Authored by: Conor Tomac and Laura Musick
For those in the liquefied natural gas (LNG) business, the term “bunkering” has been a relatively recent addition to our vocabulary, but we’re hearing it a lot. In the past year, Black & Veatch has worked on three different projects, at different stages of development, to support new LNG bunkering infrastructure.
The maritime industry has started a major transition to using LNG as a marine fuel, and by 2025 as many as 60% of all ships on order may be LNG-powered. Ferries, cruise ships, cargo ships, and potentially military vessels will be impacted by this shift. Ports around the world are bolstering their LNG bunkering capabilities. Europe currently has the most facilities in place, and Asia Pacific countries are also rapidly developing bunkering capabilities. North and South America seem to have limited developments underway despite expecting a large influx in regional and global LNG ships over the next five years.
Driven by Emissions Restrictions
The maritime passenger transportation industry is entering a new generation that is heavily influenced by increased emissions restrictions. On 1 January 2020, the International Maritime Organization (IMO) lowered the global regulatory limits on sulfur in maritime fuel, reducing the limit from 3.5% to 0.5% (by mass). The most widely used fuel for commercial vessels is Heavy Fuel Oil (HFO), which has a sulfur content of 3.5% and no longer meets the regulation limits set by IMO.
This has left the maritime industry in a difficult position with the following alternatives to consider:
- Ultra-low and low-sulfur fuel oil can be used as an alternative fuel source and meet the IMO regulations. However, these blends can cost up to 50% more than traditional HFO, causing major concern for the impact on operating expenses in the coming years.
- Electric-powered vessels are another alternative, though the use of electric engines has not proven effective for large vessels because of the size restraints and low-reliability of implementing large on-board battery systems.
- Rather than changing fuel sources, some existing ships are being retrofitted with sulfur scrubbers or exhaust gas cleaning systems that remove particulate matter from exhaust gasses. These systems can be expensive and difficult to install on large maritime vessels.
- LNG is another alternative fuel source. With a sulfur composition of less than 0.004% (by mass), LNG easily meets even the strictest IMO requirements, and LNG powered vessels have already been proven within the maritime industry.
Given the difficulty and expenses associated with some of the above solutions, the use of LNG as a maritime fuel is becoming increasingly popular. The trend is resulting in an exponential increase in the number of LNG-powered ships expected globally in the coming years. A sample summary of LNG-powered ships is shown in Table 1.
Tabel 1 – LNG-Powered Ships by Ship Classification
|Ship Classification||In Operation||Under Construction||Future||Total by Type|
LNG-Powered Vessels Are Not a New Concept
The transition to LNG-powered passenger ships was first realized in ferries with countries like Norway and Canada, who have had great success since they began their operations in 2000 and 2013, respectively. There are currently at least nine LNG-powered ferries in operation in Canada and Norway alone. Other regions of the world, particularly regions with large volumes of maritime commerce, are looking to adopt LNG-powered ferries as well. The most notable region with LNG ferries under construction is Japan, which has at least four ships that are to be completed by 2023.
The Future of Cruise Ships
The largest wave of ships transitioning to LNG as the fuel source is the cruise line industry. Because of the placement of the engines and fuel storage on cruise ships, it is generally cheaper and easier to incorporate greener fuel technologies on new ships rather than updating old ships. While it is slightly more expensive to build an LNG-powered vessel, the reduced cost of LNG compared to HFO represents a significant reduction in operating costs. The potential savings in operating costs over the lifecycle of a cruise ship has driven investment from a majority of the major cruise line companies.
There are currently at least five LNG-powered cruise ships in operation with at least 35 ships on order to be completed by 2027. Carnival Cruise Line, Disney Cruise Line, and Royal Caribbean International, all based out of the U.S., have a combined eight LNG-powered cruise ships that will be in service by 2025 and will require a significant increase in LNG-bunkering infrastructure in North America to support their operations.
