In a previous blog, we outlined the issues surrounding the rapidly approaching "IMO 2020" directive. In this directive, which will come into force in January 2020, sulphur emissions from marine fuels will be limited to a maximum of 0.5%, compared to 3.5% today. In a series of six blogs we will describe a number of alternative fuels that are available now and in the future.
The use, technical applicability and commercial feasibility is different for the various types of ships and shipping routes. Deep-sea vessels have fewer options compared to the short-sea segment. Currently, apart from the low sulphur fuels and scrubbers discussed in the previous blog, only liquefied natural gas (LNG) and biofuels are viable for these ships. The Netherlands is Europe's largest supplier of marine fuels and this provides opportunities to leverage this position to become a leader in the production and supply of low sulphur marine fuels. In part 2 of the series we will explore the possibilities of LNG and bio fuels in more detail.
The use of LNG as a fuel has been much discussed, it has environmental advantages, but it still belongs to the fossil fuels: the sulphur and nitrogen emission of LNG is significantly less than that of HFO, but the CO2 emission is only 20% lower. In addition, there are safety issues associated with the use of LNG, particularly because it must be stored under high pressure and at low temperature. The danger of explosions means that it is subject to stringent regulations.
An LNG engine is mainly an option for new ships, but a number of existing ships have also converted to LNG. This is a costly affair. Fearnley LNG has calculated that a conversion costs $ 28 million; a new ship immediately fitted with an LNG-powered engine costs approximately $ 10 million extra.
The first LNG powered ship was the Norwegian ferry Glutra, built in 2000. In 2015, there were 102 ships running on LNG, and 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 rise to more than 10 percent by 2030 and 23 percent by 2050.
In container shipping, CMA CGM leads the way with its decision to use LNG as fuel for its ultra-large vessels. This was preceded by seven years of development 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, CMA CMG will have 20 LNG-powered vessels in its fleet.
The cost of LNG as a fuel is more advantageous than MGO or ULSFO. Comparing prices is difficult because there is no standard price for gas: the US market has its own exchange, the Henry Hub; in many other markets the price is linked to the price for oil. The current price at Henry Hub is about $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 cost of liquefying the gas is also added. For comparison, LNG provides 50 GJ of energy per metric ton, compared to 40.5 GJ of energy at HFSO.
Until recently, infrastructure development was a limiting factor: not so long ago, there was insufficient LNG bunkering infrastructure, which did not encourage shipowners to build LNG-powered ships; but with insufficient growth of the LNG-powered fleet, it was too risky for LNG bunkers to develop LNG infrastructure. This "chicken and egg" problem is resolving: LNG can be bunkered on the major trade routes as a fuel and nine of the world's ten major bunker ports can bunker LNG or have plans to be able to offer it by 2020.
The North Sea and the Baltic Sea have the most developed LNG bunkering infrastructure. In January 2019, there were 22 ports with LNG bunkering capacity in the Baltic Sea and 18 in the North Sea. Further another 49 in the rest of Europe. Yet another ports are actively developing LNG infrastructure.
The EU is very keen to develop a good LNG network. There is already more than $ 250 million European money invested through Connecting Europe Facility, these are credit facilities for LNG infrastructure development. In addition, there are also national initiatives by governments to stimulate the development of LNG.
Currently, about 150 LNG powered ships sail the world's seas and another 145 are on order from shipyards. The current demand for LNG bunkers is about 300 million mt/year.
The use of biofuel is a good option for shipowners to reduce CO2 emissions. The production process is known from other sectors and the fuels are used in more sectors than just shipping. In road transport, the coming years will see major investments in bio-LNG with a European network. For aviation, sustainable kerosene is expected to play a major role.
As with more "new" fuels, infrastructure is a limiting factor.
Nevertheless, several pilots and tests are underway. Back in 2015, Boskalis launched a pilot, in collaboration with GoodFuels and Wärtsila, for the development of scalable and affordable biofuels for shipping. The pilot covered a period of 2 years, during which the consortium tested different biofuels at the Wärtsilä test facilities in Vaasa, followed by live testing on different vessels within Boskalis' global 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 bio-fuel. The sustainable fuel oil is extracted from old cooking oil and is less polluting, because the CO2 emissions would be up to 80% lower than those of 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 the sustainable fuel oil is that it has a higher price tag than ordinary fuel oil. CMA CGM is conducting the test in collaboration with Ikea. The furniture company is fully paying for the costs of the more expensive fuel. For Ikea, it is an important step towards more sustainable shipping; if successful, the company plans to use the sustainable fuel for all containers transported from Rotterdam in the future.
Container liner Maersk is also testing biofuels: between March and June, the Triple-E ship Mette Maersk sailed from Rotterdam to Shanghai and back again on fuel consisting of 20% biofuel. Heineken, DSM, Shell, Unilever, FrieslandCampina and Philips were involved in the experiment. The use of biofuel generates extra costs for the transporters. Maersk advocates a global policy to reduce these costs.
The question is, however, to what extent biofuels will actually become available in sufficient quantities for use as shipping fuel. Other transport modalities are also testing biofuels, and the food and chemical industries also want to have access to biomass. These last two industries want to upgrade biofuel to high-grade products. Using biomass as ship fuel is considered a low-grade application. Moreover, the energy needs of the shipping industry - in particular the 'deep sea' - are very high.
Part 3 describes a (future) fuel with high expectations: hydrogen.