The prospects of LNG been used as a true alternative to more conventional marine fuels are fast becoming more and more viable. The potential is there, but a major shift towards LNG as a marine fuel, will also most likely impact its cost and availability. According to the latest weekly report from shipbroker Intermodal, the majority f international trade is realized via shipping and the world’s s fleet predominantly consumes marine diesel & fuel oil. LNG, despite the fact that it requires more tank space (volumetric) compared to other transportation fuels to generate equivalent energy, is of lower cost and more environmentally friendly.
According to Katerina Restis from the Tanker Chartering department of Intermodal, "market expectations are that oil prices shall continue to rise, however the truth lies in the fact that the spread between LNG & marine fuels price depends on the area of source. According to the International Gas Union, in Spain, the spread between HFO prices and LNG is considerable, with $ 5-10/mmBtu difference, whereas in Japan for the margin is a lot smaller. Moreover, future sulphur emission regulations set an extra incentive, as by 2015, in USCaribs, North America and European waters (SECAs) it will be obligatory for fuel sulphur content to be further limited from 1% down to 0,1%. On a global basis, by 2020, it will be required that the sulphur content on marine fuels to be further reduced to 0.5%. LNG in comparison fits perfectly into these requirements with a sulphur content of 0.004%. Some indicate that there will be insufficient fuels available that match the requested requirements and thus push for a later date of strict enforcement".
She added that "European governments have been exploring for some time the idea of LNG usage as marine fuel and consequently looking into ways ports could provide LNG bunkering services. In terms of coastal shipping, certain N. European countries have already invested in building small scale bunkering infrastructures, whereas in the Med region, similar options are being explored. In January 2000, car/passenger ferry “Glutra” had gas engines installed in 4 separate machinery spaces, making it the first LNG powered ferry, while in 2006 the “Provalys” was the first tanker to use LNG to fuel her diesel propulsion systems. These days, around 50 LNG powered vessels are in operation and approximately 30 more are currently on order. Taking into account that the busiest trade routes are between W. Europe and the U.S. East Coast; Asia to the U.S. West Coast and continuing to the Gulf and East Coasts; Asia to W. Europe via Suez Canal and return; Middle East to W. Europe; and Middle East to Asia all of which follow a regular and repeating pattern, it is most likely that Deep-sea vessels utilized on these routes would also be the first adopters of LNG as an alternative marine propulsion fuel while bunkering stations along these routes would find it easier to be the first to build infrastructure and lead the way in terms of operating such services. At the same time many owners are considering the more economical option of a dual-fuel engine which would allow the flexibility of switching to LNG as a fuel source only when entering SECAs", Restis said.
She concluded her analysis by noting that "the question rising is whether the LNG price will continue to make economic sense or if it will align gradually with that of the competing energy sources used as fuels. It is projected that Europe and the US will rely on internal production of natural gas, while Asia Pacific will mostly depend on imports. With the growing need to challenge the new safety concerns involved with operating vessels that use LNG as fuel, the IMO has already embraced Interim Guidelines and is working on a draft of an “International Code of Safety for Ships Using Gases or Other Low Flashpoint Fuels (IGF Code)” with the aim of completing this within 2014. Uncertainty of global economic activity affecting shipping activity, fuel prices, environmental regulations, know-how and machine technology, costs of infrastructures and LNG availability, are all key elements affecting the underlying demand, the scale and form of which is only just starting to take shape.
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