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LNG fuelling proves to be a slow burner for the industry

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Tradewinds

But the next wave of newbuildings for deepsea vessels across all types could change that

Some bigger names have entered the LNG-fuelling arena in 2018, with constant veiled hints being made across the industry that more will follow in the coming months.

Sovcomflot (SCF Group) and Shell are demonstrating that using LNG as bunkers can make sense for aframax tankers trading in northern Europe, and Carnival is due to show off its first LNG-fuelled cruiseship — the 183,000-gt newbuilding AIDAnova — this month.

These are all new vessels specifically designed to bunker LNG and it is widely accepted that this fuelling solution best stacks up for newbuildings, whereas retrofitting existing vessels to use LNG as a fuel is prohibitively expensive in most cases.

But with the approach of the IMO’s 2020 deadline for a reduction in sulphur emissions fast approaching, those following the LNG fuelling business say shipowners' minds are largely on making sure their existing fleets are compliant.

Scrubbers or low-sulphur fuels

Here the choice is largely about fitting exhaust gas emission scrubbers so ships can continue to burn high-sulphur fuel oil (HSFO) or switching to the new low-sulphur fuel oil products.

For many, the decision on whether to opt for LNG fuelling is one for the next generation of newbuildings.

This is just one of the reasons given for what on the surface seems like a slow uptake in LNG as a fuel.

Shipowners weighing it up as an option also flag up the availability of LNG bunkers globally, the high capital expenditure compared to the other options for meeting 2020 compliance, and the possible restrictions within ports on these types of operations.

Today, DNV GL’s figures show there are 137 LNG-fuelled vessels in operation, with a further 136 on order. In addition, there are 135 LNG-ready ships, which are designed and built for simpler conversion to LNG fuelling.

While the number might seem small, the appearance of larger vessels among their number is huge for LNG bunkering.

Mark Bell, who is general manager at the Society for Gas as a Marine Fuel, says that when the first vessel of boxship owner CMA CGM’s nine, 22,000-teu dual-fuel containership newbuildings emerges in 2020, it alone will use more than the total volume consumed by all of the LNG-fuelled ships in operation today.

Infrastructure is being put in place. Currently, there are seven LNG bunker vessels on the water compared to just one in 2017. David Colson, GTT’s vice president of commercial, says there are another 14 ships either under construction or being discussed.

Bell says this alone is an indication that there are LNG fuelling projects under consideration.

'Increase in projects'

“There is a huge increase in the number of projects compared to what there was 12 months ago,” Bell confides.

Industry coalition SEA\LNG says nine of the world’s current top 10 bunker ports will have LNG bunkering capabilities by 2020.

Despite these developments, shipowners appear concerned that LNG will be available to them at transparent pricing and when and where they need it.

“There is gas everywhere, but is it available to the maritime market for use as a fuel? No,” Bell says. “It’s in the terminal or it is not where you need it, or it has already been bought and sold and is not necessarily available to you. It’s everywhere and nowhere.”

He believes there will need to be a gestation period of perhaps five to seven years before LNG fuelling starts to fly.

“2025 is probably the time when we are going to see the biggest take up,” he says.

Forecasts vary as to how large that uptake might be when it finally gets underway. Colson quotes Poten & Partners' estimates that by 2030, up to 3,500 new LNG-fuelled orders could be placed, of which 500 — or 15% — could be containerships.

But Bell says people are looking more seriously at using LNG now.

And what if they do opt for LNG fuelling? “Personally, I think you leapfrog everything and leave everyone else standing, but it does cost you upfront,” Bell says.

He says there is “no way” the industry can meet the IMO’s target to cut carbon emissions from shipping by 40% by 2030 without gas: “Gas is the last fossil fuel.”