11 July 2017

Compliance Not Cost the Driver Toward Cleaner Ocean Freight and Passenger Shipping   

LNG Study Shows Potential for Gas as a Practical and Available Marine Fuel

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Shipping News Feature SPAIN – PORTUGAL – EUROPE – WORLDWIDE – The change in anti-pollution regulations which come into force under the revised MARPOL Annex VI, means the global sulphur cap will be reduced from the current 3.50% level to 0.50%, effective from 1 January 2020, subject to a feasibility review to be completed by the International Maritime Organization (IMO) no later than 2018. This forthcoming change is having a dramatic effect on ocean going vessels, from tankers and container ships to cruise liners, with Liquefied Natural Gas (LNG) the favoured future fuel choice for many.

High concentrations of sulphur contributes pollution that can enter human lungs and pass on into the bloodstream causing a variety of medical disorders. Earlier this year around 100 ships worldwide were powered by LNG with an additional 90 or so on order. By the time the new regulations come into force in 2020, the number may rise to around 250, excluding LNG carriers and inland waterway vessels, and new designs are already under way for many of the major freight carriers.

Uncertainty over the take up rate for the gas is however causing delays and now classification society DNV GL has addressed this issue with a recent market study on the future LNG market in the Iberian Peninsula, as part of driving the development of an EU-wide network of LNG refuelling points. The study has forecast the potential future demand for LNG as a marine fuel, and the required future infrastructure for the areas around Spain and Portugal, covering the Mediterranean, Atlantic and Gibraltar Strait peripheral regions.

DNV GL conducted the market study on behalf of the six-year CORE LNGas hive project1, which aims to provide an investment plan for LNG fuelling in Spain and Portugal. The €33 million project is coordinated by Spanish gas transmission group Enagas, and co-funded by the European Commission. The results of the Danish group’s analysis have now contributed to the CORE LNGas Hive project’s recommendations for the development of the LNG supply chain infrastructure, involving over 40 ports in the project area. Fernando Impuesto, CORE LNGas hive project coordinator from Enagas, observed:

“The consortium partners selected DNV GL to execute the demand studies of the project based on the fact that [it] has been at the forefront of the development of LNG as a ship fuel. DNV GL’s network and market knowledge have added to a successful outcome. Through this market study we now have a strong decision basis to prepare the supply side on the Iberian Peninsula in meeting future demand for LNG bunkering at competitive conditions.”

Despite LNG fuelled shipping being high on the agenda in the maritime industry, the market drivers are seen to have changed. From previously being encouraged by a lower price of LNG compensating for the added cost for installation of the LNG fuel equipment, results from interviews conducted by DNV GL indicate a shift towards compliance with emissions regulations to be the main motivation. The study has revealed a huge potential for LNG as a marine fuel that will utilise the current spare capacity of the existing LNG import terminals. The consolidated, quantitative results show that by 2030 up to 2 million m3 /year of LNG is to be bunkered by ships (with Algeciras, Las Palmas and Barcelona as most important ports) and by 2050 approximately 8 million m3 /year of LNG will be used.

Logistically the market study further concludes that existing LNG terminals will need to develop break bulk capacity to allow for loading LNG to small carriers and LNG bunker vessels. In most ports, development of local intermediate storage capacity needs to be synchronised with increasing LNG demand by larger vessels. Besides bunker stations and local storage facilities, small carriers for delivering batches of LNG to ports overseas will play an important role for the times ahead.

All the up scaling of course costs money, and the estimate of what it will cost in order to realise the predicted LNG supply chain in 2030, is about €1 billion of capital expenditures (CAPEX) rising up to a total cost of €3.7 billion in 2050. Liv Hovem, Senior Vice President, DNV GL – Oil & Gas, commented:

“[The] market study has clearly shown the major potential LNG has as a fuel in the region. We hope that the conclusions from our study will help ship owners, natural gas suppliers, bunker companies, port authorities and LNG terminal operators gain the confidence they need to move forward with LNG as a fuel for a more sustainable shipping industry.”

Photo: An LNG carrier with (inset) a cross section of a carrier’s spherical moss tanks (named after Norwegian designers Moss Marine) which hold the fuel as it is being transported.

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