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WHAT ARE THE CHALLENGES AND OPPORTUNITIES OF LNG AS AN ENERG AND A FUEL?

LNG has huge advantages, especially as a bunker fuel in the light of ever-tightening emission regulations. Conventional oil-based fuels will remain the main fuel option for most vessels in the near future. However, the commercial opportunities of LNG are interesting for many projects. While different technologies can be used to comply with air emission limits, LNG technology is the only option that can meet existing and upcoming requirements for the main types of emissions (SOx, NOx, PM, CO2). LNG can compete price wise with distillate fuels and, unlike other solutions, in many cases does not require the installation of additional process technology.
Meantime, there are also the critical triggers for the LNG as a bunker fuel:
Availability of LNG to the end consumer. Having an import terminal does not mean that LNG bunker barges can be filled.

    

Established legislation and regulatory framework. Land-side regulation and shipping regulation have to interface well. Gaps in the regulation need to be closed and over regulation needs to be reduced.

Favourable investment climate and taxation. Infrastructure development has a cost and long payback times. Investors want to be sure that their investment is not lost.

Necessary competence, knowledge and skills. Decision makers in governments, authorities and companies need to understand the subject of their decision-making and the consequences of the decisions they make. In addition, workers (or personnel) need to be trained for safe operation.

Public acceptance. LNG is not so well known across the world. The general public must be informed about LNG and its benefits, as well as the associated risks and how they are dealt with.

Reliable and safe logistical concepts. To serve as a fuel on regular shipping or transport connections, LNG must be delivered where it is needed and when it is needed in the volumes required.

Anyway, a key driver for uptake of marine LNG is the introduction of the 0.50% global sulphur cap in 2020. The advantages of LNG include its availability and relative price competitiveness. Depending on the circumstances, LNG can be the most cost-efficient option.

 

WHAT ROLE WILL LNG PLAY IN THE GLOBAL ENERGY MIX AND AS A FUEL OVER THE NEXT 5 YEARS?

The increased transition to natural gas in heating, electricity generation as well as in maritime industry around the world will continue to drive liquefied natural gas (LNG) demand growth for years to come. Despite the growing importance of environmentalism and the public scrutiny concerning the fossil fuel industry, natural gas has maintained its importance in the global energy mix. Rising power demand and installation of renewables such as wind and solar have strengthened the need for on-demand energy production, for which gas is the only alternative currently.

I also expect that global demand for LNG as a bunker fuel is set to grow significantly and a key driver, of course, will be the sulphur emission regulations coming into force on 1 January 2020. The expectations for the global LNG bunker market are based on the trends already discernible in northern Europe. As an example, the LNG-fuelled fleet in Norway and the North Sea/Baltic Sea region has grown strongly, from three at the beginning of 2006 to 35 in 2012, and further to 112 by Aug 2019. The number of vessels in the order book could reach 156 by 2022. Meanwhile, the global LNG-fuelled fleet (contact plus in operation) is set to double in size (from 167 to 334) by 2026 (source: DNV GL)

Besides, the ‘exponential’ growth in installed LNG tank capacity points to a ‘potential boom’ in LNG for larger vessels over th coming years. Order intake for LNG-fuelled vessels has remained steady for several years now at around 40 ships per year. However, in 2019 it has already reached 37 new orders in the first six months, which could be a sign that the pace for LNG fuel investments is picking up. The 2020 “sulphur cap” seems to have accelerated LNG adoption, especially for larger ships, which could be good news for the industry, increasing fuel availability and improving asset utilisation.

All-in-all, demand for LNG bunker fuel could rise up to 30 million tonnes per annum by 2025-30. Heavy fuel oil (HFO) would probably continue to be the dominant bunker fuel in 2030, but LNG use would grow to 11 percent.

  

 

HOW WILL LNG IMPACT REGULATION, COMPLIANCE AND THE ENVIRONMENTAL ELEMENTS OF MARITIME?

Since in the gas mode LNG-fuelled ship emits almost no SOx and PM (particulate matter) and 85-90% less NOx emissions compared to a ship that uses Heavy Fuel Oil or distillate fuels, environmental regulation is expected to lead to a higher demand for LNG-fuelled ships and LNG bunkering fuel in the future.
At the moment, government policies supporting the adoption of LNG are in place in many countries and are being developed in others. The EU parliament set out the Clean Power for Transport Package, which requires each member state to develop a national policy framework and develop LNG bunkering facilities at inland ports and maritime ports and LNG fueling stations for heavy-duty vehicles by 2025/2030 (LNG bunkering facilities are required to be built in 139 ports by the end of 2030). Moreover, LNG fueling and bunkering codes and standards on a national and international basis are being worked on to improve standardization across borders and provide an effective and safe framework for operations.
The reduction of Greenhouse Gases and CO2 emissions from shipping activities also lies within IMO’s priorities. The IMO has approved a measure mandating ships to record and report their fuel consumption as of 2018 to quantify CO2 emissions. This can be interpreted as a first step toward potential future emissions restrictions, which again would benefit LNG over oil-based fuels.
And, finally, a group of ports including Rotterdam, Antwerp, Hamburg, Le Havre and Bremerhaven have recently called on the IMO to declare the North Sea and the Baltic Sea as Nitrogen Emission Control Areas (NECA) by 2021. Looks like a good chance for LNG as a bunker fuel too.

