Bunkering is expected to provide a significant impetus to small-scale LNG as it gains increased traction as a viable marine fuel ahead of tighter environmental rules for the shipping sector, sources at an industry event said this week.
According to a poll at the LNG Forum 2018, part of the Singapore Maritime Week 2018, over 50% of the respondents said that in Southeast Asia, small-scale LNG was expected to take off most in the LNG for ships segment when compared to LNG for road transport or for off-grid power supply.
LNG, a sustainable alternative fuel for ships and long-haulage trucks, is also attractive as an energy source for industries in areas that are not connected to the natural gas grid. Such applications are known as small-scale LNG to distinguish them from the more conventional use where it is delivered on a large scale and regasified for injection into the natural gas grid.
“We have seen a steep rise in the number of inquiries in the past 4-6 months, particularly for container ships,” GTT’s General Manager Southeast Asia Stephane Maillard said.
There are currently 121 ships with LNG fuel in operation, 127 have been ordered, and 110 are LNG ready, Cristina S. Santa Maria, regional manager for Southeast Asia, Pacific and India at DNV GL Maritime, said.
The rising interest in LNG coincided with the International Maritime Organization’s global sulfur cap for marine fuels from January 1, 2020, she said.
The new regulatory environment is a factor that led DNV GL to predict that LNG and LPG will account for 32% of total shipping energy use by 2050, she said.
“When we look at the uptake in different ship segments today, car and passenger ferries are still far in lead. One reason is that LNG consumption and loading frequency often enables LNG distribution and bunkering by truck,” she said, adding interest in using LNG as fuel for ships was perhaps most noticeable in the cruise industry.
Container ships were also well suited to use LNG fuel, with fixed routes and a high fuel consumption offering the potential to earn back the additional investment, she added.
There were a lot of opportunities for small-scale LNG, especially in Indonesia, Singapore LNG Corporation CEO John Ng said.
In Indonesia, supply came primarily from the eastern part of the country while demand centers were mostly along the western side. This meant that there were a lot of opportunities for redistribution of LNG, Ng said.
“Today, decarbonization, decentralization and demand disruption are often the key buzzwords and small-scale LNG will also help tackle many of these themes in different market segments including bunkering,” Ng said.
“For LNG terminals such as ours, the decision to facilitate LNG bunkering is much easier because the incremental investment is much lower as compared to [the] entire infrastructure cost. So I am quite bullish from that perspective. Small-scale LNG facilities will grow and this will support bunkering,” he added.
Switching to LNG is slow, but once the tipping point is crossed, it would be a long term solution, Ng said.
“We have the infrastructure, LNG is there and demand is also there,” Cees Boon, senior safety advisor in the harbor master’s policy department at the Port of Rotterdam, said.
In ports such as Rotterdam, incentives from the EU to curb emissions were also supporting LNG’s uptake as a marine fuel, he said.
“In 2020, Rotterdam will have six licensed LNG bunker vessels doing regular LNG bunkering. An additional 4 LBVs will have a license to operate in the spot market,” he said.
ECONOMICS MAJOR CONCERN
It all came down to price and demand, sources said. There is an extra cost for LNG for ships — capital expenditure for scrubbers, LSFO and operating costs such as crew training, maintenance, GTT’s Maillard said.
“In terms of space, adjustments are also required on vessels. You need to size LNG tanks according to owner operating profile by keeping in mind to save as much as possible cargo capacity,” he said.
Some apprehensions also remained regarding safety, some industry sources said separately.
However, safety concerns will ease as LNG use as marine fuel increases, more training is provided to personnel, and a structure is introduced for bunkering operations, they added.
While conventional oil-based fuels will remain the main option for most existing vessels in the near future, the commercial opportunities of LNG as a marine fuel were growing, DNV GL’s Santa Maria said.
Source: PlattsPrevious Next