Given the current price of low sulfur diesel, the enormous global emphasis on reducing the carbon footprint of our industry, and the fact the price of natural gas is currently at a 10 year low, the writing is on the wall for the global shipping industry…
Wartsila’s John Hatley and DNV’s Tony Teo gave an extraordinary presentation at this year’s SNAME conference in Houston last year titled, LNG as a Fuel, one that really helped to define the key characteristics of LNG, the current state of the LNG shipping industry, and why using LNG as a fuel source is unquestionably the future of the global shipping industry.
Tony Teo, DNV’s North American Business Development Director, began his presentation with an overview of his LNG and some insight from his experiences while working in Qatar.
“Qatar is one of the richest countries in the world and the largest exporter of LNG. It’s a clean natural resource and everyone wants to use it because it is environmentally friendly.”
Properties of LNG:
There are a hazards associated with LNG because it is very cold. If it spills on steel it will crack the steel right away and you can sink a ship, or a rig if you are not careful with it. So, the handling of LNG, this special material, has to be done with safety and utmost care.
Look at the scenario today from Europe where the Baltic and the North Sea are an ECA [Emissions Control Areas], they are getting a shortage of low-sulfur fuel. Next year, we will see the same issue and as you know, everything is on a demand and supply basis. When the demand is high, the price will go up.
At $100 per barrel oil, the price of low sulfur oil is around $1000 per ton, and the price will definitely go up.
This is THE attraction to LNG. If you are burning a large amount of fuel, you get cost savings by switching to LNG.
The Market for Natural Gas
John Hatley, VP Ship’s Power at Wartsila, gives a macro perspective…
“Oil and gas companies widely recognize the US natural gas market demand as mature and overwhelming at 23 trillion cubic feet (TCF) per year, which is the largest in the world. What comes as a surprise is illustrating that the next greatest potential gas market is the world’s commercial shipping fleet, which today consumes nearly 370 million tons of heavy fuel oil annually.
That much fuel oil is equivalent in gas terms to 15 TCF, which is two-thirds the size of the ENTIRE US gas market. It looms out there on the horizon, but off the radar of many companies and governments due to the difficulties inherent in maritime shipping, whereas they possess a much greater awareness with other transportation modes encountered in daily life, such as cars, trucks, trains, and planes.
The reaction is telling when we provide US stakeholders with a global top down view:
Considering 8 percent of the world trade comes to the United States, the potential natural gas market is roughly 1.2 TCF.
Looking at this issue from a marketing standpoint, would your business prefer sales to a large number of small consumers, or a small number of large consumers? Obviously the latter is easier to target as it exhibits a lower cost basis to effectively pursue, particularly when a new market such as the natural gas market is developing.
The typical gas company business plan of today takes this idea forward by seeking to target truck fleets as a key to achieving bulk sales. It’s an easy to understand fact as many highway trucks each consume about 20,000 gallons of diesel per year, or 34,000 diesel gallon equivalents LNG.
Alternatively, let’s consider the fuel consumption numbers for a marine player.
Take a common ocean tug that burns 30 tons of diesel fuel daily, or about 200,000 gallons monthly. This represents a couple million gallons per year, or 3.4 million diesel gallons equivalent of LNG. Scaling this up, let’s now consider a large container ship that consumes 200 tons fuel per day. Suddenly, your potential market for LNG has now exceeded 20 million gallons of LNG per year, per ship!
So now let’s ask the same question again, does it make more business sense to sell to a large number of small consumers, or a small number of large consumers?”
In ExxonMobil’s “Outlook for Energy” they write:
Natural gas will be the fastest-growing major fuel to 2040, with demand rising by more than 60 percent. Much of this growth will come from electric utilities and other consumers shifting away from coal in order to reduce CO2 emissions. By 2025, natural gas—which emits up to 60 percent less CO2 emissions than coal when used for electricity generation—will have overtaken coal as the second most popular fuel, after oil.
Demand is expected to grow in every part of the world, but especially in the Non OECD countries in the Asia Pacific region, where demand for natural gas is expected to triple over the next 30 years. The Middle East also will see significant growth, while Russia/Caspian demand flattens.
Current Operations in the Maritime LNG Sector
Glutra, the prototype for short sea, LNG-powered shipping. Tony Teo remarks:
“The vessel needs to be refueled once every 6 days, with a bunkering time of approximately 2-hours. Ever since she was delivered 10 years ago, she has been trading without any problem for 19 hours per day, every day.
Because of the potential explosive area of the engine room, we need the room as simple as possible so that there is no corners, or spaces that could trap any escaped gas, and the ventilators and gas detectors are all EX-certified. Anything that is not necessary is outside the engineroom, like incinerators and gas generators etc. We developed this technology with the Norwegian Maritime Directorate, and this is their advice to us:
‘Do a formal safety assessment, and consider a worst case scenario… an explosion.’
Therefore, we make the room as small as possible so anything that is not necessary is outside, and limit the equipment inside to the bare minimum.”
