The current and future use of LNG fuel in shipping

Although LNG fuel is a fossil fuel, proponents of LNG as a marine fuel have long touted its green credentials. There are signs emerging that an initially sceptic industry is now more prepared to consider the merits of LNG fuel for shipping.

When dual-fuel engines first began attracting attention in the early 2000s, their perceived advantage was in allowing LNG carriers to burn cheap HFO rather than valuable cargo. A decade later with new regulations on exhaust emissions and the establishment of emission control areas, it was the ability to allow ships to burn clean LNG rather than ‘dirty’ fuels that was becoming their key selling point.

When did interest begin in LNG fuel?

It is hard to define when LNG first became a green fuel and not something that should be conserved by burning HFO instead but most of the initial cheerleading for that role came from Norway. That was mainly because of Norway’s environmentalist leanings and in particular the NOx tax the country introduced in 2007.

NOx had been a concern long before the NOx tax was and the first vessel besides an LNG carrier running on boil off gas to operate on LNG was the 2000-built ferry Glutra owned by Norwegian domestic ferry operator Fjord 1. Within three years, Glutra had been joined by two Norwegian owned PSVs and thereafter a stream of LNG-fuelled vessels began appearing.

The combination of Norway’s NOx tax, which was applied to emissions from all ships, and the abundance of LNG produced locally favoured development of LNG-fuelled vessels. So much so such that with one exception, all of the 37 LNG-fuelled ships operating globally through to 2013 were based in Norway. The one exception was the Swedish-owned product tanker Bit Viking converted in 2011 with the installation of a pair of Wärtsilä 50DF dual-fuel engines. Even that owed its conversion to the fact that it was operating in Norwegian waters and was financed from the Norwegian NOx fund.

Viking Grace LNG fuel
The Finnish owned ferry Viking Grace

Once the two European SECAs and two North American ECAs were established and with the price of bunker fuel soaring, the possibilities of LNG were being explored by a wider audience than previously. In 2013 the Finnish owned ferry Viking Grace was delivered and signalled an end to the Norwegian monopoly in more ways than one. Arguably it was the first vessel with no Norwegian ties but it was also the first LNG-fuelled vessel to be classed with a society other than DNV (this was before the DNV/GL merger in September 2013).

Orders increasing around LNG Fuel

From 2013, the number of deliveries and orders has gradually increased as has the types of ships so that today there is no ship type not represented in the growing list of LNG-fuelled vessels which includes container ships, car carriers, bulkers, tankers, cruise ships and tugs.

There is a natural brake on the numbers of LNG fuelled ships caused by the lack of bunkering facilities. That is changing, aided perhaps by the fact that there are now international regulations on gas fuel systems on ships in the shape of the IMO’s IGF Code rather than a hotch potch or local laws and special dispensations.

As can be expected the four ECAs are the catalysts for take up of LNG as a fuel and most of the ships will operate almost full-time in such areas. There are other considerations not least being the local availability of LNG supplies. Norway and the US have natural advantages in this regard but in general Europe does not so must import supplies. The EU is actively promoting the use of LNG and is funding projects aimed at improving the supply situation and as interest grows suppliers are adding to the facilities available on a regular basis.

In April this year, the EU announced the latest four grants for LNG bunkering activities. The grants and projects involved are;

  • €4.48m to CYnergy towards the establishment of a natural gas supply system on Cyprus;
  • €2.6m to Go4Synergy in LNG for a study aimed at creating a pilot deployment of a motorway of the sea link between a small scale LNG-to-container transhipment facility in Zeebrugge and a bunkering facility in Gothenburg;
  • 600,000 for a study to develop LNG fuel in Malta and
  • €1.05m for assessing the feasibility for the construction of a small-scale LNG reloading terminal in the port of Gdansk and of LNG bunkering vessels as well as at launching the related preparatory activities.

More important than EU funding will be the active participation of commercial interests. Chief of these is the cross-industry organisation SEA/LNG founded in 2016 where owners and prospective owners of gas-fuelled ships have come together with engine suppliers, class societies and bunker suppliers among others to form a coalition aimed at promoting the use of LNG. The initial 14 or so organisations that founded SEA/LNG have been joined since by many others so that by early August this year it has more than doubled its membership.

