LNG Opportunities & Challenges as a Marine Fuel

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With less than a year remaining before IMO 2020 sulfur regulations take effect, shippers and carriers alike are finalizing viable compliant fuel choices in their marine freight operations.

While many vessel operators are choosing to either front the volatile cost of low-sulfur marine fuels or install scrubbers and continue using high-sulfur fuel oils, one compliance option which offers more stable prices, fewer greenhouse and toxic gas emissions, and growing industry demand is the use of Liquefied Natural Gas (LNG).

LNG Marine Fuel Technology

LNG technology works by creating an environment in ocean vessel storage tanks where natural gas can be liquefied. Natural gas is held at, or slightly above, atmospheric pressure. The resulting fuel product is forced into its liquid state and stored at supercooling temperatures. It is this super cooled liquid natural gas that is used for fuel.

Containership vessels with LNG capabilities have unique fuel burning systems compared to regular vessels. Since LNG is a more complex fuel to burn, its storage systems and engines require additional machinery to consume it and to ensure burn-off gas (BOG) doesn’t escape into the surrounding environment, which is both wasteful and potentially hazardous.

LNG Marine Opportunities

LNG offers several advantages over other methods of IMO 2020 compliance. Compared to the volatility of high-sulfur fuel oil (HSFO) and low-sulfur fuel oil (LSFO), natural gas products experience prices that are lower and more stable. LNG fuels have a liquefaction fee, or additional fixed cost that accounts for the cooling materials necessary to maintain liquidity. This price addition, however, does not fluctuate to the same degree as other refined products like fuel and gas oils in response to geopolitical or economic activity.

LNG’s price stability makes it more attractive to shippers looking for consistency in their maritime freight costs—acting as a natural price hedge.

Another favorable element of LNG compared to other fuel types is its environmental footprint. Current estimates indicate that powering ships with LNG instead of HSFO or LSFO may reduce toxic emissions associated with nitrogen and sulfur oxides by over 90 percent.

Carbon dioxide emissions are also minimized substantially with LNG. One British thermal unit (Btu) of burned diesel fuel and heating oil product releases 161 pounds of carbon dioxide, while one Btu of natural gas releases 117. Although the accidental release of methane—which has a greenhouse gas potential roughly 30 times more potent than carbon dioxide—is possible with LNG-burning engines, standard methods of handling and safe storage minimize this risk.

As the IMO transitions its focus away from sulfur oxides reduction and begins to target COin the years following 2020, the pollution-reduction capabilities of LNG will likely become increasingly attractive.

LNG Challenges in the Marine Industry

That’s not to say there are no significant challenges to the widespread adoption of LNG in marine cargo vessels. Some of the most significant of these include the capital cost and dedication required to build and retrofit vessels, as well as a considerable lack of LNG bunkering infrastructure.

Though several key international ports, including Rotterdam, Singapore, and Panama currently offer LNG bunkering, global availability is still limited. This lack of infrastructure contributes to the current low number of LNG vessels operating on the high seas. With limited global LNG bunkering capacity, vessel operators are left weighing the decision to invest in a technology that has a promising future, but an uncertain present.

Post updated from its original post date of 2/18/2019 to ensure the most accurate and up-to-date information on the topic.

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