orders for similar LNG-powered vessels and simultaneous massive investments in LNG bunkering infrastructure, have been largely disappointed.
The underlying belief is that the use of LNG as a marine fuel will proliferate eventually, but as yet a critical mass has not been reached and the logjam remains in place. The majority of the 35 LNG-fuelled ships in service are Norwegian-flag vessels sailing in Norwegian waters. Their appearance has been supported by funding available under the country’s nitrogen oxides (NOx) emissions tax regime and the availability of plentiful supplies of natural gas from the North Sea.
But Norway has shown the way and stoked up interest in the LNG fuel option. The entry into force on 1 January 2015 of the stricter sulphur oxide (SOx) emissions requirements in the emission control areas (ECAs) established under IMO’s MARPOL Annex VI regime is another key factor focusing the shipping community’s attention on the options that will ensure compliance. For ships sailing in ECAs the maximum allowable sulphur content in marine fuels will be reduced from 1.0 to 0.1% in 2015.
A new European Directive mandates that EU member states not only comply with the 2015 ECA requirements but also introduce a global sulphur cap limit of 0.5% from 2020. The latter requirement is potentially more stringent than that called for in the IMO Annex VI regime. Annex VI states that the 0.5% global sulphur cap will be introduced for the worldwide shipping community in either 2020 or 2025, depending on the outcome of an assessment study to be carried out later in the decade.
While acutely aware of the extra capital costs entailed in providing their vessels with an LNG fuel system, a growing number of ship owners believe that the LNG option represents the most complete and viable short-to-medium term solution to the problem of Annex VI compliance. The use of LNG enables full compliance with all the tabled and anticipated ship emission controls. The LNG alternative is not a universal panacea; it will suit only particular types of ships and particular types of ship operations. But the potential marketplace is large.
Another 40 LNG-fuelled ships are on order and this order-book is not limited to more vessels for Norway. It encompasses a range of large and small ships, some of which will sail on international routes and others that will be employed by US, Canadian, Chinese and Uruguayan owners.
The swelling order-book indicates that the momentum is building and breakthroughs are poised to happen. The presence of large quantities of competitively priced gas in the US and Canada will ensure that North America is amongst the market leaders in LNG-powered vessels within the next five years.
In China the government has called for the “gasification” of the Yangtze River and several other major waterways in an effort to reduce the high levels of pollution that persist over many of the country’s main population centres. China already plays host to one of the world’s largest concentrations of LNG-powered vehicles and the first steps are now being taken to provide the fuelling station infrastructure that will enable a proliferation of gas-fuelled inland waterway traffic.
Elsewhere, the number of countries that have yet to initiate a study into the potential for the use of LNG as a marine fuel is dwindling. Classification societies have played a key role in assisting governments, ports, gas companies and ship owners with their appraisals of this potential, in the process amassing a considerable body of knowledge that will stand the LNG bunkering sector in good stead as it becomes established.
The European Union, as a promoter of one of the most robust set of environmental protection policies worldwide, has come to the debate over the use of LNG as marine fuel relatively late. However, awareness is growing in Brussels of the need for some form of community-wide impetus if a region-wide LNG fuel breakthrough is to be made. Notice has been taken of the positive effects of the incentives that underlie Norway’s NOx tax regime and the EU has been stepping up its game in recent months.
As regards overland transport operations, Europe’s clean air policy initiatives to date have primarily addressed fuel specifications and vehicle performance capabilities. No consideration has been given to fuel distribution networks, primarily because there is already an extensive oil distribution infrastructure in place and the use of natural gas as transport fuel has only recently come onto the radar.
Efforts to provide incentives for roadside gas-fuelling networks have been unco-ordinated and insufficient. Those for marine bunkering facilities have been non-existent. In the absence of the necessary fuelling infrastructure ship and vehicle owners have been reluctant to commit to LNG.
The initial investments from Brussels have come only quite recently, in the form of funding for feasibility studies. It is obviously critical that Europe’s initial LNG bunkering infrastructure developments are based on a sound assessment of the challenges and opportunities and concentrated optimally as part of a longer term master-plan. The feasibility studies also need to take note of the large body of LNG knowledge accumulated to date; the existing rules, standards and guidelines; and the LNG bunkering arrangements being developed by the private sector.
In Autumn 2012 the European Commission selected three natural gas study projects that will collectively receive USD 5.4 million EU co-financing through the Trans-European Transport Network (TEN-T) funding programme to continue improving transport infrastructure across Europe. One of the projects entails the completion of technical and design studies for a prospective LNG bunkering station at the port of Dunkirk, where a large LNG import terminal is currently under construction.
More recently, a pioneering LNG bunkering vessel supplied to the port of Stockholm has been chosen to receive another tranche of TEN-T funding. Also, in a related development, the EU has agreed to co-finance a joint study into potential LNG bunkering arrangements for ships in Sweden and Finland. The study group will make the results of their investigations available to interested third parties.
These initiatives were followed, in January 2013, by the Clean Power for Transport package drawn up by the European Commission. The programme consists of a Communication on a European alternative fuels strategy, a Directive focusing on infrastructure and standards and an accompanying document laying down an action plan for the use of LNG as ship fuel.
The Commission is proposing that LNG fuelling stations be installed in all 139 major EU maritime and inland ports on the TEN-T Core Network by 2020 and 2025, respectively. Such fuelling stations could be of the fixed or mobile type. The Clean Power for Transport package also calls for the installation of LNG fuelling stations for heavy goods vehicles, to be installed at least every 400 km along the TEN-T Core Network. At present there are 38 LNG filling stations for road vehicles in the EU.
In recent weeks the European Maritime Safety Agency (EMSA) has released the results of its own study into the regulatory oversight of LNG bunkering operations. EMSA acknowledges the availability of established guidelines and the current work at IMO in drafting the new International Code of Safety for Ships using Gases or other Low Flashpoint Fuels (the IGF Code) as a legally binding regulatory instrument.
However, these provisions cover only the design and construction of the ship systems and arrangements for these alternative fuels. The agency identifies the weak link in the regulatory chain as the lack of uniform and universally agreed operational guidelines for handling LNG bunkers.
Some relevant guidance is available, such as that from the Society of Gas Tanker and Terminal Operators (SIGTTO) on LNG ship-to-ship transfers. However, these provisions need to be amalgamated in a new comprehensive LNG bunkering guidance document for use by operational staff throughout Europe and the rest of the world.
Author: Mike Corkhill who is a technical journalist and consultant specialising in oil, gas and chemical transport, including tanker shipping and chemical logistics. A qualified Naval Architect, he has written books on LNG, LPG, chemical and product tankers and is currently the Editor of LNG World Shipping.