Outlook positive for LNG even when the charterer pays

01 Apr 2012
Jesper Aagesen of LR: “LNG is certainly one of the fuels of the future but it is not yet THE fuel of the future”

Jesper Aagesen of LR: “LNG is certainly one of the fuels of the future but it is not yet THE fuel of the future”

Wendy Laursen says that LNG’s CO2 performance may be debatable, but it will improve EEDI values and take shipowners beyond compliance.

While charterers pay the fuel bill, will LNG really take hold? DNV’s Lars Petter Blikom says yes, and the signs of change are already evident. “A lot of shipowners deliver exactly what they charterer says but I get very strong indications now that this is changing. They are expecting charterers to start asking questions.”

Although it hasn’t been the case before, if charterers start to see big differences in efficiency and therefore fuel bills, this will impact on the market, says Blikom. Recognising that investment in LNG or scrubber systems is difficult for shipowners at present, he points out that by burning MGO in emission control areas (ECAs), shipowners can expect their fuel bills to increase significantly. MGO only just meets ECA requirements but LNG far exceeds both SOx and NOx requirements.

DNV research indicates that LNG is considerably cheaper on a per-energy-content basis than oil-based fuels, and taking a 20 year perspective, it is estimated that LNG has the lowest net present value cost compared with alternative solutions for newbuildings in most trades. DNV heads a project team within ISO to develop an internationally agreed standard for LNG bunkering as this will be required to ensure uniform infrastructure at ports throughout the world. The new standard anticipated in 2013.

Overall, we are very positive about LNG as a clean fuel, says Jesper Aagesen, senior surveyor and ship design specialist at LR, but in the context of a growing world fleet, just switching to LNG is unlikely to make a significant impact on the total global greenhouse gas emissions from shipping. Across the supply chain from well to flue, there is concern that LNG does not reduce CO2 emissions and there will be a huge energy cost in developing and maintaining a cryogenic bunker network, he says.

Individually, though, the use of LNG will improve (reduce) the energy efficiency design index (EEDI) of a vessel. “This is particularly true as there is no provision for methane slip in the EEDI formula, but a reduced carbon factor when burning LNG compared to conventional fuel oil,” says Aagesen. Methane can pass unburnt through Otto cycle engines but methane slip does practically not occur in other engine types. “As to the exact change in EEDI value, the reduction is about 12%, all things being equal. However, it is well known that when LNG is used, a ship’s deadweight may decrease for dual-fuel concepts due to the additional equipment and systems on board and this somewhat counteracts the benefits of LNG. For pure LNG-fuelled ships the deadweight might be about the same as for a similar ship with conventional fuels.”

While it has many benefits, LNG is just another fossil fuel, says Aagesen, and in the short- to mid-term, it is technically easier for tankers, container ships and bulkers, the ships responsible for the vast majority of emissions, to either switch to distillates or emissions abatement technologies such as scrubbers to meet legislative requirements. Long-term it may be beneficial for these ships to consider LNG, especially for the liner trade with ‘foreseeable’ bunkering locations, provided the infrastructure is in place and the LNG as bunker is available.

LR is involved in the largest newbuilding project involving LNG as a fuel, for a Viking Line 56,000gt ferry, but the organisation is also examining renewable fuels through a biofuel project with Maersk, research into methanol and various hybrid solutions. “LNG is certainly one of the fuels of the future but it is not yet THE fuel of the future,” says Aagesen.

In terms of the production, processing and transfer of LNG to a ship, recent studies suggest that LNG has no greater GHG impact than standard fuels and may in fact be lower, says GL’s deputy head of environmental research, Dr Gerd-Michael Würsig, who cites the TNO study Environmental and Economic aspects of using LNG as a fuel for shipping in The Netherlands.

Don’t hesitate to develop LNG vessels, says Würsig. “Right now builders can use the interim guidelines of MSC.285(86). Ships built according to these rules will without doubt be allowed to operate even after the IGF code becomes effective [probably in 2014],” he says. “The only factor to consider is that the interim guidelines might require owners to obtain permission from flag states and port states to operate their vessels. This makes things a bit complicated for operators calling at different ports or port states.”

GL is a partner in the EU funded HELIOS project involving MAN Diesel’s work on developing two-stroke low speed marine diesel engines that operate on high-pressure compressed natural gas or LNG. GL has overseen the conversion to LNG of the 25,000dwt tanker Bit Viking and has developed a concept design for a 900TEU container vessel, approved in principle for IPP Ingenieur Partner Pool’s 4,200TEU container vessel and DSME‘s 14,000TEU container vessel. “For very large container vessels, the number of stakeholders involved is small so all we need is container liners and fuel suppliers to agree on using LNG as ship fuel in the future. I believe this will happen sooner rather than later,” says Würsig.

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