One of the key factors behind the drive to LNG as fuel is the approach of year 2015 when stricter rules under MARPOL Annex VI enter into force in the world's Emission Control Areas (ECAs).
Approximately 80 to 90 percent of merchant vessels will enter an ECA during their lifetimes and, what makes the onset of LNG even more relevant, is that more ECAs are expected – particularly in the Mediterranean and the Far East – in the future.
Shipowners with vessels operating in these areas must get their priorities absolutely right. From 2015, the maximum allowable sulphur content in ship fuels is 0.1 percent. From 2020, a global requirement of 0.5 percent maximum will apply to all areas outside the ECAs which currently lie in northern Europe and around North America.
The LNG option
With fossil fuels there are three main options that comply with ECA rules.
Lloyd's Register believes that all three of the above options are feasible and some are more appropriate for certain vessel types than others. In other words, LNG operation is considered a solution, but not the solution for everybody.
But LNG is indeed an option especially for newbuild short-sea vessels and those operating in trades with more-or-less fixed ports.
Operation on LNG opens up different possibilities. One option is to operate on dual-fuel engines, where the engines can be switched to LNG fuel when operating in ECAs and then operating on HFO outside ECAs. This is a very flexible solution enabling vessels to operate globally. The newbuild price will of course increase but the flexible option may have a positive influence on the second-hand value.
Another option is pure LNG operation with no heavy fuel back-up. This will mean a simplified engine-room and tank layout compared to the dual-fuel concept, though with less flexibility. The latter has been introduced for very short trades such as inland water ferries.
A very hot topic
If you make an internet search on LNG-driven vessels, you will find not less than three million hits have been logged, so this is indeed a very hot topic. A number of shipowners are considering the LNG option very seriously indeed. Up to now about 20 to 25 vessels are operating on LNG and a number of vessels are in the order-book with more expected to follow.
A vote on future fuels was polled among delegates who attended the Green Ship Technology Conference in Oslo in March. The result of this "unscientific" vote was that more than 75 percent of attendees expected LNG as the fuel likely to make the most progress during the next 10 years.
One of the key merits of LNG operations is the virtual elimination of harmful emissions at a local level.
"LNG as fuel produces no SOx, particulate emissions are low and NOx emissions are reduced with the added advantage that control technologies can be more readily applied to produce yet further reductions," commented Alasdair Anderson, Technical Manager of Lloyd's Register's LDSO Electrotechnical Systems. "CO2 is reduced by over 10 percent – or to around 2.75 tonnes for every tonne used – compared to heavy fuel oil (HFO)."
But LNG's potential to reduce carbon dioxide emissions is doubtful. The combination of methane escape during extraction and methane slip during combustion as well as the overall energy needs of the LNG supply chain need to be further investigated to adequately claim that the LNG can reduce greenhouse gas emissions on a like-for-like comparison with HFO.
Rules for LNG as fuel already exist for gas ships within the IGC Code currently under review at the IMO. A new code for LNG and similar fuels is also under development at IMO and is planned to be introduced together with the next revision of SOLAS in 2014. An IACS project team will work with the IMO on the code chaired by Lloyd's Register's Stuart Carpenter, Senior Surveyor, LDSO Electrotechnical Systems.
For now, IMO Res. MSC 285(86) is being used for ongoing projects. Lloyd's Register is also working to replace the current provisional rules with a new rule set in 2012.
It will of course be very difficult to predict the future fluctuations of bunker prices. However most experts agree that the price of fossil fuels in general will increase in the future. But the increase of LNG will be less than the increase of HFO (and distillates) and therefore the expected future pricing will be in favour of LNG. An important aspect is also the "end bunker cost" meaning the bunker cost the operators will have to pay. This will be very sensitive and will depend on the number of suppliers of LNG in the port or place where bunkering takes place.
The bunkering question
Another key consideration for LNG is the whole infrastructure and supply chain as it is seen as a significant barrier to a wider adoption of LNG as fuel. As many in the industry are aware, there has been a kind of chicken-and-egg situation. The gas providers/oil majors are not too keen to invest in the infrastructure needed to supply the merchant fleet if demand from shipowners is not there and will wait to invest until sufficient demand is there.
On the other hand shipowners will not wish to invest in LNG-operated vessels if the LNG is too difficult to buy. This is also why Lloyd's Register regards LNG operation as most relevant for shortsea vessels with operation to and from port is in a regular schedule.
It is highly unlikely that we will see the adoption of LNG applications in mainstream worldwide trading of tankers and containerships. Even Maersk Line's new 18,000TEU ships are retaining HFO.
Today ships burning LNG are being bunkered by a tank truck or a shore-based tank plant, although LNG terminals for small-scale bunkering are expected to be introduced in strategic ports in the foreseeable future.
Furthermore, rules and standards for bunkering arrangements are lacking and there is a strong demand in the industry to develop standards for the bunkering, interface, hose connections, couplings and overall safety.
Lloyd's Register sees a potential in LNG-operated vessels in the next five to 10 years, mainly in shortsea operations and developing from a very local fuel to a more regional one.
The conclusion is that on a short- and medium-term basis LNG is expected to become a more significant fuel for shortsea shipping in certain conditions and will fulfil the regulatory requirements on SOx emissions in ECAs and also contribute to a significant reduction of NOx and particulates.
Jesper Aagesen, Lloyd's Register's Design Support Senior Surveyor
