Swedish fuel company Preem has signed up to a year-long contract with gas supplier Gasum of Finland to take a blend of liquefied biogas (LBG) and LNG to fuel two tankers it has on charter.

Gasum sales director Jacob Granqvist believes this is the first time a company has taken contracted volumes of LBG over a term period for marine bunkering, outside of the pilots that have been done on using the fuel.

Under the deal, Gasum will supply a new fuel blend of LNG and 10% renewable LBG to bunker Preem’s time-chartered tankers, the 14,827-dwt Tern Ocean (built 2017) and 7,999-dwt Thun Evolve (built 2019).

GHG cuts

While using LNG as a marine fuel reduces greenhouse gas (GHG) emissions by up to 20% over conventional bunkers, Gasum has said switching to 100% LBG would cut GHGs by up to 85%.

The figure is not 100% because the production of biogas requires energy and it is not possible, at this stage, to know whether the electricity being used for this is carbon-neutral.

Key to the use of LBG, sometimes also referred to as liquefied biomethane (LBM), is that it can be used in the same way as LNG, without the need to modify existing infrastructure or ships.

“This deal with Preem is showing the world that you can blend liquid biogas into the LNG offering,” Granqvist said. “I think that is crucial for the whole gas industry to be capable of showing that there is really a path beyond the fossil gas.”

Gasum takes its LBG supply from the Risavika LNG production plant in Norway.

Jacob Granqvist, sales director at Gasum. Photo: Gasum

Granqvist, a master mariner by training, explained that producers of biogas push bio molecules — made from agricultural waste by anaerobic digestors — into the gas grid connected to the plant.

Gasum uses its time-chartered LNG bunker vessel, the 5,770-cbm Coralius (built 2017), to lift and supply the LBG.

He said Gasum has “full traceability” of the gas. “When we sell to customers it [LBG] comes with a certificate of origin of where it is coming from and where it is produced,” he says. “We can prove that that producer is connected to the grid and that is where we are buying from.

“It is a paper trade with the producers — like green electricity which is pushed into the grid.”

Granqvist said that aside from Risavika, Gasum also has biogas production in Finland and Sweden and is sourcing gas from Denmark and “constantly investing” in new production.

He said it is “a myth” that there is not enough biogas available for shipping.

“We have more molecules available than there has been demand so far,” he said. “We are not sold out. We could supply much more to the shipping industry than what we are doing right now. For all our customers today, we could provide them with some kind of a blend.”

Premium pricing

But LBG is more expensive.

Granqvist said Gasum sells it at a fixed premium on top of the LNG price. If a customer were using 100% biogas the cost would be slightly more than double that of LNG, he said.

LBG does not follow the same pricing fundamentals as LNG, as its cost is more related to logistics than production, he explained. But he does expect its price to fall as demand rises and shippers become further prepared to pay more to improve their own environmental credentials.

Granqvist said current discussions with customers focus on supplying LBG on demand.

He cited Sweden’s forestry industry, which he said has huge ambitions to decarbonise. A customer in this sector can choose to decarbonise a batch of paper being sent to a buyer in Germany by using LBG for its shipment, and pushing the extra cost on to the shipment’s receiver.

“We can allocate that exact amount of biogas to that parcel,” he said, which he believes as a more clear-cut solution than airlines planting trees to offset carbon emissions for flights.

Similarly, for cruise and ferry operators, customers could have an option to decarbonise their journeys by paying a premium for a ticket, with Gasum allocating the LBG to cover this.

Gasum is now looking to digitalise its LBG offering so that owners can get proof of origin and certificates for volumes, and follow these on board vessels.

“What is important for us is to show we have the capability and availability,” Granqvist said. “Some customers might never want to lift LBG, but it is enough for them to know that this possibility exists, so that it justifies the investment in an LNG-fuelled vessel.”