INTERVIEW: LNG gains interest as marine fuel for cutting emissions, costs: SEA-LNG

LNG as a marine fuel is experiencing a surge in interest because it offers immediate reductions in greenhouse gases and provides a cost-effective way to comply with the International Maritime Organization's and the European Union's shipping decarbonization rules, SEA-LNG Chief Operating Officer Steve Esau said.

Alternative fuel-powered newbuild vessels comprise about 40%-50% of the shipping order book, of which about 30% are LNG-powered. The number of ships with LNG propulsion is expected to rise in the future, as LNG usage as a marine fuel could lead to cost savings of more than $5 million per year for a mid-sized container vessel in certain instances, compared with other green fuels, Esau told S&P Global Commodity Insights in an interview.

In 2023, the IMO adopted a revised GHG strategy to significantly curb such emissions from global shipping. The targets include a 20% cut in GHG emissions by 2030 and a 70% reduction by 2040 compared with 2008 levels, ultimately achieving net-zero emissions around 2050. Meanwhile, the EU Emissions Trading System and the impending FuelEU Maritime are also imposing additional costs and requirements on shipowners to curb GHG emissions.

“LNG is able to comply with FuelEU Maritime until about 2039 in its fossil form. Green fuels such as liquefied biomethane are only needed for compliance from 2040,” Esau said.

In addition to rules such as the IMO's Carbon Intensity Indicator, EU ETS and FuelEU Maritime, it is also imperative to consider the impact of local emissions regulations, such as sulfur emission control areas, nitrogen oxide emission control areas and the EU’s Onshore Power Supply mandates at core TEN-T European ports that take effect in 2025, he said. This also presents positive prospects for using LNG as a bunker fuel.

“Under certain assumptions, for an eight-vessel [container] fleet fitted with two alternatively fueled balancing vessels, the overall cost of compliance with LNG will be between $5 million and $17 million per year lower than that in the case of methanol and ammonia,” Esau said, citing a recently conducted analysis by SEA-LNG.

Other considerations

Ready availability of LNG and its requisite bunkering infrastructure, well-developed standards for its consumption and handling also make it favorable for use as a marine fuel, Esau said.

According to an Oct. 8 statement from the industry coalition, the total number of LNG-powered vessels in operation globally by the end of 2028 will reach 1,154. Additionally, there are 772 LNG carriers in operation, with 341 more on order as of the end of 2023. This means that over 2,000 of the world’s 60,000 largest vessels are LNG-powered.

The LNG bunkering vessel fleet has grown worldwide from a single vessel in 2010 to 60 in operation currently. A further 13 LNG bunkering vessels are on order, the statement said. The expanding infrastructure will also be immediately ready for bio-LNG as it scales, and eventually renewable synthetic or e-LNG.

The issue of methane slip is being eliminated as LNG uptake accelerates, Esau said. Currently, two-stroke diesel cycle engines, which account for about 75% of the LNG-fueled vessel order book, have effectively eliminated the slip, he said.

For low-pressure engine technologies, manufacturers have reduced slip levels from low-pressure four-stroke engines by over 85% over the past 25 years.

Regarding methane slip, one of SEA-LNG’s recent members, Rotoboost, has developed a precombustion carbon removal system based on thermo-catalytic decomposition. This technology, when used on LNG-fueled vessels, enables the cracking of the methane molecule into hydrogen and solid carbon, Esau said.

The hydrogen is mixed into the methane fuel feed for the engines, reducing methane and CO2 emissions, while the solid carbon can be sold, Esau said.

SEA-LNG is leading a bio-methane working group along the Singapore-Rotterdam Green and Digital Shipping Corridor, or GDSC.

“We are developing bio-LNG bunkering pilots at both ends of the chain -- Rotterdam and Singapore,” Esau said. The pilots use the mass balancing chain of custody principle, which involves physically blending certified bio-methane with non-certified conventional LNG.

“Once we have done those pilots, we will look to demonstrate and crystallize the certification process to generate regulatory credits along key maritime routes,” Esau said. The success of the GDSC will provide a framework for scaling and offer the industry more certainty around the use of this fuel.

While Singapore and China have been demonstrating accelerated use of LNG as a marine fuel in Asia, countries such as Japan and South Korea also show promising potential, Esau said.

Significant LNG volumes are expected to come online by 2026 onward from the US and Qatar and pressure prices, prompting increased use of the fuel, he said.

Platts, part of Commodity Insights, assessed LNG bunker Singapore at $778.856/mt on Oct. 8.