Mr. Teo continues,
“There are 23 LNG-powered vessels in operation throughout the world. It varies from ferries, coasters, OSVs, and even the Norwegian Coast Guard. When they need high speed, they switch to diesel, but when on normal steaming speed, they switch to LNG.”
DNV announced on 19 January that they had approved in principle, a design by Kawasaki Heavy Industries (KHI) for a 9000 TEU containership powered by LNG following DNV’s innovation concept “Quantum 9000” announced last year. This ship is designed with a prismatic Type B LNG fuel tank that allows for more space for container cargo. There have been no requests yet to build this ship, however the formal safety assessments for the gas supply and storage are underway between KHI and DNV.
A few challenges associated with LNG…
The bunkering process presents new and perhaps unfamiliar challenges to the operator.
Transferring cryogenic and flammable fluid is detailed process, one typically operated by engineers at the helm of computer-controlled valves inside the ship. From the initial hookup, throughout the transfer, and the final inert gas flushing of the lines, the engineers must be skilled in using computer technology, use proper safety equipment, and be highly process and safety-driven.
Where do you store it, and for how long?
Mr. Teo notes,
“You can store LNG for a long time. On small ferries, you can actually store the LNG for up to 4 weeks. The pressure will increase by only 2 or 3 bar, and the tanks are built to 10 bar pressure. After a few weeks, or when the pressure gets up to say around 7 bar, for safety reasons it’s important to start a piece of equipment just to burn the excess pressure off.”
One of the biggest challenges facing the wide-scale adoption of LNG-powered ships is infrastructure.
Bunkering (a.k.a refueling)…
The primary means of bunkering the short sea shipping industry in Norway and Finland is currently via trucks from a liquefaction plant to the vessels, or to a storage location with bunkering facility. In a discussion with Dr. Pierre Sames, SVP of Strategic Research and Development at Germanischer Lloyd (GL), he commented that current studies were being conducted with the Hamburg Port Authority (HPA) in an effort to develop LNG bunkering capability.
Their initial plan is to identify possible locations for a 10,000 – 20,000 cubic meter LNG terminal in Hamburg, while also looking at potential hazards such as navigational risks associated to small gas tankers operating in a relatively busy port, and the hazards associated with LNG bunkering and the simultaneous loading and unloading of containers. Current LNG bunkering options include loading LNG on to small carriers from export terminals in Rotterdam or Belgium, and refueling container feeder vessels in Hamburg. Dr. Sames also discussed an option for the Baltic region’s short sea ferries where instead of going through the time consuming process of refueling the fuel tanks when the ship returns to the pier, empty, or depleted LNG fuel tanks could be swapped out with newly recharged ones. It would be a bit like swapping out the canister on an outdoor grill.
In December, Lloyd’s Register announced the delivery of MT Argonon, a 6,100-DWT dual-fueled chemical tanker to a Deen Shipping subsidiary, Argonon Shipping B.V. We asked Lloyd’s Register’s Inland Waterway Product Manager, Bas Joormann, how the LNG distribution and storage issues had been mitigated. His reply:
An LNG infrastructure is not yet available as this is the first inland waterway vessel using LNG as fuel. The fact is, this is a chicken and egg situation. As long as there are no more vessels, no real infrastructure will be provided. The first bunkering with LNG is done in Zwijndrecht (20 km south of Rotterdam) from a truck. At the moment, LNG bunkering stations in Rotterdam, Zwijndrecht, and Harlingen are planned. In addition, a bunkering facility in Brunsbuttel in North Germany is planned, however this will be for the bunkering of seagoing vessels.
Until they are operational, the bunkering will be done by trucks which bring the LNG from Zeebrugge in Belgium. The LNG is stored on board the Argonon in a 35 m3 tank, which is situated on deck in the cargo zone.
This ship represents the first-ever LNG-fueled tanker.
“This has been a great project and it is a significant first,” said Piet Mast, Lloyd’s Register’s Marine Business Manager for Western Europe. “The nature of inland waterways traffic, which passes through or close to major population centres, makes LNG an attractive way to reduce harmful local emissions. We had to look carefully at the risks and worked closely with the owner and the regulators to ensure that they understood, and were comfortable with, the technical solutions that were developed.”
The dual-fuel system on board the Argonon is designed to burn an 80/20 mixture of natural gas and diesel, greatly reducing SOx, NOx and particulate-matter emissions compared to conventionally-powered vessels of similar size. Some technologies being implemented by some marine engine manufacturers raise that ratio closer to 95/5, and still others use Ott0-cycle engines that burn 100% LNG. There are trade-offs of course and the technology continues to evolve.
What are our options for meeting future emissions requirements?
We could continue to use Low Sulfur Diesel…
We could use Heavy Fuel Oil (HFO) with SOx Scrubbers…
Or we could switch to LNG- fueled ships…
Considering the massive Marcellus Shale gas finds in the Appalacian mountains and companies such as BG and Cheniere committing to significant US-LNG export plans, as well as multi-billion dollar gas developments off Northwestern Australia, it’s highly evident we’re in a global transformation toward a new fuel source.
A fuel source that is not only clean-burning, but an abundant natural resource.
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