A shift to using LNG for bunkering commercial vessels would require government support or intervention and is unlikely to be a realistic global phenomenon before 2025 at the earliest, shipping industry representatives said this week.
Speaking at the Petrospot seminar in Singapore "LNG - The Future Fuel for Shipping," Torben Skaanild, secretary general of shipping association BIMCO, said he did not "believe we will see an immediate drastic shift to LNG." Given the current fleet, a significant shift would be a "2025 scenario," he added.
Several speakers at the seminar said that the drivers for shifting from fuel oil to LNG were environmental regulations and pricing.
Johnny Kackur, sales director at Finnish engine-builder Wartsila Corporation, said his company's dual fuel engines, which run on both fuel oil and LNG, produced 25% less CO2, 85% less nitrogen oxides and 100% less sulfur oxides and particulates than conventional fuel oil engines.
On the sidelines of the conference, he added that in terms of fuel efficiency the dual fuel engines had little difference when burning gas or fuel oil.
Skaanild said European emissions regulations had moved to zero tolerance for sulfur, which gave a significant boost for LNG as a new fuel. On the whole LNG was cheaper than liquid fuels, he added.
But a shift to LNG was "not without challenges," he said, notably in the area of on-board storage, which would require larger tanks with more insulation than shipowners were accustomed.
Logistics were also a challenge, he added, with relatively few places worldwide that could bunker LNG as a fuel.
"It's probably not realistic to expect shipowners to invest in LNG ships until bunkering infrastructure is available, but it's also unrealistic to expect infrastructure owners to create bunkering facilities without the ships available," Skaanild said.
Similarly, Ian Fisher, a partner at law-firm K&L Gates, said there were still legal issues surrounding LNG bunkering, including the need for ship-to-ship transfer regulations, port approvals for LNG activities and standard bunkering procedures. He added, however, that "none of the legal issues are insurmountable."
Aside from the legal issues, Fisher said, for the shipping industry to accept LNG bunkering, it would have to be "as similar as possible to fuel oil bunkering."
Despite the measured outlook for a shift towards LNG bunkering, a few speakers pointed out that there were already 22 ships using LNG for bunkering, mostly operating around Norway.
Dimitri Maroulis, senior consultant at classification agency DNV's Clean Technology Centre, said a further 18 ships would be delivered by 2018. The current fleet was fed by trucks, he said, while pricing was based on long-term contracts.
Those ships faced somewhat higher prices for LNG than market levels, Maroulis added, in part because the LNG came from small liquefaction projects with high costs. If a worldwide infrastructure were developed, he said, costs would be lower.
Comparing net present costs over 20 years for an LNG-fueled ship and a conventional one, Maroulis said, LNG bunkering could have a negative present value, "depending on how you view future LNG prices," while conventional bunkering costs would be in the tens of millions of dollars.
A few ship-builders attending the seminar told Platts on the sidelines that they were interested in the development of LNG bunkering. But one company official said he would not seriously consider LNG-fueled new-build ships unless the Singapore authorities pushed ahead with creating bunkering facilities.
"It is a chicken and egg problem," he added.
Officials from Singapore's Maritime Port Authority attending the seminar expressed uncertainty concerning the possibility of building LNG bunkering facilities, however.
Singapore is building an LNG import facility, due for completion in 2013, and officials from the project said in February that the terminal would be able to provide bunkering services once a second jetty was added later.
At the Petrospot seminar, officials said they were still analyzing the possibility of providing bunkering facilities and were yet to decide how to proceed.
