There are currently 41 LNG-powered ships in service that are not LNG carriers and a further 38 such ships on order. These LNG-fuelled vessels, a harbinger of things to come, are tabulated in the Small-Scale LNG Supplement published in April 2013 by LNG World Shipping, a Riviera Maritime Media sister journal.
Coverage of small-scale LNG and LNG as marine fuel has been growing in every issue of LNG World Shipping, in tandem with the rapid expansion and diversification of the downstream end of the LNG supply chain. The April 2013 Small-Scale LNG supplement, the first of what promises to be an annual publication, augments the regular coverage and provides an overview of the direction that small-scale LNG and LNG bunkering developments are taking.
Many studies have been published into how marine propulsion systems will evolve as the shipping industry comes to terms with stricter IMO requirements governing ship emissions over the coming decade. The use of LNG as propulsion fuel is one of only three realistic alternatives available to shipowners, the others being the burning of low-sulphur marine diesel oil and the continued use of heavy fuel oil in combination with an exhaust gas scrubber on board.
All three options have their advantages and disadvantages and each of the options is likely to come into its own in particular applications. LNG fuel, for example, is not regarded as being an especially attractive option for existing ship retrofit projects but, for newbuild vessels likely to spend most of their working lives operating within emission control areas, the concept is worthy of serious consideration. The attractiveness of LNG fuel in other shipping operations will increase with the development of an LNG bunkering infrastructure.
Despite the increased capital cost for a gas-powered vessel, LNG fuel offers the most straightforward way of complying with all emissions restrictions, specified and anticipated. In the final analysis, however, for shipowners having to decide the most appropriate option, the comparative cost of the fuel delivered to bunker tanks on their ships will be the critical factor.
The spread of small-scale LNG infrastructure is set to boost the attractiveness of gas fuel in the years ahead. Several of the new LNG import terminals now being commissioned in China, for example, are being provided with jetty arrangements that allow LNG to be reloaded onto smaller LNG carriers for onward distribution along the country’s coastline and river systems, including to LNG fuelling stations.
China has been trialling several LNG-fuelled vessels on its rivers in recent years and is poised to make a major commitment to this sector in the immediate future. The experiments carried out to date have relied on providing the vessels with an LNG bunker tank, retrofitting a gas-burning or dual-fuel engine and bunkering by means of road tanker deliveries.
The list of vessels on order in the Small-Scale LNG supplement include only two ships earmarked for service in China – a pair of tugs due to be delivered later this year that will be powered by Wärtsilä dual-fuel engines. However, there could well be a number of other LNG-powered ships currently contracted at Chinese yards for domestic owners that have, as yet, received no publicity.
What is certain is that the list of LNG-powered ships will grow considerably over the years ahead. One study predicts that ships in 2025 will be burning LNG bunkers at the rate of 24 million tonnes per annum (MTA), or 10 per cent of the current global trade in the product. A Lloyd’s Register (LR) investigation forecasts that around 650 LNG-fuelled vessels will be built between now and 2025, or 4.2 per cent of the expected newbuilding deliveries over the period.
A look at the LNG-fuelled ships-in-service table in the Small-Scale LNG supplement shows that Norway has dominated developments in the sector to date. The cross-fjord passenger ferry Glutra, with its four Mitsubishi gas engines, is the first such vessel and has been in service since 2000. This pioneer was followed in 2003 by two LNG-powered offshore support vessels (OSVs), Stril Pioneer and Viking Energy.
These breakthrough ships were the precursors for 18 further LNG-fuelled vessels delivered during the first decade of the new millennium. All the early ships were built for Norwegian owners and domestic service. All were classed by DNV and flagged in Norway. The government’s enlightened tax regime, which offers significant breaks for ships providing enhanced environmental performance, proved to be a key catalyst.
Norway’s commitment to LNG-fuelled ships has continued into the current decade. All but four of the LNG-fuelled ships in service are DNV-classed. One of the four, the Baltic Sea passenger cruise liner Viking Grace, delivered earlier this year, is on the LR register book. At 57,000gt, it is the largest ship that is not an LNG carrier to be powered by LNG. Viking Grace is expected to consume 23,000 tonnes of LNG per annum in its Wärtsilä dual-fuel engines on the daily route linking Helsinki, Mariehamn and Stockholm.
