DNV – foot on the gas
As political unrest spreads across the Middle East from one country to another, there is growing concern over the security of oil supplies and the impact of soaring oil prices on the world economy.
Paul Bartlett writes: As February drew to a close, West Texas Intermediate was flirting with the $100 threshold whilst Brent crude came close to $120 before falling back just below $115. In what increasingly appears to be a masterly stroke of timing, DNV's initiative to promote gas as a sound source of alternative fuel should come as a major relief to ship owners and operators gritting their teeth in the race of soaring bunker prices rising steadily through the $600s.
Speaking to journalists recently in Dubai, DNV's Tore Høifødt, head of communications for Asia, Pacific and Middle East pointed out that proven global reserves of gas are currently around 185,000,000,000m3 which, at current consumption rates, is sufficient to last about 60 years.
However, vast supplies of shale gas, not included in this figure, have radically altered the gas supply equation. If shale gas stocks are added in, total reserves shoot up to 800,000,000,000m3, more than 250 years' supply at current usage rates. And whilst Middle Eastern countries – notably Iran and Qatar – do account for a sizeable share of the world's previously proven gas reserves, much of the newly found shale reserves lie in North America, China and Europe – in other words, for large energy consumers, more secure in terms of supply and much closer to home.
This may not come as great news for owners of liquefied natural gas (LNG) carriers hoping to win long-term supply contracts from conventional gas producers to hungry consumers in the east and west. But it is surely music to the ears of beleagured ship owners and, of course, fuel bill-paying charterers who have been wrestling with the dual challenges of soaring bunker prices and the increasingly vocal environmental lobby and its concern over emissions.
DNV has classified 21 of the 22 ships currently burning LNG, and more are under construction. The classification society does not see the use of gas as a challenge. “After all,” Høifødt points out, “we've had rules for 10 years.” And he is keen to list its benefits compared with conventional bunkers. Not only is it more efficient as a source of power, but its emissions profile is radically better – CO2 emissions down by about a fifth, NOx by about 80% and the virtual elimination of SOx and particulates.
However, what really puts the cream on the gas cake for owners opting for new generation LNG-powered vessels is the growing disconnect between oil and gas prices. DNV executives point out that the early pioneers of LNG engines – primarily one or two offshore vessel and ferry operators in Norway – were prepared to swallow the higher first cost of gas machinery in exchange for good performance and a lower emissions profile. Now, though, they are also benefiting from the significantly lower cost of gas which many believe is likely to remain relatively low as more and more reserves of shale gas add to world reserves.
DNV has a wide range of gas-related initiatives in progress at present. But two are focused specifically on the Middle East. Firstly, the class society has entered into a co-operation agreement with Drydocks World (DDW), focusing on innovation, operational efficiency, and possible improvements to the environmental performance of ships in repairs and conversions, including the application of gas-fuelled engines.
Commenting on the deal when it was signed, DNV chief executive Henrik Madsen said how promising it was that “DDW demonstrates willingness to look ahead and prepare for a shipping market where lng will play a much more prominent part as fuel. We will bring in DNV's unique competence on lng-fuelled vessels from more than 20 projects in Europe.”
In a second initiative, the classification society is working closely with NITC which, fortunately, is not black-listed by the various sanctions against Iran and estimates that it will need a fleet of more than 80 LNG carriers when its gas reserves are developed. The company is already building up its fleet and reckons that it will climb from number five to number three in the world tanker-owning league when all of its vessels have been delivered in two years' time. By then it is possible that the company may have placed orders for new 150,000m3 LNG carriers, probably at yards in South Korea and China.
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