New fuel rules push ship owners to go green with LNG

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Tough new rules on marine fuel are forcing ship owners to explore liquefied natural gas as a cleaner alternative.

In Ireland, Shannon LNG applied to An Bord Pleanála to extend the planning permission to build an LNG terminal on the Shannon Estuary near Ballylongford earlier this year.

Ports such as Gibraltar are preparing to offer upgraded refuelling facilities in the shipping industry’s biggest shake-up in decades.

From 2020, International Maritime Organisation rules will ban ships from using fuels with a sulphur content above 0.5pc, compared with 3.5pc now, unless they are equipped to clean up sulphur emissions. This will be enforced by fines levied by the IMO’s member states.

Using LNG to power ships instead of heavy fuel oil or the lighter marine gasoil can reduce polluting emissions of nitrogen oxides and sulphur oxides by 90 to 95pc, according to industry estimates.

The stakes are high. Analysts at Swiss bank UBS estimate that the green shipping market could be worth at least $250bn over the next five years.

To scoop up some that market, Gibraltar is in the process of launching an LNG-fuelled power station whose accompanying storage tanks will also be able to be used to refuel cargo ships via barges.

Gibraltar already supplies the most marine fuel of any port in the Mediterranean and is aiming to do the same with LNG, said Manuel Tirado, CEO of the Gibraltar Port Authority.

“The GPA’s aim is to be the number one LNG bunker port in the Med, however, this is something that will not happen overnight,” he told Reuters.

The shipping industry is under pressure to cut its emissions of the main greenhouse gas which causes global warming – carbon dioxide (CO2) – by at least 50pc by mid-century from 2008 levels, after the IMO agreed on a target in April after years of debate. Although still a fossil fuel, LNG emits 10 to 20pc less CO2 than even low-sulphur fuel oil.

A period of low oil prices slowed the take-up of LNG as a marine fuel. But over the past year, as the oil price has risen, appetite has grown in the cruise ship industry as well as in the container, cargo and tanker sectors.

There are currently 125 ships around the world using LNG, according to ship certification experts DNV GL, with between 400 to 600 expected to be delivered by 2020. That is a still small fraction of a world fleet of more than 60,000 commercial ships.

Valuation company VesselsValue said 78 ships with dual-fuel engines capable of using LNG would be delivered in 2018, the largest annual number to date.

“Over the last year or so there is a growing consensus among shipowners that LNG is a reasonable next step. It is gaining traction,” said Martin Wold, a senior consultant at DNV GL.

But the transition to LNG will take time, with low-sulphur oil-based fuels also used to replace heavy oil.

By 2050, DNV GL forecasts that only 47pc of energy for shipping will come from oil-based fuels. Gas fuels will account for 32pc, and the rest will be provided by carbon-neutral energy sources, such as biofuels and electricity.

One of the challenges in using LNG to power ships has been the investment needed to build the refuelling facilities.

In addition, commercial vessels powered by LNG cost around $5m more than regular ships.


Irish Independent

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