Investment that will extend the use of LNG as a marine fuel in offshore has accelerated in Asia and the Americas, even amid a lull in gas-fuelled newbuild orders
An analysis of the uptake of LNG as fuel in the offshore vessel market reveals a dearth of big ship projects in recent months. Of the handful of projects emerging in Europe, two stand out as being particularly noteworthy: DEME Group’s 216.5m installation vessel Orion, which launched in November; and Offshore Decommissioning Services’ plans for Moonraker 1, a UK-flagged semi-submersible heavy-lift vessel with an initial delivery date scheduled for Q2 2021. But these are the exceptions which confirm the fact that, and after a slew of gas-fuelled OSV and PSV projects in and around Norway since 2015, momentum has now stalled.
In a slow-moving market. Europe remains the epicentre for LNG ship projects. Of the 282 gas-fuelled ships in operation or on order globally (as of mid-January), 168 operate in Europe and Norway, according to classification society DNV GL’s Alternative Fuels Insight portal. But in Asia and the Americas there are signs that the old objections are giving way to a more enlightened view, albeit slowly. Gas as a fuel may not yet have been adopted wholesale in these offshore markets, but some important developments are helping to dismantle the logistical and technical challenges involved in facilitating its uptake.
If LNG as fuel has been maturing in Europe, development has lagged somewhat in the Americas. Of the 144 LNG-fuelled ships worldwide (excluding gas carriers) at the end of 2018, just 13 of them were operating in the Americas. But in this small arena it is offshore, alongside the cruise and ferry sectors, that is leading the way. One of the biggest LNG-fuelled fleet owners in the region is Harvey Gulf, with five gas-fuelled, Jones Act offshore supply vessels; a sixth was ordered in June.
The pace of adoption is increasing however and a further 15 ships are on order. A project driven by Harvey Gulf is intended to further drive growth, by extending the LNG bunkering infrastructure in the region. The company intends to grow its LNG-fuelled fleet twice in the medium term, as it adds ship-to-ship gas bunkering capability via two articulated tug and barge (ATB) units ordered by a new subsidiary company, Quality LNG Transport (Q-LNG). The offshore marine transportation company is positioning itself to take a prime role in the anticipated boom in the use of gas as a marine fuel in the US.
The first barge for Q-LNG will be chartered to Shell on a long-term basis when it is delivered from VT Halter Marine (VTHM) in 2020. Among its clients will be Carnival Corp cruise ships, which will call at ports along the US southeast coast – the cruiseship owner has already signed a supply agreement with Shell to that effect. Offshore vessels are another likely customer group, including Harvey’s, when not served from the company’s home in Port Fourchon, Louisiana.
Harvey’s firm belief in the potential for LNG bunkering in the region is evident from the fact that Q-LNG has already signed a preliminary agreement with VTHM to build a second barge, even before it has secured a charter for the vessel; with a capacity of 8,000 m3, it will be twice the size of the first.
Wärtsilä will provide the first barge, Q-LNG 4000, with a wide range of systems and equipment, including cargo storage, handling and control, as well as automation, power management and ballast water management systems. The barge will also feature a Wärtsilä bow thruster. The accompanying tug will feature Wärtsilä steerable thrusters and shaft lines for main propulsion, controlled by the company’s automation and NACOS Platinum dynamic positioning systems.
According to Wärtsilä sales manager Bill Amundsen, the barges will provide the “missing link” between North America’s prodigious supply of LNG and shipowners who have been considering a switch to gas. “It answers the question of where shipowners are going to get the fuel,” he said. “It provides a transport link from the liquefaction plant to the ship receiving the LNG, and therefore increases the viability of LNG as a fuel source.”
That move may come just in time; IMO’s global sulphur cap, which will come into effect from 1 January 2020, threatens to make other fuelling options a lot more expensive. With shipowners having to decide whether to switch to expensive low-sulphur fuel oil or install costly exhaust gas cleaning systems, LNG offers a third way. Initial capital expenditure may be high but, in America at least, the fuel is expected to be both affordable and in steady supply.
Affordability and availability are assured by the growing output of LNG in North America. According to the US Department of Energy, if all production projects come online as scheduled, the country’s LNG export capacity will treble by the end of the year, to around 8.9Bn barrels a day, making it the world’s third-biggest LNG exporter, behind Qatar and Australia. This will be driven by equivalent growth in liquefaction plants, with capacity set to surge to more than 60M tonnes annually by 2023, according to the International Gas Union.
An increasing investment in training is a clear indicator of the newfound emphasis on renewable energy and LNG as a marine fuel in the US – from the shipping and energy sectors, if not from President Trump’s government. At the State University of New York’s (SUNY) Maritime College, a major grant awarded in October will fund two related projects: The Off-Shore Energy Center will house training for offshore seafarers, including those working both in offshore wind and in the oil and gas sector; while the Liquified Natural Gas Center of Excellence will offer courses for seafarers expecting to sail on gas-fuelled vessels.