The scale of the increase in the membership of SEA/LNG is reflected in the number of ships that are, or will be, capable of running on LNG. In May this year, there were 106 vessels globally operating on LNG and a further 115 on order. The significance of the number of order is that it represents a much higher percentage of newbuilds compared with the existing vessels and the global fleet. However, the numbers are still only a very small fraction of newbuilds and it has to be said that some of the ships, although fitted with dual-fuel engines and LNG fuel systems, may run most of the time on HFO or distillates depending on fuel availability.

In addition to the ships that can use LNG immediately, a slightly smaller number are equipped with a dual-fuel engine but are only considered as LNG ready rather than being fully fledged gas-burning ships from the outset. This is an understandable hedging of bets by the owners given the uncertainty around fuel mix and availability when the 2020 cut in the global sulphur cap kicks in. If it transpires that refiners produce sufficient quantities of compliant HFO then the owner need not proceed with installing the LNG storage and supply system but on the contrary, they can do so if necessary.

Building the LNG fuel bunkering infrastructure

All are agreed that the success or otherwise of LNG as a marine fuel will hinge on the supply infrastructure. So far with ships involved in mainly domestic or short sea trade, most LNG supplies have been delivered to vessels using road tankers but the number of LNG bunker tankers and barges is expected to swell as demand takes off.

LNG fuel
The 5,000m3 ENGIE Zeebrugge

The first ever LNG bunker vessel to become operative was the 5,000m3 ENGIE Zeebrugge delivered to Gas4Sea by Hanjin Heavy at the end of 2016. Ordering the vessel was something of a leap of faith for the owner as it was ordered in 2014 following a collaboration agreement by multinational energy company ENGIE, Mitsubishi Corporation and NYK Line for developing an LNG bunker supply business based in Zeebrugge one of Europe’s largest LNG import ports. ENGIE Zeebrugge’s first use was in supplying the UECC car carriers Auto Eco and Auto Energy in June this year.

In August this year, another and slightly larger LNG bunker vessel the Cardissa, arrived at Rotterdam. The 6,500m3 Shell Western LNG ocean-going vessel is the first to operate out of Rotterdam but Shell has also agreed a charter for a smaller 3,000m3 vessel that will mainly serve inland waterway vessels.

There are only a handful of these LNG bunker vessels in operation at the moment but more are on order. Although planned primarily to bunker ocean going vessels, they can also serve as transports for smaller quantities of LNG allowing a second revenue stream.
One of those on order is a 7,500m3 vessel to be owned by Bernhard Schulte and used for servicing Nauticor’s (the successor to Bosin Linde after Linde Group’s acquisition of all shares in the JV in April this year) LNG bunkering facility in the Baltic port of Klaipeda. The vessel is currently the largest of all the planned bunkering vessels and is scheduled for delivery in April next year.

Building confidence in LNG as a fuel

Developments in LNG bunkering are happening at an accelerating rate but whereas traditional bunkering facilities are well known to ship operators, the same is not true of the limited number of LNG suppliers and their facilities. Ignorance of new facilities may be one reason why ship operators are hesitant about opting for LNG-fuelled vessels. By the same token, bunker suppliers are equally in the dark as to the intentions of shipowners to adopt LNG as a fuel.

SEA/LNG is hoping to change this and one of its members – DNV GL – has developed a tool to help educate interested owners. In May, DNV GL launched the LNG Fuel Finder – a new tool on its LNG business intelligence portal LNGi. The new LNG Fuel Finder service will allow shipowners and charterers to register their interest in using LNG as a ship fuel free of charge, connecting them directly with LNG suppliers. “The LNG Fuel Finder helps these two parties come together, by providing shipowners with the opportunity to show the supply industry their interest in LNG bunkering. It also helps to overcome the high entry barrier for new suppliers to the market,” said Martin Wold, Senior Consultant Environmental Advisory at DNV GL – Maritime.