Viking Grace and the current orderbook for LNG-powered vessels indicate that the concept is spreading beyond Norway, quickly. Among the vessels under construction are five OSVs for Harvey Gulf at the TY Offshore yard in Mississippi; the owner holds another five such OSVs on option. The five newbuildings will go into service in the Gulf of Mexico on delivery. Although the precise bunkering arrangements are yet to be announced, there are several facilities in place able to source the fuel. The US Gulf Coast is dotted with LNG import terminals built during the previous decade in anticipation of a surge of purchases of overseas cargoes by gas-deficient US utilities.
In the event these terminals have not been employed to anywhere near the extent for which they were intended due to the discovery of vast amounts of shale gas in Texas and Louisiana. As a first corrective step, a number of the terminals have introduced a means of re-exporting cargoes stored in their tanks.
More recently, in view of the quantities of shale gas becoming available, operators of US LNG import terminals have sought to reinvent themselves by building liquefaction plants to give themselves a bi-directional capability and the opportunity to export LNG. The first such terminal is currently being reconfigured and a total of 24 schemes for LNG exports, many similarly involving the construction of liquefaction trains at existing import terminals, have been tabled.
Harvey Gulf, and any vessel owners wishing to emulate this owner’s example, will have no shortage of facilities from which to source LNG bunkers. Thanks to the shale gas revolution, US gas prices are among the lowest worldwide and the attractions of gas fuel, including for use in powering heavy goods vehicles, are growing by the day across the US. Canada, too, has abundant supplies of shale gas.
Shell, which will charter the first three Harvey Gulf OSVs to be completed, has taken the lead in providing small-scale LNG distribution infrastructure in North America. Earlier this year, shortly after confirming the full takeover of the Norwegian LNG distribution company Gasnor, the energy major announced plans to build two small-scale liquefaction plants in the US and Canada in support of its customers and its own operations. Each of the two plants will have a capacity of 0.25 MTA and is being built to supply LNG as both a marine bunker and heavy goods vehicle fuel.
The liquefaction units will form the basis of two new LNG transport corridors in the Great Lakes and Gulf Coast regions. The initiative follows an investment decision by Shell in 2011 on a similar liquefaction plant and road vehicle corridor in the Canadian province of Alberta.
The liquefaction plant for the Gulf Coast corridor is to be built at Shell’s petrochemical complex in Geismar, Louisiana. Once operational, the unit will supply LNG along the Mississippi River and the Intracoastal Waterway, to vessels serving in the Gulf of Mexico and to the onshore oil and gas exploration areas of Texas and Louisiana, including highway fuelling stations.
Shell has also signed a memorandum of understanding with the Edison Chouest Offshore group of companies to supply LNG as fuel to its marine vessels operating in the Gulf of Mexico and to provide what is anticipated to be the first LNG barging and bunkering operation in North America at Port Fourchon in Louisiana. The LNG transport barges will move the fuel from the Geismar production site to Port Fourchon where it will be bunkered into customer vessels.
The liquefaction plant for the Great Lakes corridor will be installed within the boundaries of the company’s manufacturing centre at Sarnia in the Canadian province of Ontario. Once operational, this facility will supply LNG fuel to all five Great Lakes, their bordering US states and Canadian provinces and the St Lawrence Seaway. The Interlake Steamship Company is expected to be the first marine customer for LNG fuel in this region, as it begins the process of converting its vessels to run on natural gas.
Pending final regulatory permitting, the two new Shell liquefaction units are expected to begin operations and production in late 2015.
Harvey Gulf is not the only North American shipowner to have LNG-fuelled vessels on order. STQ Quebec has committed to the construction of three St Lawrence ferries that will be powered by LNG while TOTE has opted to run two newbuilding container ships and two existing such vessels on gas fuel following the necessary conversion work. Staten Island Ferries, too, is embarking on converting one of its vessels to run on LNG and many other owners besides Interlake Steamship are considering the option.
North America is poised to become as busy an area for LNG bunkering as China and Scandinavia/North West Europe. MP
© 2023 Riviera Maritime Media Ltd.