Wednesday, March 12, 2014

How Will Ocean Bulk Freight and Container Shipping be Powered in Future?

New Report from Eminent Sources Studies Fuels of the Future
Shipping News Feature

UK – WORLDWIDE – Whilst many in the shipping industry chatter excitedly about hybrid and LNG technology a new report on marine fuels, published by two bodies which together pack in a wealth of knowledge on the subject, now takes a more considered view of how the bulk cargo, container shipping and tanker freight trade will be powered in the future. Research undertaken by Lloyd’s Register and University College London’s Energy Institute explores in great depth the drivers for the future energy mix in shipping in 2030. This week’s report, Global Marine Fuel Trends 2030, looks at the fuel demand for a sector which accounts for approximately 70% of the global shipping industry’s energy requirement.

This new study follows up the Global Marine Trends 2030 report issued last year which indicated the likelihood of strong growth for shipping and the symbiotic relationship between shipping, as the enabler of world trade, and raised trade levels, which obviously result in an increase in seaborne tonne/miles of cargo. With the GMT 2030 report indicating the likelihood of strong growth for shipping the twin realities of emissions regulations and rising energy costs means the authors believe shipping decision makers will benefit from a clearer understanding of the potential scenarios for marine fuel demand.

The new report is available to download free here (whilst hard copies can be ordered from the Lloyd’s Register Webstore) and it considers what it believes to be the three likeliest developments in the field which it terms Status Quo, Global Commons and Competing Nations. Status Quo is of course obvious, the world will continue its familiar current growth momentum with some booms and busts over the next twenty years. Global Commons foresees a shift to greater concern over resource limitation and environmental degradation will see a desire for a more sustainable world being developed and fairness in wealth distribution. Governments will find common ground and accelerated economic growth, within a framework of sustainable development, which will follow, a hopeful but some may say less likely outcome.

The third consideration is considerably gloomier. Competing Nations would see states act in their own national interest with little effort to forge agreement amongst governments for sustainable development and international norms. This is a self-interest and zero-sum world with a likely rise in protectionism and slower economic growth. So what does the marine fuel mix look like for containers, bulk carriers and tankers by 2030? In two words: decreasingly conventional.

Heavy fuel oil (HFO) will still be very much around in 2030, but in different proportions for each scenario: 47% in Status Quo, to a higher 66% in Competing Nations and a 58% share in Global Commons, the most optimistic of scenarios for society. A high share of HFO, of course, means a high uptake of emissions abatement technology when global emissions regulations enter into force.

The declining share of HFO will be offset by low sulphur alternatives (MDO/MGO or LSHFO) and by LNG, and this will happen differently for each ship type and scenario. LNG will reach a maximum 11% share by 2030 in Status Quo. Interestingly, there is also the entry of Hydrogen as an emerging shipping fuel in the 2030 Global Commons scenario which favours the uptake of low carbon technologies stimulated by a significant carbon price. Project Leader, Dimitris Argyros, Lloyd’s Register Lead Environmental Consultant, said:

"I think that the report underlines that any transition from a dependency on HFO will be an evolutionary process. LNG is forecast to grow from a very low base to a significant market share by 2030 - even if there is no major retro-fit revolution, most of the LNG take-up will be in new buildings. But it is important to note that an 11% share in 2030 is the equivalent in volume of about 20% of the bunker market today.

"What we can say is that the uptake of engine and alternative propulsion technology and the emergence of non-fossil fuels can only be driven by a society’s ability to create a world with lower GHG emissions, the technology is not the barrier. Key will be policy and markets. Shipping can control its own destiny to some extent, but ship owners can only focus on compliance and profitability. If society wants lower GHG emissions and cleaner fuel, change in shipping has to be driven by practical regulation and market forces so that cleaner, more efficient ships, are more profitable than less efficient ships with higher GHG emissions."

The fuel trend study is not entirely inclusive, which considering the vast array of vessel types and fuels available would be a virtual impossibility, however the report studies the containership, bulk carrier/general cargo and tanker (crude and chemical/products) sectors, which represented approximately 70% of the shipping industry’s fuel demand in 2007, a figure which has not altered radically since.

Fuels studied included those ranging from liquid fuels used today (HFO, MDO/MGO) to their bio-alternatives (bio-diesel, straight vegetable oil) and from LNG and biogas to methanol and hydrogen (derived both from methane or wood biomass). Engine technology includes 2 or 4 stroke diesels, diesel-electric, gas engines and fuel cell technology.

Modelling for the study also looked a comprehensive variety of energy efficiency technologies and abatement solutions (including sulphur scrubbers and Selective Catalytic Reduction for NOx emissions abatement) compatible with the examined ship types. The uptake of these technologies influences the uptake of different fuels whilst regulation is aligned with each of the three overarching scenarios to reflect business-as-usual, globalisation or localisation trends. They include current and future emission control areas (ECAs), energy efficiency requirements (EEDI) and carbon policies (carbon tax) with oil, gas and hydrogen fuel prices also linked to the Status Quo.