One of the key takeaways of 2020 is that LNG will remain a central pillar of the world’s energy picture for decades to come.
Covid-19 roiled the global economy and energy markets and changed the fabric of our very lives. But long term, the outlook for LNG demand remains strong, underpinned by the world’s transition to cleaner energy to fight climate change and meet the goals of the Paris Agreement. LNG is plentiful, cheap and far cleaner burning than coal, diesel and heavy fuel oil.
For countries looking to wean themselves off of carbon-intensive fuels, LNG makes perfect sense, particularly since the market has become more flexible. Caribbean islands that depend on high-priced distillate and HFO for power generation can reduce their fuel costs, while producing fewer CO2 and greenhouse gas (GHG) emissions by switching to cheaper LNG.
This is because when it comes to purchasing LNG, buyers now have more choices, with the ability to fill their requirements via long-term or short-term contracts or by spot cargoes. This dynamic market has emerged with the expansion of LNG production, particularly from the US.
Stranded buyers can obtain access to LNG through break-bulk cargoes transported by small-scale and mid-scale LNG vessels.
It is a business model that Avenir LNG is counting on. Avenir took delivery of the first of six LNG bunkering and transport vessels, Avenir Advantage, which began operating under a three-year charter to Petronas LNG in Malaysia, bunkering LNG-fuelled vessels and transporting LNG break-bulk cargoes.
“LNG is plentiful, cheap and far cleaner burning than coal, diesel and heavy fuel oil”
Avenir’s second vessel will go on charter in Brazil, supporting shareholder Golar LNG’s gas-to-power project in that South American country. Using a fleet of LNG bunkering and transport vessels will enable Avenir LNG to deliver LNG to those energy users who are not able to access the gas market today, company chief executive Milorad Doljanin told LNG Shipping & Terminals. Using a ‘hub-and-spoke’ model, Avenir Accolade will load LNG from floating storage and regasification unit Golar Nanook for delivery to various ports across Brazil, while also being available for ship-to-ship bunkering operations. ISO containers are also being considered as another means for distributing LNG by truck for vehicle, industrial and power generation users. Avenir LNG is looking to duplicate this model in other regions; its vessels are part of a growing global LNG bunker fleet, with some 19 in operation and another 20 or so on order. This growing fleet is part of a maturing supply chain for delivering LNG to gas-powered vessels, underpinning shipping’s path to decarbonisation. But we are not there yet.
In the Fourth IMO GHG Study, released in July, shipping’s total CO2 emissions increased 9.3% from 2012 to 2018, rising from 962M tonnes to 1,056M tonnes in 2018. Total GHG emissions – including CO2, methane, and NOx – expressed as CO2e, jumped 9.6%, climbing from 977M tonnes in 2012 to 1,076M tonnes in 2018.
Overall, shipping’s share of global human-made emissions increased from 2.76% in 2012 to 2.89% in 2018 – meaning we are moving in the wrong direction.
Shipping needs to reduce its GHG emissions by 40% per vessel by 2030 as compared to 2008 levels and by 50% for the entire fleet (70% per vessel) by 2050 to meet IMO targets. LNG fuel delivers up to 28% lower CO2 emissions from tank to wake. By starting with a dual-fuel engine and fuelling system, shipowners that have chosen to burn LNG have the option of transitioning to ‘drop-in’ lower carbon intensity future fuels, such as bioLNG or synthetic methane.
LNG is not the ‘silver bullet’ solution, but it moves the CO2 reduction needle in the right direction – and every journey starts with a first step.