According to a recent article by analyst S&P Global Platts, upgrading the main engines of very large gas carriers to dual fuel technology using LPG to reduce sulphur emissions would cost more than three times that of retrofitting scrubbers, a senior Dorian LPG official said in the week to Oct. 23.
Research and preliminary engineering studies by the company to upgrade the main engines of up to 10 of its VLGCs to dual fuel technology showed “significantly higher” capital expenditure than deemed necessary to justify the investment, the company’s chief financial officer Ted Young said. “Capital expenditure for dual fuel LPG upgrade is generally quoted at over three times that of a scrubber retrofit capex,” he said.
In response to S&P Global Platts queries, Young said the company was not currently undertaking any LPG retrofits or conversions to dual fuel technology. “Ten of our ships are equipped with scrubbers and we have commitments for another two, which we expect to install in the coming months,” he said. All 12 are ECO vessels, so removing those and the company’s three modern ships that are not equipped with reinforced deck tanks “leaves the possibility of LPG retrofits for up to seven vessels,” he said.
“The technology continues to improve and come down in price and remember that the first commercially viable prototype was only made available in late 2018. We are anticipating the first upgraded LPG engine in the world to go to sea during the current Q4 and the first dual fuel LPG newbuilding vessels in 2021,” Young said, referring to the LPG shipping industry in general.
Dorian LPG’s fleet of 22 vessels is comprised of nineteen 84,000m3 ECO-VLGCs and three 82,0003 VLGCs. Young said the US-headquartered company was in regular contact with yards and engine manufacturers to keep abreast of latest developments in the roll-out of LPG engines.
LPG has a lower CO2 output compared to HFO and is being promoted as a useful strategy in meeting IMO CO2 emission reductions. “All dual fuel engine vessels could benefit from a scrubber when operating in fuel oil mode, instead of consuming VLSFO with 0.5% sulphur content,” Young said.
“Environmental emissions reductions are the most important considerations both for scrubber vessels and dual fuel LPG engines in preparing their fleet for the IMO emissions reduction trajectory. However, our fleet is currently ahead of the Poseidon Principles AER curve for VLGCs, which we believe is an important fact in looking environmental focus,” he said.
The Poseidon Principles rely on the annual efficiency ratio, or AER, as the carbon intensity metric. To assess a vessel’s climate alignment, its annual carbon intensity is compared with the decarbonization trajectory for ship type and size class.
Evaluating marine fuel options, Dorian said the readily available and lower-priced 3.5% HSFO only requires scrubbers on ships and does not need operational changes, though will incur capital expenditure for vessel modifications and is subject to new marine applications on vessels and compliance rules.
The 0.1% and 0.5% low sulphur fuel oil will require tank cleaning, which is not readily available and has no ISO standard, but is operationally compliant and does not incur capital expenditure or require vessel modifications. Alternatives such as LNG, LPG and ethane, require newbuilding, or can be used with engine retrofitting for dual fuel. While an available, compliant and greener solution with lower greenhouse gases and nitrous oxides, they are not easy to source, have higher installation costs and face re-supply issues and storage considerations, according to Dorian.