With the new tool, shipowners can quickly and easily inform LNG suppliers about their potential interest in bunkering LNG in specific locations. Shipowners and charterers will be able to log in and submit a request for LNG bunkering for free, specifying location, volume and from which date they would like to bunker LNG – then, this information will be made available to LNG suppliers. The tool should prove especially useful for shipowners evaluating their fuel decision for newbuilds, who would like to efficiently confirm or dismiss the feasibility of the LNG option, and connect with all potential suppliers. There is even a map facility in LNGi which shows availability of bunkering points.

LNG fuel finder
Screenshot from DNV GL’s LNG Fuel Finder – a new tool on its LNG business intelligence portal.

What has not yet been fully addressed is the practices and perceived risks of bunkering LNG fuels. There is of course already extensive experience that has been gained in a few areas but as its use spreads, new ports and facilities will be added. There has not as yet been a major incident resulting from bunkering a ship with LNG but it is accepted that the risk may be higher. As well as being delivered at extremely low temperatures, any escape of fuel must also present a higher risk of fire or explosion.

Advice on LNG bunkering has been disseminated by class societies and also the USCG, but in the long run it will be down to port authorities as to what safety measures have to be put in place. Those measures may result in restrictions being placed on what activities involving the vessel are permitted when at berths and may in some cases mean bunkering will have to take place at anchor when delivery is by bunker vessel.

Geographical growth

With around 85% of all LNG-fuelled vessels presently operating in the four ECA areas around the world, there is obviously much more work to be done in promoting LNG in other areas of the world.

Aside from a small area of Chinese waters, there has been little in the way of environmental initiatives and it is even likely that the 2020 global sulphur cap will not be rigorously enforced in some areas.

One area where it will be is Singapore which, as one of the world’s most important bunkering centres, has a vested interest in being prepared to accommodate any shift in bunkering practices. The Maritime and Port Authority of Singapore has already licensed two bunker suppliers in the port and has put in train other initiatives to be ready to supply all the LNG fuel required from 2018 onwards.

Similar initiatives in other ports along the main trade lanes between Asia and Europe may make LNG an acceptable fuel for deep sea vessels especially those that operate on liner services with fixed ports of call. Operators of large ships believe that the space onboard a ship needed for LNG fuel to give an equivalent range as HFO is a major obstacle to its acceptance.

That is a valid concern for long haul voyages but some large ships make shorter trips and under the right circumstances, LNG is a viable option, especially if the voyages begin or pass close to LNG production facilities. In March this year, Sovcomflot ordered a quartet of LNG-fuelled Aframax tankers from Hyundai Samho and plans to charter them to Shell. The vessels have a high ice class which could suggest planned routes along the Northern Sea Route where LNG is available.

More recently two separate designs for LNG-fuelled bulkers have been developed and both were publicly announced on the same day at Nor-Shipping. The two designs are aimed at the coal and ore trades from Australia to China and are planned to take advantage of the LNG produced in Australia. The first of the two is a joint industry project involving BHP, Fortescue, Mitsui OSK. Lines (MOL), Rio Tinto, SDARI, U-Ming, Woodside, and DNV GL.

The ship is a 210,000dwt Newcastlemax type from Chinese ship designer SDARI and is based on their highly energy efficient Green Dolphin design. Based on fuel consumption analyses, an LNG fuel tank size of approximately 6,000 m3 was found to be optimal, with bunkering in Australia for the round-trip. Several locations for the LNG fuel tank were considered before deciding the ideal location for the two LNG fuel tanks was directly above the engine room and submerged a few metres below the main deck. This offers protection for the fuel tanks, enhances fire protection, and does not reduce the cargo carrying capacity, even for volume cargoes such as coal. The cargo space available would be in the region of 225,000m3.

The second vessel was again a joint project but this time involving Hyundai Heavy Industries (HHI) and Lloyd’s Register (LR). At 180,000dwt the ship is slightly smaller but again designed with the same trade in mind. Less details have been released about this project.

As the growth of natural gas extraction expands and appropriate LNG production and storage facilities, the chance of more vessel types and routes being added grows. With gas fields being developed in West and East Africa, even this area of the world could benefit.