In a previous blog, the problem was outlined around the impending directive “IMO 2020”. In this directive, which comes into effect on January 2020, the sulfur emissions from marine fuels are limited to a maximum of 0.5%, compared to previously3.5% now. In a series of six blogs we describe a few alternative fuels that are available now and in the future.
The use, the technical applicability and the commercial feasibility are different for the different ship types and shipping routes. Deep sea vessels have fewer options compared to the short-sea segment. Currently, in addition to the low-sulfur fuels and scrubbers discussed in the previous blog, only liquefied natural gas (LNG) and biofuels are profitable for these ships. The Netherlands is the largest supplier of shipping fuels in Europe and this offers opportunities to take advantage of this position to become a leader in the production and supply of low-sulfur fuels for shipping. In part 2 of the series we explore the possibilities of LNG and bio-fuels.
The use of LNG as a fuel has been widely discussed. It has environmental benefits, though it’s still one of the fossil fuels: the sulfur and nitrogen emissions from LNG are significantly less than from HFO, but the CO2 emissions are only 20% lower. In addition, safety issues are associated with the use of LNG, because it must be stored under high pressure and in low temperature. The danger of explosions means that there are heavy regulations around it.
An LNG engine is especially an option for new ships, but a number of existing ships have also switched to LNG. This is a costly affair. Fearnley LNG has calculated that a conversion costs $28 million; equipping a new ship with an LNG-powered engine immediately costs around $10 million extra.
The first LNG-powered vessel was the Norwegian ferry Glutra, built in 2000. In 2015 there were 102 vessels that operated on LNG, in 2017 there were 117. In February 2019 the number was 143, with another 135 on order. DNV GL estimates that the share of LNG in the global marine fuel mix will increase to more than 10 percent in 2030 and 23 percent in 2050.
CMA CGM is at the forefront of container shipping with its decision to use LNG as fuel for its ultra-large vessels. Seven years of development preceded this, together with shipyards, suppliers, SMEs and research laboratories. The first ship in this fleet of nine container ships will already be delivered in 2020. By 2022, the CMA CMG will have 20 LNG-powered ships in its fleet.
The costs of LNG as a fuel are cheaper than the cost of MGO or ULSFO. Comparing prices is difficult because there is no standard price for gas: the American market has its own stock exchange, the Henry Hub; in many other markets the price is linked to the price for oil. The current price at Henry Hub is approximately $ 2.40 per million btu (British termal unit).
The price of Japanese LNG, the world’s most expensive LNG, is between $ 7.50 and $ 5.00 per million BTU. The costs for liquefying the gas are then added. For comparison: LNG supplies 50 GJ of energy per metric ton, compared to 40.5 GJ of energy at HFSO.
Until recently, the development of infrastructure was a limiting factor: not too long ago there was insufficient LNG bunkering infrastructure, which did not encourage ship owners to build ships running on LNG; but with insufficient growth of the LNG-powered fleet, it was too great a risk for LNG bunkers to develop an LNG infrastructure. This “chicken and egg problem” is being resolved. LNG can be bunkered as fuel on the most important trade routes and nine of the ten most important bunker ports in the world can bunker LNG or have plans to be able to offer this by 2020.
The most developed LNG bunkering infrastructure is in the North Sea and the Baltic Sea. In January 2019 there were 22 ports with LNG bunkering capacity in the Baltic Sea and 18 in the North Sea. Another 49 were located in the rest of Europe. There are other ports that are actively developing an LNG infrastructure.
It is very important for the EU to develop a good LNG network. More than $ 250 million European money has already been invested through Connecting Europe Facility, these are credit facilities for LNG infrastructure development. In addition, national initiatives have been taken by governments to stimulate the development of LNG.
Currently, around 150 LNG powered ships are sailing across the world’s oceans and a further 145 are on order at shipyards. The current demand for LNG bunkers is around 300 million mt / year.
The use of biofuel is a good option for ship owners to reduce CO2 emissions. The production process is known from other sectors, the fuels are used in more sectors than just shipping. In road transport, a lot will be invested in the coming years in bio-LNG with a European network. Sustainable kerosene is attributed a major role for aviation. As with more “new” fuels, infrastructure is also a hindrance here.
Nevertheless, several pilots and tests are ongoing. Already in 2015 Boskalis started a pilot, in collaboration with GoodFuels and Wärtsila, for the development of scalable and affordable biofuels for shipping. The pilot included a 2-year period in which the consortium tested different biofuels at the Wärtsilä testing facilities in Vaasa, followed by live testing on different ships within the worldwide Boskalis fleet in different regions and ports.
CMA CGM also started a test: in March this year a CMA CGM container ship sailed partly on fossil fuel and partly on biofuel. The sustainable fuel oil is extracted from old frying fat, among other things and is less polluting, because CO2 emissions are up to 80% lower than those from fossil fuels. GoodFuels also plays an important role here. The company is in fact a producer of this sustainable fuel oil. A major disadvantage of sustainable fuel oil is that it has a higher price tag than the standard fuel oil. CMA CGM is doing the test in collaboration with Ikea. The furniture company will pay for the cost of the more expensive fuel. For Ikea it is an important step towards making the shipping sector more sustainable; if successful, in the future the company wants all containers transported from Rotterdam to run on sustainable fuel.
Container liner Maersk also conducts tests with biofuels: between March and June, the Triple-E ship Mette Maersk sailed from Rotterdam to Shanghai and back on fuel, which consisted of 20% biofuel. Heineken, DSM, Shell, Unilever, Friesland Campina and Philips were involved in the experiment. The use of biofuel results in extra costs for the transport companies. Maersk argues for a global policy to reduce those costs.
The question is, however, to what extent biofuels actually become sufficiently available for use as marine fuel. Other transport modalities also test biofuels and the food industry and chemicals also want to have access to biomass. These last two industries want to convert biofuels into high-quality products. Applying biomass as marine fuel is considered a low-value application. In addition, the energy requirement of shipping – in particular the deep sea – is very high.
In part 3 a (future) fuel with high expectations is described: hydrogen.