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Wednesday, January 16, 2013
Will LNG become a widely-used marine fuel?
By Michael Hansen @ 5:19 PM :: 7856 Views :: Energy, Jones Act

Will LNG become a widely-used marine fuel?

by Michael N Hansen, President Hawaii Shippers Council

The rising cost of petroleum fuels coupled with strict new international air pollution regulations for ships, which will come into force over the next decade, are causing ship owners and operators to look seriously at the use of Liquefied Natural Gas (LNG) to fuel vessels from tug boats, to offshore service vessels (OSV)s and deep draft oceangoing ships.

There are a host of infrastructural and other impediments to be over come in order to bring about the widespread use of LNG as bunkers  --  which is the maritime industry’s term for a fuel to power a vessel.  For example, there are virtually no LNG bunkering facilities in the world’s ports, existing vessels must be converted from conventional petroleum to LNG fuel, and ships crews must be trained to safely operate LNG storage and re-gasification equipment on board ship.

Today most marine vessels consume petroleum-derived fuels. Workboats such as tugs and OSVs typically use distillate diesel fuel in high speed diesel engines.  Large modern motor ships normally operate on heavier residual fuel oils in low and medium speed diesel engines.  The small number of steamships still in service use heavy fuel oil to produce steam in their boilers.

The petroleum based fuels produce relatively high amounts of particulates, sulfur oxides (SOx) and nitrous oxides (NOx) pollution, especially the heavier residual fuel oils.  Currently the new international air pollution regulations require ship operators to use very low sulfur bunkers when operating in coastal Emissions Control Areas (ECA)s.  As a  result, these low sulfur bunkers are now in short supply and prices are rising sharply.  In the future, this requirement for low sulfur fuels will extend past the ECAs for ships transiting across the oceans.

The international  air pollution regulations have been promulgated pursuant to Annex VI of the International Convention to Prevent Pollution by Ships (MARPOL) which is administered by the International Maritime Organization (IMO), a specialist agency of the United Nations based in London, U.K.  The Protocol of 1997 (MARPOL Annex VI) was adopted in 1997, and entered into force on May 19, 2005.

U.S. implementation of MARPOL Annex VI is through the U.S. Act to Prevent Pollution from Ships (33 U.S.C. §§ 1901 et seq.).  The U.S. Environmental Protection Agency (EPA) and the U.S. Coast Guard (USCG) through a Memorandum of Understanding (MOU) of June 27, 2011, will jointly enforce U.S. and international air pollution requirements for vessels operating in U.S. waters.  These requirements establish limits on nitrogen oxides emissions and require the use of fuel with lower sulfur content with the most stringent requirements applying to ships operating within 200 nautical miles of the coast of North America.

In response to these developments, the U.S. ocean common carrier TOTE Maritime recently announced on December 5, 2012, that they ordered two LNG fueled 3,100 twenty-foot equivalent unit (TEU) containerships from General Dynamics NASSCO San Diego for their Sea Star Line Inc. service between Jacksonville, Florida and San Juan, Puerto Rico.  Previously, TOTE announced on August 3, 2012, that they would be converting two of their existing oceangoing trailerships employed in the domestic Alaska trade from intermediate fuel oil (IFO) to LNG .

Other recent LNG-fueled newbuilding announcements include:  four LNG-fueled OSVs for US operator Harvey Gulf International Marine for the Gulf of Mexico on August 15, 2012; the Australian shipbuilder Incat launched the world’s first LlNG-powered high speed passenger RO/RO ferry for operator Buquabus for their Plate River service between Buenos Aires and Montevideo; and, the major Italian ferry operator Lauro Shipping on November 26, 2012, said they are developing an LNG-powered ferry design for service between mainland Italy and the islands of Capri, Ischia and Sicily,

The potential use of LNG by Hawaiian interIsland shipping services was addressed in a recently released State-funded report by Facts Global Energy (FGE) Consulting entitled “Liquefied Natural Gas for Hawaii: Policy, Economic, and Technical Questions,” dated December 20, 2012, and contracted for by the Hawaii Natural Energy Institute.

Most recently the London-based FC Business Intelligence announced their “LNG for Marine Transportation Conference” to be held in Houston, Texas, on June 11-12, 2013.  The conference is designed to address the issues, challenges, and opportunities with making LNG a viable marine fuel.  In connection with their conference, FC Business Intelligence issued a very informative white paper 'Liquefied Natural Gas as a Marine Fuel in the USA'  and have made a conference brochure available.

This is a major issue that will affect all the noncontiguous trades – Alaska, Guam, Hawaii and Puerto Rico – as all are part of the U.S,. ECA and the requirements for higher cost low sulfur fuels will apply to all the trades.  In August 2012, the major ocean carriers began assessing special low sulfur bunker surcharges to compensate for the high cost of those fuels.

In response to imposition of this impending new requirement, the State of Alaska under the leadership of Governor Sean R. Parnell (R) sued the federal government in the person of Secretary of State Hillary R. Clinton in federal district court on July 13, 2012, asserting that enforcement of the North American Emissions Control Area (ECA) lowering the allowed maximum sulfur content for bunker fuel from 3.5% to 1% within the 200 mile Exclusive Economic Zone (EEZ) limits is unconstitutional.

This is a story well worth following as it will certainly affect the transportation dynamics of the noncontiguous jurisdictions.

---30---

The Hawaii Shippers Council (HSC) is a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment with the ocean carriers operating the Hawaii trade.  Please contact the HSC at email pacmar@hawaiiantel.net if you wish to be placed on our email list.

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