Maritime Cargo Vessels
The transition to LNG-powered cargo ships has been slower than that of the cruise ship industry. This is largely due to the scale and fuel requirements of larger shipping vessels. Smaller shipping vessels have successfully begun using LNG as the fuel source. There are currently at least 40 LNG-powered cargo ships in operation with LNG storage capacities ranging from 200 to 2,000 m3 or more. These vessels began entering service in 2014, starting with small-scale service vessels and car transportation vessels and have steadily increased in scale since.
In recent years, U.S. companies have turned to mid-scale LNG-powered vessels for the shipping of dry goods from the mainland to Alaska, Hawaii, and Puerto Rico. Shipping operations to Puerto Rico have acted as the pilot project in the U.S. for LNG-bunkering services. Many small- to mid-scale ships currently operate out of ports in Japan, Russia, and numerous countries in Europe. In addition to these, there is a recent trend of large-scale vessels under construction that will be powered by LNG.
Companies in Europe and Asia are increasing their investments in LNG-powered cargo ships as well. CMA CGM SA out of France has 20 newbuilt ships under construction and expected to make their maiden voyages between 2020 and 2022. Of these ships, nine will be among the largest vessels in the world and capable of carrying 23,000 twenty-foot equivalent units (TEUs). The LNG storage capacity on a vessel of this size is nearly 18,600 m3, which introduces logistical challenges for sourcing LNG on dedicated shipping routes.
Current LNG Bunkering Infrastructure
The volume of LNG required for large shipping vessels may require dedicated liquefaction plants and bunkering facilities throughout the shipping route. This introduces a classic “chicken-and-egg” situation. It is difficult to move forward with production of large LNG-powered vessels without additional LNG bunkering infrastructure in place; however, it is also difficult to justify additional LNG bunkering infrastructure without vessels to service.
LNG bunkering operations are present in varying levels around the world. The development of bunkering operations to this point has been primarily driven by government-provided incentives and initiatives focused on transitioning to LNG as a cleaner marine fuel. Because of global ships transitioning to LNG as the fuel source, it is predicted that the use of LNG bunkering for ships will rise sevenfold by 2025. Without bunkering infrastructure in place, ships will be required to adjust their schedules and routes to meet fueling needs. A quantitative summary of LNG-bunkering operations in each region is shown in Table 2.
Table 2 – LNG Bunkering Operations by Region
|Region||In Operation||Under Construction||Future||Total by Region|
|Europe, Middle East, Africa||55||11||3||69|
Is North America Falling Behind?
Based on current LNG bunkering operations, Europe is the region most prepared for the next generation of LNG-powered ships; Asia Pacific is actively developing the required infrastructure. North America appears to be the least prepared region to support LNG-bunkering operations, even with an abundance of natural gas sources. There are only two U.S. ports that currently offer LNG bunkering – Jacksonville, Florida, and Port Fourchon, Louisiana. Two additional ports are under development in Jacksonville, Florida, and in Tacoma, Washington. Considering that the United States is the world’s second largest bunkering hub behind Singapore, the country may risk losing maritime business if it does not increase its LNG-bunkering capabilities.
Based on the number of LNG-powered vessels on order and the number of planned LNG-bunkering projects, it is fair to assume two things:
- The LNG-bunkering market is going to be booming for the next several years.
- There will be a major focus on new LNG infrastructure development.
The need for LNG-bunkering operations in North America is particularly high, and the market drivers appear to support urgent developments to meet upcoming industrial needs.
Do you have a need for LNG bunkering operations in your community? Let the professionals at Black & Veatch bring that project to reality. Together we can build a cleaner world for our oceans and our community.
Visit bv.com/oil-gas to learn more or email Laura or Justin today to discuss project development needs.
Project Development Manager – LNG Solutions, Oil & Gas
4400 Post Oak Pkwy, Suite 1100, Houston, TX 77027
P +1 713 400 6526 | E MusickLD@bv.com
Principal Process Engineer - LNG Systems Leader
11401 Lamar Avenue, Overland Park, KS 66211
P +1 913 458 2891 | E EllrichJ@bv.com