* LNG seen a cleaner fuel alternative for ships
* Market seen in nascent stage
By Jonathan Saul and Henning Gloystein
LONDON, Oct 26 Ports around the world are
considering liquefied natural gas (LNG) as a ship fuel in a
drive to reduce carbon emissions, but the shift will be slow due
to the high capital costs of fitting ports and vessels and a
lack of investors, industry players say.
The Rotterdam and Singapore ports, both major international
sea transportation hubs, recently announced plans to invest in
facilities that would allow ships to take LNG as fuel instead of
oil-based fuel products, known as bunker fuels.
Leading ship classification societies such as Britain's
Lloyd's Register, Germany's Germanischer Lloyd (GL) and Norway's
Det Norske Veritas (DNV) say LNG is a viable alternative to
conventional marine fuels.
Despite these developments, analysts say LNG has yet to kick
off as a shipping transport fuel, even though its cost is
competitive with oil-based fuels, and is likely to remain a
"Despite the excitement, there has yet to be an order for
deep-sea, large-engined, LNG-fuelled ships," said Hector Sewell,
head of marine business development for Lloyd's Register.
"LNG is unlikely to simply replace heavy fuel oil. We will
see specific niches embrace LNG in small-scale applications."
All ports planning to introduce LNG as a transport fuel are
in regions that already have, or planning to put in place,
Emission Control Areas (ECAs) where ships would reduce their
emissions of climate-changing chemicals into the atmosphere.
In Australia, the maritime and port industry has teamed up
with DNV to introduce LNG-fuelled support boats and port tugs.
"Emissions controls, introduced by the IMO (U.N. shipping
agency the International Maritime Organization) ... combined
with the introduction of emission control areas in European,
U.S. and Canadian territorial waters will have a profound impact
on international shipping over the next 10 years," GL said.
LNG, currently used almost exclusively for electricity
generation, is a cleaner fuel than oil-based products. Initial
studies show that the use of LNG instead of diesel engines can
reduce a ship's CO2 emissions by 25 percent and cut its sulphur
emissions by as much as 80 percent.
The five ports that are developing LNG bunkering
infrastructure are Gothenburg and Nynashamn in Sweden, Zeebrugge
in Belgium, Rotterdam in the Netherlands and Singapore, a study
by Lloyd's Register study published this month showed.
"It had to happen in an Emission Control Area and will begin
with European and Scandinavian countries," said Navin Kumar, a
senior research manager with consultants Drewry.
ENERGY MAJORS NEEDED
Lloyd's Register said the use of LNG as fuel will pick up
only from 2019 and by 2025 will make up 3 to 8 percent of global
bunker fuel demand and only 1.5 to 4 percent of total global LNG
Shippers say that the high capital investment requirements
to build an LNG fuelling infrastructure and the limited interest
by major oil and gas companies to take on these costs are
Additionally, the shipping industry would have to be willing
to invest in a fleet of LNG-powered ships at a time it is
struggling with a glut of vessels and economic uncertainty.
"This idea could get a boost if the energy operators decide
to pursue that idea, (but) the market right now is at a nascent
stage and not big enough to interest these players," Drewry's
Although the Dutch government and a group of energy
companies including Royal Dutch Shell, BP,
Chevron and ExxonMobil have pledged to
accelerate the use of LNG as transport fuel, efforts so far have
largely concentrated on harbour vessels rather than large
Without major players, analysts say it will be difficult to
find the cash to build a global LNG fuelling infrastructure for
"The infrastructure to actually deal with LNG bunker is very
capital intensive," said Latifat Ajala, Lloyd's Register's
senior market analyst.