I attended an interesting seminar this week at the Brookings Institution in Washington, D.C., that focused on the intensifying debate over whether LNG is the fuel of the future for the shipping industry.
One of the points I found particularly striking was how advanced Asia and Europe are in promoting and using LNG in maritime and inland shipping, compared to the U.S., which has adopted a more reserved approach. This is despite the fact that the U.S. shale gas revolution is essentially fueling (sorry for the pun) the rise of LNG as an alternative to oil in the global marine fuel market.
For sure, there have been advances here. Just this week, Conrad Shipyard announced it would build a bunker barge, the first barge-to-tanker vessel that will carry LNG in North America. The barge will be operational in 2016 in Tacoma, Wash., where it will fuel ships before being relocated to Jacksonville, Fla. Crowley Maritime is building two LNG-fueled ships that will serve its Jacksonville- Puerto Rico routes. Totem Ocean Trailer Express serves the Alaska trade with LNG ships. And Harvey Gulf International Marine is building the first U.S. LNG marine fueling facility at Port Fourchon, La. HGIM recently took delivery of its first dual-fueled PSV from Gulf Coast Shipyard Group. LNG applications have also found their way into trucking, mining, railroads and oil and gas operations.
All these developments are driven by the economics of lower priced natural gas, and a bunch of domestic and international regulations mandating the use of cleaner fuels,.
But compared to Europe and Asia, the U.S. is lagging behind. “In the United States, there has been sporadic development,” said John E. Graykowski, former deputy and acting Maritime Administration administrator who is now a maritime industry consultant. “There is no real (national) strategy here, while in Europe, there are stringent (environmental) regulations and subsidies available to support LNG development”in the marine sector.
Many U.S. shipping companies, he explained, are reluctant to commit to LNG, given economic studies that suggest that costs of converting ships will not produce the same return on investment found among ocean going vessels, irrespective of the emissions gains and other non-economic aspects of LNG. Furthermore, infrastructure development at U.S. ports lags behind LNG ship construction, due largely to uncertain regulations and permitting, he added.
Everyone — ports, shipping operators and gas suppliers — are waiting for someone to go first. Meanwhile, the U.S. government is in the early stages of regulating this new form of marine fuel in terms of shipping and terminal procedures and safety.
“LNG is a complex industry, and we’re looking to put the right standards in place so as to not impede commerce,” Coast Guard Capt. John Mauger, chief, Office of Design and Engineering Standards, told the Brookings seminar.
Contrast the risk-avoiders with the risk-takers. Europe has lead the way in LNG use in marine operations, and the European Union has mandated that all ports have infrastructure to support LNG shipping by 2025. LNG has fueled passenger ferries and offshore support vessels in Norway since the early 2000’s. Plans are underway for LNG bunkering, with Rotterdam permitting ship-to-ship bunker deliveries and ocean-going vessels to be LNG fueled. Spain, Finland and Germany are taking measures to support LNG fleets and supply infrastructure, and demand is growing in the Baltic countries. Shell recently confirmed plans to build a sea-going LNG bunker vessel serving northwest Europe. Canada is also a big player, building LNG facilities.
Further afield, China is supporting an LNG bunkering network along its inland rivers, and Singapore is improving its infrastructure to preserve its position as the largest bunkering port in South Asia. It is also working to harmonize LNG bunkering rules and procedures with Rotterdam and Zeebrugge.
LNG appears to be the next big step in marine fuel, just as steam replaced sails and diesel replaced steam. If your company is thinking of LNG, what is holding you back?