A new study conducted by research and consulting firm UMAS on behalf of the nonprofit European Federation for Transport and Environment is throwing some cold water on the idea that liquified natural gas could help the maritime shipping industry comply with looming emissions regulations.
The report, titled “LNG as a marine fuel in the EU: Market, bunkering infrastructure investments and risks in the context of GHG reductions,” found that developing the necessary infrastructure to fuel ocean vessels using LNG in Europe would cost $22 billion and would only result in a 6 percent reduction in greenhouse gas emissions by 2050 when compared to traditional diesel fuel.
UMAS notes in the study that European nations and firms have already spent more than $500 million on LNG bunkering infrastructure and warns that the “meager emissions savings would likely be canceled out by the growth of maritime trade.”
The report comes as the maritime shipping industry scrambles to put the necessary pieces in place to comply with two pending regulations from the United Nations’ International Maritime Organization that aim to drastically reduce the environmental impact of the maritime shipping industry as a whole.
The first is a much stricter limit on sulfur oxide (SOx) emissions from ship exhaust that takes effect on Jan. 1, 2020, while the second will see the industry reduce total greenhouse gas emissions to at least 50 percent of 2008 levels by 2050.
LNG fuel does not contain sulfur and, therefore, does not emit SOx when burned, but it is a mix of hydrocarbons (primarily methane), meaning carbon dioxide (CO2) emissions would still be an issue, and it has a much higher rate of potential methane slip, the unintended release of unburned methane during consumption. And as noted in the UMAS study, methane is 28 times more potent than CO2 as a greenhouse gas.
As a result, detractors argue LNG would not be a suitable solution for reducing overall greenhouse gases, but proponents have often referred to it as a “bridge” technology, one that could get the industry through the 2020 mandate while other, noncarbon fuels are developed to meet the 2050 deadline.
Faig Abbasov, shipping officer at T&E, argues, “LNG is not a bridge fuel, it’s an expensive distraction that will make it harder for the EU to achieve its shipping climate goals and reduce gas imports from places like Russia. Europe should back future-proof technologies that would deliver the much greater emissions reductions that will be needed, including port-side charging or liquid hydrogen infrastructure. This means the EU needs to stop mandating LNG infrastructure in European ports.”
The EU in 2014 directed member states to develop comprehensive LNG infrastructure across European ports, a move that will make the decarbonization of shipping an “even more challenging transition for the industry,” the study warns.
“[If] investments in LNG infrastructure are made now expecting a large LNG market for shipping, but the sector is subsequently required to switch to zero-emission technologies like hydrogen, ammonia and electric propulsion in order to decarbonize, then significant LNG assets (feeders, barges and storage tankers) will likely become stranded by 2050.”
According to Domagoj Baresic, consultant, UMAS and PhD researcher at the UCL Energy Institute, all this adds up to a market in which true demand for LNG as marine fuel over the next decade is still a bit of a mystery.
“On the one hand, it is an option for complying with the 2020 sulphur cap, but as it cannot enable the GHG reductions that have been committed to in the IMO’s initial strategy for GHG reduction, and the Paris temperature goals more generally, it is clear its role in shipping’s transition to a low-carbon future can only be transient,” he said.
Somewhat ironically, the release of the UMAS study also coincided with an announcement from French energy giant Total, which in 2017 purchased Maersk Oil for $7.45 billion, and Pavilion Energy that the two firms would jointly develop an LNG bunkering supply chain in the Port of Singapore, the world’s second-busiest cargo gateway by volume.
The agreement includes a shared long-term time charter of a new generation LNG bunker vessel, as well as an LNG supply arrangement between the two companies that will allow Total to deliver LNG bunker to its customers.
“The development of infrastructure is one of the key drivers for the takeoff of LNG as a marine fuel,” Patrick Pouyanné, chairman and CEO of Total, said of the deal. “For the past few months, Total has been very active in that direction. The agreement signed with Pavilion Energy marks a new step in our commitment to provide our customers with fuels that are more environmentally friendly, particularly in Singapore, which is the leading bunkering hub in the world.”
Tan Sri Mohd Hassan Marican, chairman of Pavilion Energy, said the agreement “sets the stage for making LNG bunker readily and reliably available for the market. Together, we mark a decisive step forward in leading the change towards cleaner and more responsible solutions with LNG bunkering in the region.”