But perhaps the real reason why shipowners are hesitating before jumping into ordering LNG fuelled vessels has less to do with methane slip and more to do with the vast expense and complexity of implementation that LNG as fuel represents.
For the major owners, money may not be a problem, but many LNG as fuel projects have struggled for commercial viability without subsidies; its availability is intermittent and quality varies by region, with little or no price fungibility. Several new projects have been announced or reached FID, but the LNG sector has a legacy of cost overruns of up to 40%, which will need to be recouped at some point, which means fuel prices will continue to be volatile.
The costs of constructing an LNG-fuelled ship are considerably higher than the next most commercially-efficient alternative and while some yards would be happy to get the work, there are limits to which ones could build such complex tonnage in any volume. Others have decided that the additional requirements means tying up berth space when there is still plenty of conventional tonnage to be built.
At another recent industry event, a consultant with experience of building low and zero carbon ships pointed out that adoption of LNG as fuel is still challenged by safety risks and cost issues.
Fuelling a large LNG powered ship is more akin to lightering than bunkering, given the volumes required, while ordering a 50,000dwt LNG-fuelled MR tanker could put $9m on the order price and would still require exhaust after treatment for NOx Tier III emission compliance.
Not surprising then that some banks are hesitating too. At least one institution currently outside the Poseidon Principles remarked recently that environmental sustainability needs to go hand in hand with financial and economic sustainability, creating a big question mark regarding alternative fuels.
For the oil majors or shipowners to sink billions into LNG as fuel would be a colossal risk, which is why so far, though there are planned investments in the fuel for larger tonnage, the numbers so far are small.
Taking this into account, LNG becomes more of a distraction, preventing much needed innovation in advanced biofuels and carbon capture technology. LNG’s unsuitability as a mass-market transport fuel creates a number of immediate problems for a shipping industry seeking the means to comply with the first IMO carbon intensity reduction target in 2030.
The first is that the zero carbon alternatives we hear so much about are, while promising, decades from commercial availability and regulatory approval.
The growing attention being paid to hydrogen and ammonia in particular belies the fact that like most alternative fuels, they are derived from fossil fuels, in the case of ammonia, normally as a by-product of Methanol, with experience as a fuel at scale existing on paper only.
No regulations exist under which such ships could be built so as a result there are there no shipyard designs that an owner can specify. Even if they did exist, the cost of building them at a scale that could carry more than small numbers of passengers or small amounts of cargo, would be prohibitive without further subsidies, something policy-makers look likely to move away from.
Whether or not ports would even allow the entry of ships powered by such explosive or toxic substances is questionable too. Even once a safety case exists for hydrogen and ammonia these vessels must satisfy what are likely to be stringent demands from local authorities for risk management, given the potential dangers of using these fuels near to shore or inland.
Anytime gas comes into contact with oxygen, it becomes extremely volatile; despite decades of experience with land-based hydrogen refuelling stations, we have seen three accidents this year alone; in Norway, California and Korea. To bring it on board a ship will require a significant regulatory and technical undertaking and expense in order to make it safe.
At present, this makes them more akin to LNG; technologies for which there is potential demand but no robust market model. This doesn’t mean they won’t eventually take their place in the future fuels mix but for the moment, the industry needs to put the alternatives in context and understand what is possible in the next 10 and 25 years.
Investors and asset owners in shipping are traditionally driven by ROI but in the near future they will be driven by environmental performance too. This combination makes LNG a very short ‘bridge’ fuel for SOx, CO2, NOX and PM, as methane slip negates all such gains.
Methane slip is much higher at lower engine speeds, as much as 36g per kilogram of LNG, so slow steaming will not be an effective means for optimising emissions on a gas-powered vessel. Effectively reducing methane slip will require additional investments in both injection and after-treatment systems.
Taking this into account, it is possible that LNG’s operational performance will fall short of where the industry needs to be for GHG emissions by 2030 and afterwards.
The truth is that the industry can’t afford to sit and wait for a zero carbon fuel but neither does it have to incur the risk and expense of building LNG-powered tonnage. Because shipping needs an interim fuel with a pathway to full sustainability it would make more sense for those oil majors and tanker owners to look at Methanol.
For compliance with 2020 as well as a pathway fuel for 2030, Methanol provides a safe, cost efficient and regulated alternative, with no SOx or PM emissions, very low CO2 emissions during combustion and NOx Tier III compliance without an expensive SCR.
Methanol is available globally – at prices competitive to marine diesel – it’s safe, clean and is already adopted into the IGF Code, with fuel cells next in line for incorporation within the Code. Fuel cells represent a technology platform where methanol has already been widely used as the fuel of choice for decades.
It can be used as a ‘drop-in fuel’ to conventional diesel with simple conversion technology, or in blends of up to 27% with limited conversion requirements. Any vessel with a modern electric engine can be converted to burn Methanol for a fraction of the cost of an LNG conversion.
Unlike compliant low sulfur fuel oil or LNG, Methanol is widely available, with standardised product specifications and a transparent price. Research conducted for the Methanol Institute has concluded that Methanol can be available as marine fuel at over 100 ports around the world, plentiful enough for regular bunkering around the world.
As we move into the 2020s, more renewable Methanol will become available, meaning that owners can progressively reduce their carbon footprint at reasonable cost, without the need for technical or operational measures such as speed reduction or lower installed power.
Even when synthetic and bio-derived gas start to appear in quantity, the advantages of Methanol will still outweigh the challenges of LNG. It has been said that the shipping industry will wait a long time for a liquid fuel that it can use to replace fuel oil, but for the moment, that alternative is already within reach.
The views presented hereabove are only those of the author and not necessarily those of SAFETY4SEA and are for information sharing and discussion purposes only.
About Christopher D. Chatterton
Chris Chatterton joined the Methanol Institute (MI) in February 2015 as the Institute’s Chief Operating Officer (COO), where he is responsible for supporting the association’s CEO and for managing MI’s Asia pacific and Middle East operations. This includes government and strategic relationships, membership growth, and administration of the Singapore office. Over the past 20 years, Mr. Chatterton has worked at the executive level across the power, oil & gas, biofuel and chemical sectors, where he has been responsible for creating strategy, fundraising, restructuring, and operations for both startups and multinationals. Previously, Mr. Chatterton led several successful energy and agriculture initial public offerings (IPOs) and cross-border private placements in the European Union (EU), Asia, Middle East and the Commonwealth of Independent States (CIS). With extensive experience in Europe and the former Soviet Union, Mr. Chatterton is fluent in Russian and holds an Executive Master in Business Management Administration (EMBA) degree from HEC Paris.
