Wednesday, August 12, 2015

Classification Society and Finance Expert Partner Up to Power Merchant Fleet with LNG

Confidence in New Fuel is Growing as Bunkering Infrastructure Develops
Shipping News Feature

US – WORLDWIDE – A year or so ago Lloyd's Register North America pronounced an ongoing interest in the classification of vessels carrying gas, specifically ethane, and last month, expanding its portfolio to cover the fuels it seems likely will power much of the merchant fleet in the future it announced it has teamed with Penn Oak Energy Corp to help companies raise much needed capital and mitigate the technical risks associated with retrofitting ships fuelled by liquid natural gas (LNG), by providing a ‘one-stop-shop solution’ to the industry.

Ships that are fuelled by LNG can greatly reduce operating costs while meeting stricter environmental regulations. LNG-fuelled ships have reduced emissions (nitrogen oxide, sulphur oxide and particulate matter) as compared with heavy bunker oil and even low-sulphur marine diesel. Historically, the leading expense for ship operators is fuel and personnel and the challenge to building these new ships has been that shipowners are unwilling to invest in LNG-fuelled ships if supplies of LNG bunker are difficult to obtain.

Things however are moving fast with more bunkering facilities under construction. The Register’s LNG Bunkering Infrastructural Survey 2014 indicates that major ports around the world are either planning for, or are anticipating, the wide-scale development of LNG bunkering and further developments, such as the Jensen Maritime articulated LNG bunkering barge we featured recently, are giving investors more confidence.

The other challenge for shipbuilders are the large initial capital costs to build these new ships and that’s where Penn Oak come in. The group, despite its origins in supplying land-based infrastructure finance, is a developer of LNG fuel solutions for industrial clients. The company specializes in turnkey solutions that take into consideration technology, natural gas liquefaction and supply, as well as logistics and financial considerations leading as a natural progression to investment in a fast growing area for the use of the gas.

Penn Oak Energy says the value it adds with this partnership to ship-owners and their fleets is through a fuel-procurement agreement, where they can spread the cost of the LNG conversions and the upfront capital requirements for these conversions over the life of the project. Philip Parker, head of business development for Penn Oak Energy explains his company’s involvement:

"The reason Penn Oak Energy chose to partner with Lloyd’s Register after doing a thorough review on other class societies throughout the maritime industry was that Lloyd’s Register was the most experienced in LNG conversions and transport vessels. Working with Lloyd’s Register and various shipyard owners throughout North America, Penn Oak Energy has been able to sign up exclusive relationships with various shipyard builders to bring their yards up to spec on certification, safety and standards required to convert ships to dual fuel solutions."

For its part Lloyd’s Register believes it is well placed to support a new fleet of gas-fuelled ships, and help them to operate safely and efficiently through its position as the leading classification society in the gas carrier market, both for LNG and LPG. In response to industry demand for clarity over options for gas-fuelled readiness, Lloyd’s has established clear standards describing different levels of readiness to use natural gas as a marine fuel. The Register also provides training on the key practical aspects of modern LNG carriage by sea and risk management services to support safe LNG bunkering. Rafa Riva, Marine Business Development Manager commented:

"LNG as a fuel has emerged as one of the most considered choices for a new generation of vessels. The infrastructure to support this new class of ships has started to mature, and we have seen great strides in companies willing to convert their existing ships to this new fuel, or constructing new ships in the US Emission Control Areas. Our relationship with Penn Oak Energy will help provide the private equity to ship owners to undertake these ambitious projects, and assist those ship builders that the US will need to expand this growing demand.”