Bureau Veritas has gone to bat for LNG as a mainstream future fuel for shipping, hitting back at suggestions it is a “dead end” in the industry’s climate change battle.
Only a fraction of over 500 trading ships are powered by LNG, with the solution largely overlooked in favour of scrubbers to meet IMO 2020 regulations.
A lack of infrastructure makes LNG a tricky option for tramp shipping owners today, leaving its adoption largely confined to the gas carrier, containership and cruise markets.
However, with fresh emissions restrictions hanging over shipping in both 2030 and 2050, Bureau Veritas believes LNG is the only established fuel capable of meeting future regulations.
Jean-Francois Segretain, technology director at the French classification society, said those writing off LNG as a major marine fuel of tomorrow were assuming the only way to meet future emissions caps were with non-carbon fuels, such as hydrogen or ammonia.
“We don’t think it’s a dead end at all,” he told TradeWinds.
“If you invest in LNG right now, you invest not only for a fully compliant solution for the present rules and a good solution for the community, you invest also in a solution that can be used in the future when the IMO objectives come into play.”
Segretain noted that LNG fuel was gaining most momentum in the cruise and containership segments, while mainstream tramp markets were still constrained by global bunkering infrastructure, which remains under development.
“We think when the distribution network is fully deployed, this [LNG fuel] could be a mainstream application,” he added.
'Lowest emissions of any form'
However, there are signs of tramp tanker and bulk carrier shipowners exploring LNG as a fuel as charterers feel pressure from their own investors to improve their environmental credentials.
Shell is working with major shipowners on the world’s first LNG-fuelled VLCC and BHP — which has launched a high-profile climate change project — is looking to construct the inaugural dual-fuel newcastlemax bulker.
“LNG-fuelled ships have the lowest emissions of any form of commercial shipping and provide a way to meet the 2030 emissions targets creating further LNG demand,” GasLog chief executive Paul Wogan said.
“We believe these factors will lead to increases in both short-term and long-term demand for LNG vessels over and above the current operating fleet and orderbook.”
Despite some high-profile backers, including Total, the Saade family and Tor Olav Troim, shipping has been slow to adopt LNG fuel as a mainstream solution.
Data from Clarksons shows 507 ships on the water are LNG capable. Of those, more than two-thirds are LNG carriers and 12% cruise vessels and ferries. Tankers represent only 4% and bulk carriers just 1%.
Just over 300 ships on order are LNG capable, with more than 40% of those being LNG carriers. Cruise vessels and ferries account for almost one quarter, according to Clarksons, while containerships cover only 8%, tankers 10% and offshore 8%.
A further 143 trading ships and 85 newbuildings are classed as LNG ready, the world’s largest shipbroker said in a report this summer.
By contrast, scrubbers will be fitted to 2,219 vessels, equal to 12.2% by capacity. A further 589 newbuildings — around one-third of the orderbook — will boast the kit.
“We estimate that 3% to 4% of world tonnage will be LNG-fuel capable through [to] 2020, albeit the majority is still in [the] LNG carrier sector,” Clarksons said in the report.
“LNG infrastructure is also ramping up, with [the] number of ports globally with LNG bunkering increased from around 20 to around 100 in past five years.”
Norway has the largest share of those bunkering spots, ahead of China and Sweden. However, when planned projects are factored in, China leads the world for LNG bunker ports, Clarksons said.
One barrier for shipowners to invest in LNG-fuelled ships has been the greater upfront cost of vessels sporting the technology. Another is the uncertainty around future technology.
Trygve Munthe, co-chief executive of DHT Holdings, said this spring that the question over future propulsion technology was helping keep a cap on VLCC newbuilding orders.
“We think quite a few people are sitting on the fence because they don't want to be the first mover on a new design, and they don't want to be the last mover on the old design,” he said during the company’s first-quarter conference call.
Segretain acknowledges LNG-fuelled ships cost more upfront. However, he added that LNG is economical from the operating cost perspective.
He concludes: “Owners should do their own evaluation, to compare LNG with other solutions and chose the one which is available at present and not to worry too much about people saying it is not a future solution.
“It is probably a better future solution, then, to scrubbers. It’s quite clear for me at least.”