Clean climate training
The funding was granted as part of the Clean Climate Careers initiative established by New York state governor Andrew Cuomo in June 2017, which donated US$15M across several projects – including US$6M to SUNY’s various campuses – to develop training for clean energy jobs. That the maritime sector took such a big part of that grant highlights the promise many see for LNG in the region’s marine and offshore market.
SUNY Maritime College professor in the department of professional education and training, Ayman Alakkawi believes that the evolution of LNG as a marine fuel represents “an historic opportunity” for American yards, technology suppliers and ship designers to build some of the most technically advanced and environmentally friendly vessels ever seen. “In establishing the Center of Excellence at Maritime, the college will be able to lead the innovation,” he said.
Training and research is a critical factor in the uptake and technological development of gas fuel in other regions too. In Singapore, shipyard group Sembcorp Marine, class society ABS and the Institute of High Performance Computing (IHPC) at the city state’s Agency for Science, Technology and Research (A*STAR) have launched a cooperation that seeks to spur the development of LNG technologies and training related to offshore and marine applications.
A new cooperation between ABS, Sembcorp Marine and Institute of High Performance Computing should drive the development of LNG technologies and training
The agreement, signed in September, aims to enable Sembcorp Marine to tap ABS’s expertise and IHPC’s simulation capabilities as it develops its product portfolio for small-scale gas applications. This will include LNG-battery hybrid tugs – Sembcorp Marine president and chief executive Wong Weng Sun used the signing to announce that it would build 12 such vessels over the next six years – as well as bunker vessels and terminals.
“We can do much more in the offshore, marine and energy sectors to advance [LNG’s] adoption as a preferred fuel for global consumption,” said Mr Wong. “Our Tuas Boulevard yard will be a test-bed for the various projects identified.”
Those projects include exploring solutions for offshore LNG processing, transfer and containment. One such project aims to find ways to store the cold energy that is lost each time LNG is regasified before its final use. Another study will examine how to minimise boil-off during LNG transfer. This is a particularly pressing problem in bunker vessels, where LNG is loaded from land-based terminal to bunker vessel to gas-fuelled ship, with each transfer offering opportunities for losses. New applications of LNG as fuel will also be assessed.
The promotion of LNG as a marine fuel will also be an important element in this project. To boost the confidence of end-users and regulators, the partners say that safety studies will draw on proven computational modelling and simulation approaches regarding gas dispersion and explosion scenarios to facilitate risk assessment and mitigation. These approaches will also be applicable to the design and operation of new-generation LNG-fuelled vessels and terminals.
At the same time, the partners will develop and conduct training and technical workshops through the Sembcorp Marine Academy to build specialist knowledge that they hope will support the growth of LNG technology-related businesses in Singapore.
Indeed, Singapore is primed to become one of Asia’s biggest bunkering spots for LNG in the years ahead, thanks to strong investment from the Maritime and Ports Authority of Singapore (MPA). The authority has granted LNG bunkering licenses to FueLNG, a joint venture between Keppel Offshore & Marine and Shell Eastern Petroleum, and local energy company Pavilion Gas. Both have received grants of S$3.0M (US$2.2M) to put towards bunker vessel newbuildings as part of the MPA’s LNG Bunkering Pilot Programme. FuelLNG’s 7,500 m3 vessel will be built at the Keppel Singmarine yard in China, while Pavilion has yet to finalise its building contract, although it has already secured a long-term charter with Total from 2020.
Plans for LNG bunkering may be more advanced in Singapore than elsewhere in southeast Asia, but regional rivalries could still lead to a competitive bunkering market – something that would be welcomed by price-sensitive shipowners. A recent notice from Malaysian oil and gas company Petronas, revealed that the organisation has ambitions for the country to become a major LNG bunkering hub, competing directly with neighbouring Singapore.
In its Activity Outlook 2019-2020, Petronas notes that it is “well-positioned to support the strategic intent for Malaysia to become the regional LNG bunkering hub.” Intriguingly, the report revealed that Petronas is working with the Malaysia OSV Owners’ Association to migrate the local offshore service fleet from diesel engines to LNG.
Recent reports from Malaysia suggest early steps are being made to put that ambition into practice. A memorandum of understanding has been signed to build the first LNG-fuelled ship in Malaysia; shipbuilder and shipping company Shin Yang Shipping will build the 77 m, dual-fuelled vessel for ship operator Synergy Marine. The vessel’s keel laying is expected to take place this month, with delivery scheduled for Q4 2020.
Petronas sees dual-fuelled engines running on LNG as the predominant solution for Malaysia’s future offshore fleet. The country’s several bunkering developments, due to come online in the second half of this year, will assist in making that vision a reality. Bunkering of LNG is set to be available from two regasification terminals, RGT 1 and RGT 2, in Melaka and Pengerang respectively. These will be followed by bunkering operations in Kemaman Suppy Base and Asia Suppy Base in Labuan.
While the objections to LNG as a marine fuel are many – including a lack of bunkering infrastructure, the cost of installing gas-fuelled engines and the additional technical burden on crews – the answer to all these challenges is continued investment in LNG logistics, technology and training. LNG shipbuilding projects in the offshore sector may be few and far between, but such related investments are continuing apace.