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With EEXI looming, LNG as fuel gains interest
With adoption of the Energy Efficiency Existing Ship Index (EEXI) amendments to MARPOL Annex VI due in June 2021, more shipowners could move towards converting their fleets to LNG
Speaking at Riviera’s LNG Bunkering & Refuelling Americas conference, Bernhard Schulte Shipmanagement (BSM) LNG technical expert Johan Lillieskold noted “a great deal of interest” emerging in the shipping market to convert ships to dual-fuel, LNG propulsion.
The ship management arm of the family owned Schulte Group, BSM supports container ships, dry bulk carriers, LNG carriers, tankers and offshore vessels with full and crew management services through its 11 global ship management offices.
Such retrofits have been rare to this point. Mr Lillieskold noted many shipowners “are afraid when they see the numbers for the retrofit.”
Container shipping line Hapag-Lloyd was the first to undertake the pioneering retrofit of an ultra-large container ship (ULCS), converting Brussels Express (ex-Sajir) at Huarun Dadong Dockyard in Shanghai. The reported cost for converting the LNG-ready 15,000-TEU vessel was US$35M. It is anticipated that the price tag for such conversions will fall as shipyards and equipment, technology and engineering providers gain experience.
“The price will drop as you do more of these retrofits,” said Mr Lillieskold, noting the first conversions always cost more.
As for the conversion itself, Brussels Express’s Diesel-cycle, two-stroke MAN B&W 9S90ME-C10.2 was modified to 9S90ME-C10.5GI. Main components including high-pressure fuel pipes, cylinder cover, cylinder liners and piston crowns and rings were replaced, with new components such as gas injectors, gas control block, adaptor block, gas chain pipes, sealing oil system, and GI(E) control system installed. A pre-fabricated membrane fuel tank constructed within an exoskeleton was built quayside.
Designed and engineered by GTT, the 6,700-m3 capacity fuel tank was lifted into the vessel’s hull and welded in place.
In his presentation at the conference, USCG Rear Adm (ret) Kevin Cook, an expert technical advisor for GTT – North America, discussed membrane fuel tank design. He noted that CMA CGM selected membrane fuel tanks for CMA CGM Jacques Saade and its eight newbuild sister ships because of their “ability to efficiently fill the volume, pretty much the ship’s natural hull shape. This provides the maximum fuel capacity and minimum loss of container carriage volume,” said Admiral Cook.
While converted, Brussels Express’s engine is still oil-based, with the same output but with the ability to operate on LNG, lowering NOx emissions by 30% and SOx emissions by over 90%. CO2 emissions will be lowered by 24%, according to MAN Energy Solutions representatives.
Such retrofits are not suitable for older vessels, noted Mr Lillieskold, as such projects wouldn’t “fly commercially.” This means taking into account the vessel’s age and the price differential between fuel oil and LNG to justify the investment and calculate the payback period.
Expansion met by LNG bunker fleet
Surety of supply is another key factor in underpinning the expansion of LNG as a fuel. “Looking at the evolution of the gas-fuelled fleet, LNG is taking an increasingly key role in the maritime industry and especially in large projects,” said Bureau Veritas (BV) global market leader gas carriers and oil tankers Carlos Guerrero. “As significantly larger ships are being ordered and delivered with LNG as fuel, the LNG bunkering market is evolving to provide fuel availability in main bunkering hubs,” said Mr Guerrero in an interview following the conference.
Mr Guerrero noted Europe’s leading role in LNG bunkering with projects such as the recently delivered Gas Agility, one of the largest LNG bunkering vessels built, which includes innovations in membrane containment, the propulsion and the sub-cooling systems.
Mr Guerrero highlighted that beyond the growing purpose-built fleet of LNG bunkering vessels, additional capacity will come from adding such capabilities to other vessels. “Many of the small-scale LNG carriers on order are prepared for a later installation of additional equipment such as LNG transfer systems to enable their use as LNG bunkering vessels,” he said.
Observed Mr Guerrero, “With an orderbook of small-scale LNG carriers above 15 ships (including LNG bunkering vessels) and more under discussion at the moment, we do see LNG bunkering market infrastructure development to meet the needs of the growing numbers of large LNG-fuelled ships on order including large container ships, bulk carriers and tankers.
“Concretely, an example of the evolution of gas fuel orders, for instance from August to January, the share of the orderbook of LNG-fuelled ships is close to 19% as compared to less than 1% of the total fleet in service, measured by gross tonnes.”
The recent spate of ordering in the container ship market has included US$1Bn investments in LNG-fuelled tonnage for Hapag-Lloyd and Seaspan. Seaspan’s order is underpinned by a 12-year charter agreement with Zim Integrated Shipping, which will deploy the vessels upon delivery to Asia-US east coast trade, potentially creating the need for more LNG bunkering capability on the US Atlantic coast.
Overall, Mr Guerrero noted the growing trend of larger capacity, oceangoing LNG bunker vessels. He said ship-to-ship transfer will provide the core of the market’s LNG bunkering rather than via shoreside infrastructure or truck transfers. He said with “bunkering ships and from 11 oceangoing LNG bunkering vessels delivered between 2017 and the end of 2020, we could easily reach a figure of around 20 by end of 2021 adding a significant additional bunkering volume to the market, as the size of the LNG bunkering vessels is also becoming larger.”
LNG-ready refit opportunities
Further opportunities for conversions to LNG as fuel will come from the LNG-ready fleet. DNV GL reports there are 142 such vessels. The retrofit of the German-flag, DNV GL-classed Brussels Express was carried out as a pilot project by Hapag-Lloyd. The ULCS is one of 17 sister vessels in the Hapag-Lloyd fleet that were built with the notation ‘LNG-ready’.
A dual-fuel retrofit project on main engines can provide between 20-25% lower EEXI, according to MAN Energy Systems. MAN’s head of projects and PVU sales Klaus Rasmussen recently told Riviera that the payback for LNG retrofits at pre-Covid oil and gas prices is five years. He said LNG retrofitting may well be among the most effective ways to achieve EEXI targets.
Subject to adoption at MEPC 76, the EEXI requirements will enter into force in 2023. All vessels above 400 gt falling under Marpol Annex VI will need to comply with EEXI.
Short-term measures such as slow steaming will be enacted by 2023. Mid-term and long-term measures for improving EEXI could involve technological measures such as retrofitting bulbous bows optimised for the vessel’s operating profile, fitting an optimised propeller or propulsion-improving devices, such as twisted rudders or propeller boss caps, air lubrication systems and even wind propulsion systems.
EEXI compliance will be critical to meeting IMO’s greenhouse gas strategy, which targets reductions in carbon intensity from international shipping by 40% by 2030 and 50% in total (70% intensity) by 2050 compared to 2008.
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