The orderbook for LNG-powered vessels has grown by 36% over the past 12 months; the majority of the new contracts have been for large vessels with bunker tanks of unprecedented size
The global fleet of in-service and on order LNG-fuelled vessels has grown by 26.5% since LNG World Shipping’s previous comprehensive review of the use of LNG as marine fuel 12 months ago.
As of 1 May 2018 the world fleet totalled 253 vessels, comprising 121 ships in service and 132 on order. Over the past 12 months 18 LNG-powered ships have taken to the seas, increasing the in-service fleet by 17%, while the orderbook has been boosted by contracts for 35 new ships, representing a 36% growth.
LNG World Shipping breaks the LNG-powered fleet into four segments: tankers and bulkers, container and cargo ships, passenger ships and supply and service vessels. The year-on-year growth of the in-service and on order fleets for the four segments is shown in the table below.
Growth in the LNG-fuelled fleet over the past year
(numbers of vessels)
|Fleet segment||1 May 2017||01-May-18|
|Tankers and bulkers|
|Container and cargo ships|
|Supply and service vessels|
The most dynamic of the four segments over the past 12 months has been tankers and bulk carriers. Following the delivery of five ships, there are now 24 such tankers and bulkers in service. Contracts for 15 new vessels over the past year have boosted the tanker and bulker orderbook to 43 ships.
Most of the new orders have been for Aframax and Suezmax tankers of 110,000 dwt and above. These vessels require large bunker tanks and will ensure the volume of LNG consumed by the tanker and bulker segment will jump significantly compared to the current fleet of LNG-powered coastal distribution tankers.
The rise in the orderbooks of the passenger ship and container and cargo ship segments has also been due mainly to newbuilding contracts for large-size vessels. Most cruise ships ordered over the past 12 months have been specified with dual-fuel engines while CMA CGM’s order in November 2017 for nine ultra-large container ships of 22,000 TEU carrying capacity signalled a breakthrough order in the box ship segment.
The dual-fuel vessels ordered by the Carnival group typify recent activity in the cruise ship segment. To be among the largest such vessels ever ordered, the ships will be provided with 3,600 m3 of bunker tank capacity. For the new Aframax tankers ordered over the past year upwards of 5,000 m3 of LNG bunker tank space will be needed.
The new CMA CGM container ships will be world beaters on a number of fronts. They will not only be the largest such vessels ever ordered but also powered by the largest gas engines ever built.
The 18,600 m3 membrane-type LNG bunker tank with which each CMA CGM ship will be fitted is five times larger than any specified for a previously contracted LNG-powered ship. It also marks the first use of a non-Type C containment system in an LNG-fuelled vessel.
The supply and service vessel segment of the LNG-fuelled fleet is comprised primarily of comparatively small offshore supply vessels and tugs. Yet even here, larger vessels are beginning to make their presence felt.
Among the recent additions to the orderbook is a massive, dual-fuel, heavy-lift crane vessel that will require tankage for approximately 6,000 m3 of LNG bunkers.
The step change in LNG fuel requirements is spurring the development of bunkering infrastructure worldwide. Investments are being made in LNG bunker vessels, LNG fuelling depots and the adaptation of existing LNG receiving terminals to enable the loading of small LNG vessels and road tankers.
Fuel decision time
The choice that shipowners must make between low-sulphur marine gas oil, LNG and the continued use of heavy fuel oil in tandem with an exhaust gas scrubber has been brought more finely into focus with the latest session of IMO’s Marine Environment Protection Committee (MEPC).
Prior to that meeting, the decision still loomed large due to the reduction in IMO’s permissible fuel sulphur content, from 3.5% to 0.5%, that will come into effect on 1 January 2020.
Despite the implementation of this notable global sulphur cap, the maritime community has remained under pressure to continue to develop the regime controlling ship atmospheric pollution. In response, IMO agreed at the 72nd session of MEPC (MEPC 72), held in London in March 2018, to reduce the allowable emissions of carbon dioxide (CO2) from ships by 50% by 2050 compared to 2008 levels. This will be a precursor to phasing out all greenhouse gas emissions from shipping as soon as possible in this century.
While 2050 seems a somewhat distant target date, shipowners primarily play the long game, investing heavily in an asset with a working life of 20-plus years. The new deadline will be a factor impacting the choice of fuel for all future newbuilding, perhaps comparatively slight initially but steadily gaining in importance over the coming decade.
While LNG is the cleanest-burning of the fossil fuels, the gas option has proved a difficult choice to date for most shipowners. LNG-powered newbuildings are priced at an estimated 20% premium compared to vessels running on conventional oil fuel, due to the costs of dual-fuel engines, LNG bunker tanks and fuel gas supply systems. The cost of an exhaust gas scrubber, in contrast, requires an outlay of only about 20-25% of the LNG premium.
Against this background, it has been estimated that LNG fuel is unlikely to be chosen for more than 5% of the world fleet of merchant vessels, with interest limited primarily to newbuildings. While several more optimistic industry pundits predicted that LNG could be the fuel of choice for perhaps 7-8% of the fleet, even they had to admit that very few owners would be opting to convert existing vessels to dual-fuel running.
But even 5% of a merchant fleet of 55,000 ships of over 500 gt, ie 2,750 vessels, is not an inconsequential number. Now, following MEPC 72, additional optimism about the LNG option is creeping in.
Meeting the 50% reduction in CO2 emissions by 2050 will require significant expenditure by the shipping industry. The recent rise in oil prices and worries about the corrosion and waste disposal issues that attach to the use of scrubbers are already increasing awareness that perhaps the capital costs associated with the use of LNG are not so onerous in the context of ship lifecycles.
LNG is not a silver bullet when it comes to reduced emissions of CO2 emissions. Its use can only achieve reductions of 20-25% compared to the burning of oil fuels. However, the choice of LNG, in tandem with the other environment-friendly ship design features that owners are already introducing in the drive to achieve the GHG emission reduction goals laid down in the Energy Efficiency Design Index/Ship Energy Efficiency Management Plan regime developed by IMO, offers one of the best routes to compliance with the 2050 goal.
The technological advances in ship fuel efficiency that will inevitably continue to be made in the years ahead are expected to increase the attractions of dual-fuel engines as a propulsion system choice.