Building the momentum for LNG as a marine fuel
2017 has been a momentous year for LNG as a marine fuel. Announcements of new investments came quickly and repeatedly. As the IMO’s 2020 global sulphur cap draws nearer and the regulation’s trajectory becomes clearer, ship owners and lines are increasingly seeing LNG as a long-term, compliant solution for their operations. As one of the industry leaders heading the charge, Rudolf Saade, Chairman and Chief Executive of CMA CGM, stated quite succinctly: “LNG is the fuel of the future for shipping.”
The supply-side is also responding aggressively. The bulk LNG infrastructure is largely built, what remains is the last mile, in which the industry is showing a growing appetite to invest. The number of LNG bunkering vessels has grown from one, at the beginning of 2017 to six in early 2018, with these numbers expected at least to double by 2020. You can see this growth through our LNG Bunker Navigator tool on the SEA\LNG website.
SEA\LNG is proud that our members have been at the forefront of industry developments over the past year, but we recognise that there is much to be done to ensure that this momentum continues to build.
To effectively incentivise the developments needed to realise a competitive global LNG value chain for cleaner maritime shipping by 2020, we need to make the credible, fact-based case for LNG as a marine fuel to the shipping industry – which includes investors, bankers, shipping lines, bunkering companies, ports, and other enabling stakeholders such as shippers, governments, regulators, and local communities.
Steered by our members, we have prioritised the following areas of work for 2018. First, we need to better understand our stakeholders and decision makers in different geographies; who they are, what are their informational and data needs, and how can we communicate with them most effectively to make the case for LNG as a marine fuel?
Second, we need to develop content and data that decision makers can use as they evaluate future fuel alternatives and make decisions. The industry continues to require credible, fact-based material, backed-up by academic research as necessary, on the emissions, investment and infrastructure case for LNG.
Emissions case: The environmental benefits of LNG as a marine fuel are clear with respect to air quality improvements in relation to ‘local emissions’ such as sulphur oxides (SOx), nitrogen oxides (NOx), and particulate matter (PM). Most agree that LNG essentially eliminates both SOx and PM emissions and reduces NOx by up to 90%. The contribution to air quality should not be underestimated. We have worked for decades to improve the air we breathe and LNG will continue to be a major and positive factor in this important health-related endeavour.
Likewise various studies show that LNG offers serious GHG emissions reductions. Certainly there are still many open and important questions relating to the global warming implications of methane emissions in natural gas production and transportation as well as methane slippage in marine engines. In collaboration with partners such as the Society for Gas as a Marine Fuel (SGMF), SEA\LNG is sponsoring a comprehensive, academically validated analysis which will compare full lifecycle, well-to-wake GHG emissions of LNG-fuelled propulsion systems with IMO 2020 compliant oil-based solutions such as low sulphur fuels and high sulphur fuels with exhaust abatement; for example, scrubbers. We will also examine other alternative fuels that may not be currently viable or even commercially available to get a complete picture of all alternatives. This will be important work to help create factual, data-based answers to the questions before the industry.
Too often, we see comments or reports that claim to be neutral but in reality, are not factually based. It is our clear intention to work with real data and facts.
Investment case: Investment in assets is always a huge issue. At the end of the day viable maritime organisations must justify their decisions and ensure their business profitability over the long term if they are to survive and serve the world’s markets. Unfortunately, there remains a lack of clarity surrounding the potential for LNG among many shipping lines and investors. Many do not have adequate information and data to fully analyse the case for LNG. New-build investment decisions may often be predicated upon incomplete data and analysis and inappropriate or incomplete metrics. The investment case work that SEA\LNG is undertaking will consist of two complementary phases. In Phase I we will develop a comparative analysis of the qualitative factors that should help inform new build investment decisions. This includes operational considerations, such as waste disposal, technology maturity and supply chains, availability of fuel suppliers and bunkering infrastructure, bunkering logistics, and the likely impact of future regulation.
In Phase II we will use a sophisticated investment model capable of evaluating specific vessel types, servicing different global shipping routes, using different propulsion systems to explore new-build investment choices under a range of scenarios, such as varying fuel prices and capital expenditure assumptions. This will be based on operational data and assumptions agreed by SEA\LNG members using publicly available sources.
Infrastructure case: The question of infrastructure continues to be on the top of many LNG investment lists. Our work consists of two streams and is currently in the early phases of implementation. The first attempts to answer the question asked by shipping lines, if I invest in LNG-fuelled systems for my fleet, will the LNG be available where I need it? This takes the form of an online, map-based tool called Bunker Navigator. Based on a variety of member, publicly available data, and marine information services, it provides an overview of key LNG bunkering developments and how this growing infrastructure relates to major global shipping routes, traditional oil bunkering ports, and the bulk LNG infrastructure which will provide the foundation for future bunkering services.
Many of our members have been at the forefront of LNG bunkering infrastructure developments. So our second stream of work is to share insights from actual infrastructure projects in the form of member case studies. These set out the key lessons learned and provide insights into some of the practical challenges members have faced, and how they have harnessed collaboration and partnerships to achieve their objectives.
SEA\LNG is confident that once the fact base is set out in a clear and credible manner for the global shipping industry, LNG will move from the ‘chicken and egg’ to the implementation phase as investment confidence grows throughout the marine value chain and knowledge spreads to key enablers such as bankers, ports, regulators, and local authorities. 2018 will be an important year in the history of shipping as the industry begins to more readily embrace the inevitable transition from heavy fuels to the new reality of cleaner, more socially and environmentally conscious maritime fuels such as LNG.