  

 

WHAT TECHNOLOGICAL INNOVATIONS ARE EMERGING AROUND LNG FROM DESIGNERS, SHIPBUILDERS AND HYBRIDISATION?

The present LNG project boom is set to benefit engineering, procurement and construction (EPC) contractors as it is likely to lead to total capital expenditure—including LNG plant and upstream infrastructure—exceeding US$200 billion between 2019 and 2025. However, one major concern among analysts about the new wave of LNG projects is the fear that the industry could repeat the cost overruns and delays from the first wave of the LNG plants.

Meantime, for most gas users including bunker suppliers and shipowners, adjustment for the typical combustion characterising quantities such as the Wobbe Index, the calorific value and the Methane Number is needed to ensure a clean, safe, energy efficient and reproducible performance. It is therefore important in all discussions about gas quality to have certainty about what is meant by quality. In addition, in all information about quantities such as the Wobbe Index and the calorific value, the reference conditions for pressure and temperature have to be given.

One of the main key points: the methane number (MN) of a gas is a gas quality indicator typical for reciprocating gas engines. The MN gives the knock resistance of a gas, comparable with the octane number for petrol. Most engines have the best fuel efficiency for a MN higher than 80. Engines can also be tuned to run on a lower MN, but that has negative consequences for the fuel efficiency and for the response speed to required changes in power output.

Flow measurement: a solid accurate measurement is vital for LNG bunkering. The end goal is to have an accurate mass delivery, and this conversion of volume to mass is where lots of errors occur. We encounter more and more companies prioritising energy content. One of the main things we are looking at is additional insight – a gas analyser provides that insight, far more useful than simply monitoring mass. This gives visibility on energy content throughout the bunkering process.

One more innovation’s point I would like to stress out: when switching to LNG, current estimates state that around 5,700kg of CO2 emissions per day can be saved per vessel, or around 22 per cent. However, this astonishing saving can only be capitalised upon when vessels are at least 75 per cent capacity; with lower loads, the gap is much smaller – almost negligible at very low loads. There are few companies (i.e. Seaspan) now which have developed a feature that enables engines to cut off three cylinders, from nine down to six, when working on a small load. This allows the vessel to benefit from the environmental advantages of alternative fuels such as LNG without needing to be at over 75 per cent load.

  

 

WHAT NEEDS TO BE DONE TO BRING DOWN THE COST AND INCREASE THE ACCESSIBILITY OF LNG?

The cost of bunkers is one of the largest operational expenses. Today, in principle, all traditionally-fuelled vessels use the same fuels delivered through the same competitive and transparent supply market. This implies that the risk related to fuel cost is limited since it is unlikely that any competitor will be able to reduce the cost of fuel significantly (it happens sometimes but these are more exemptions to the rules than normal bunker activity). The introduction of LNG as a bunker fuel changes this situation dramatically since the pricing mechanism and supply cost are still unclear and the market for LNG as marine fuel is a long way from being as competitive and transparent as the present fuel market. Before a ship-owner is prepared to switch from the present fuels to an alternative fuel such as LNG, he must be convinced that he will be able to get the fuel where he needs at a price level that gives him an equal or lower overall cost than his competitors.

For most of the various consumer types, the key question is not what the exact price of LNG will be in the future. Instead it is the comparative price to the main alternative, that is the most important aspect. Possibly, LNG price or even price benchmark will become available once LNG is available in more ports. With the number of LNG ships increasing, there will be more experience with LNG, reducing the associated uncertainties.

It also becomes clear that a chicken and egg causality dilemma has to be solved in order to create a functioning market for LNG bunker fuel in ports: only when LNG bunkering infrastructure is available in ports, will ship owners/operators be willing to order LNG-fuelled ships, and only when there is sufficient demand for LNG bunkering fuel, will LNG bunkering infrastructure become available in ports.

I have to establish a fact that many ship owners and operators are still reluctant to risk significant investments in LNG and have adopted a wait-and see approach to see how technology and prices evolve. In this regard, various recent developments in the industry could serve as a trigger. But at the same time we can state that: supply exists, price is low, technology is proven, infrastructure is building out, and regulations and standards have been ironed out.

 

 

 

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