lng carrier ship

When Will the Great Lakes Have LNG Bunkering?

Total Views: 15
January 7, 2015

lng carrier ship

By Danielle Holden, Aaron Brown and Cheryl Stahl – DNV GL

The concept of LNG-fuelled ships in the Great Lakes region has support from local stakeholders, U.S. and Canadian government officials, port/terminal operators and the public. It has many advantages, including the opportunity to cost-effectively comply with upcoming strict air emissions standards because of its “cleaner” ship engines.

While the advantages to LNG conversion are compelling, there are obstacles such as finding supply to support upcoming demand. The most likely supplier in the area, Shell, announced on March 24 that it is putting on hold its planned modular liquefaction system unit in Sarnia, Ontario. Meanwhile, Interlake Steamship Co., which intended to buy LNG bunkers from the Shell site, continues to explore ways to use LNG as a fuel for its fleet, according to company President Mark Barker.

When will the Great Lakes have a mature LNG bunkering infrastructure?  Three key areas of uncertainty need to be considered to support the buildout: technical and siting issues, regulatory requirements and approvals, and financial feasibility. The first two areas are inextricably linked to the third.

Technical and siting issues.

lng bunkering solutions
There is insufficient planned LNG bunkering infrastructure in the Great Lakes to support a fleet, even though LNG supply is present, according to a Great Lakes Maritime Research (GLMRI) study prepared by Randy Helland in 2012.

A number of companies have expressed interest in developing LNG infrastructure. BLU LNG announced that it has two bunkering permits under review for Duluth and South Lake Michigan, according to a study prepared for the American’s Natural Gas Alliance (ANGA) by Gladstein, Neandross & Associates in 2014.

Identifying appropriate bunkering solutions depends on operational requirements for infrastructure, land availability in regional ports, location restrictions and barriers to co-locating. Once supply is established, operators in the Great Lakes can look at applicable bunkering solutions transferring large volumes of LNG (i.e. shore-to-ship and ship-to-ship). Private industry players have identified three bunkering locations that could support Great Lakes traffic: Detroit, Michigan, South Lake Michigan and Duluth, Minnesota.

These ports support fueling via barges and from the dock and have familiarity with simultaneous operations while bunkering, such as cargo handling, according to the ANGA study.

lng tank vessel liquefied natural gas

Determining the appropriate application and development of LNG bunkering infrastructure is needed to establish reliable and permanent LNG-fuelled fleets in the Great Lakes. To do this, there must be criteria established to evaluate the safety of LNG bunkering infrastructure to workers, staff and the public. A probabilistic risk approach that includes the likelihood of all events is better suited to manage risks and address concerns regarding facility siting in congested areas. Therefore, DNV GL encourages the use of a probabilistic risk-based approach in decision-making.

A probabilistic approach, effectively applied, would demonstrate to regulators and the public how the entire operation will be operated in a safe manner that protects workers and the public. The result of the risk assessment will also identify safeguards that can be implemented to reduce risk to an acceptable level. The risk assessment can be used at all stages in the project to identify potential bunkering operations or locations and in the design of specific operations (and safeguards applied to a specific operation).

Regulatory requirements

Concerning regulatory requirements, local and state regulations should address LNG transfers not on or adjacent to navigable U.S. waters and lightering from an inspected vessel on navigable U.S. waters. (Currently, these issues are not addressed on a local/state levels in Great Lake states).

Other regulatory requirements are on a national level and can be addressed once recommendations in U.S. Coast Guard Policy Letters 01-12, 01-14 and 02-04 are put in place. (The Coast Guard anticipates implementing its recommendations later in 2014). These recommendations address how to regulate LNG tanks (i.e. tanks that stand alone, tanks connected to intrastate-only pipelines and tanks on or adjacent to navigable U.S. water) and bunkering from an inspected vessel on a navigable water of the U.S. By addressing these regulatory requirements, LNG bunkering owners, operators and customers will clearly understand the regulatory landscape for a potential operation. In the absence of regulatory certainty, potential early movers will delay development of bunkering infrastructure.

As regulatory requirements are implemented on national, state and local scales, bunkering crews, LNG-fuelled vessel crews and local first responders, are expected to be trained. Recommended training practices for LNG-fuelled ships should describe: site-specific details, knowledge
of hazards, facility and maritime emergency response procedures, a contingency plan and understanding of mechanical integrity of LNG equipment.

Financial feasibility

Financial feasibility ultimately depends on the type of operations (fixed onshore, floating or mobile truck operations), price of LNG supplied for bunkering and competitiveness of the LNG price for shipowners compared to other methods that would meet the Emission Control Area requirements. A risk-based approach to siting and operations would improve the financial feasibility case by quantitatively demonstrating the operation can be managed safely. It can also show how the operation could be modified to be safer. This can be achieved through modification of the location of the bunkering operation, which can change the operational conditions, bunkering type or installation of additional safeguards to prevent and mitigate an incident.

A complete regulatory framework will create additional certainty in the project requirements and costs. An effective regulatory framework would allow flexibility in operation design. Incorporating risk-based criteria for site selection and safety to workers and the public would help control risks and promote a safe Great Lakes bunkering infrastructure.

LNG bunkering infrastructure

A mature LNG bunkering infrastructure will depend on how and when regulations are developed, bunkering needs from vessels, technical feasibility and financial feasibility. If the right incentives are not in place and/or project risks are not minimized, the first movers will not reap all the benefits of
constructing and using LNG infrastructure.

A recent study forecasts that a total of four LNG-fuelled vessel newbuilds and 10 conversions will be completed by 2029, with an annual LNG demand of 74,140 m3, according to the ANGA report.

There are an additional 37 high-potential U.S.-flag lakers that would demand 663 m3 per day to operate. However, an LNG ship fleet would
be difficult to expand without addressing regulatory gaps and lack of bunkering infrastructure and LNG supply.

Regulatory gaps could be addressed in the next one to five years, but depend on efficiency of federal, state and local governments who have jurisdiction over the Great Lakes. Ideally, coordination would address potential conflicts between regulations in the various jurisdictions.

Finding an LNG supplier will be most critical. Once a supplier is found, it may take three to five years to permit and construct an LNG bunkering operation.

Danielle Holden is an Associate Consultant at DNV GL-Oil & Gas.  Aaron Brown is a Senior Consultant and Cheryl Stahl is a Principal Consultant within DNV GL’s Risk Advisory Services Group.  John Kristian Norheim Lindøe and Jan Hagen Andersen also contributed to this story.

All images courtesy DNV GL

This article first appeared in the Great Lakes Seways Review

Back to Main