Hapag-Lloyd is aiming to prove that LNG conversions can pay
Hapag-Lloyd is aiming to prove that LNG conversions can pay. Its project on 16,000-TEU Safir, the biggest dual-fuel retrofit ever undertaken, would on its own prove that feasibility in some style. But with the prospect of a further 16 such retrofit candidates, inherited when the liner acquired United Arab Shipping Company two years ago, the company will be making a statement that others are likely to follow.
As anyone selling gas solutions knows too well, the economics of LNG retrofits have been challenging. Unless you have government subsidies or preferential access to LNG, the sums just haven’t added up. Now, the German liner is going back to the blackboard.
Times are changing. According to a recent study commissioned by SEA\LNG, a consortium promoting the commercial case for LNG, that case is indeed improving. One reason is that the price premium associated with gas-fuelled ships is coming down, “due to extensive LNG newbuilding experience and technology improvements leading to shipyard efficiency gains, as well as current market conditions favouring buyers of newbuildings”.
Another reason is the relative cost of sulphur compliance options. When ships have to use expensive fuel, expensive scrubbers or expensive LNG equipment, the economics for gas become more compelling than they are today. This, it finally dawns on me, is what MAN Energy Solutions’ new head of two-stroke engines Bjarne Foldager meant when he said in our recent interview that “after 2020, maybe things will make sense that didn’t two years ago”.
As the business case for LNG overall has improved, it may be that retrofitting has finally become feasible. Hapag-Lloyd is well placed to reap the benefits and lead the charge.