Asian ECAs may drive up LNG demand
01 Oct 2012
LNG fuelled ship bunkering from a small LNG tanker (picture: Kogas)
LNG as bunker fuel is becoming more than just
talk in Asia: Wendy Laursen looks at developments in Singapore and
other Asian ports, where sulphur limits are likely to make gas fuelled
ships a ‘2020 vision’.
As the world’s largest marine fuel bunkering port, proponents of LNG
bunkers believe it is strategically important for Singapore to offer LNG
bunkering in the near future if it wants to stay in the game. Given
that the global SOx cap of 0.5% is not due until 2020 (subject to review
in 2018), it is the designation and location of more Emission Control
Areas (ECAs) that might set the timetable for action, as the amount of
time a vessel spends in ECAs features strongly in the financial case for
burning LNG as bunker rather than low sulphur diesel. The oil industry
has expressed no interest in refining heavy fuel oil to provide a lower
sulphur content in order to meet the 2020 market.
There is talk within the industry of an ECA being established in the Strait of Malacca but this would have a big impact on world trade and Singapore may not get the required support from Indonesia or Malaysia to implement it. Rumours abound about a Japanese ECA too despite past resistance from Japanese shipowners. The Pearl River delta including Hong Kong is another possibility being discussed and some see Korea, Australia and New Zealand as potential ECA candidates. China has already started with a process of emissions caps and the introduction of LNG bunkering in the Yangtze River.
Captain Rohit Bhatia, managing director of Wade Maritime Consultants
in India, agrees that development of the required regulatory schemes
will be important. “The ports providing LNG bunkering facilities will do
so in partnership with third parties or bunker suppliers. Maritime
regulators like the Maritime and Port Authority of Singapore and the
Directorate General of Shipping in India would have to develop
regulations for both shore-based and ship-to-ship bunkering. In
countries like India, customs rules are very archaic and wrapped around
with a lot of red tape. This is one of the reasons why India has not
grown as a bunkering destination.”
Captain Bhatia’s predictions for the first major LNG bunkering hubs are: Singapore, Hong Kong, Busan, Tokyo Bay and Shanghai. Key challenges will be the introduction of local regulations, the cost of conversion, the availability of tank space on board existing ships and the price of LNG compared to heavy fuel oil, but, even more importantly, Captain Bhatia sees the development of efficient logistics and the exportable surplus of LNG around the world as crucial to the fuel’s future potential. Currently, Singapore is the most advanced Asian country in this endeavour, he says, and like Europe and North America, he believes the designation of more ECAs will play an important role in generating demand for LNG. “LNG bunkering in Asia is likely to be a 2020 vision.”
Singapore has been the first Asian country to take definite action on international LNG bunkering for ocean going vessels. A joint industry project was established earlier this year to investigate the operational feasibility of LNG bunkering in Singapore and Captain M. Segar, group director of the Maritime and Port Authority of Singapore, described the country’s ability to bunker LNG as in line with its commitment to clean and green shipping. “Singapore is taking it very seriously,” says Tim Wilkins, Singapore-based environmental manager for Intertanko. “The Norwegians have been pushing it and we’ve got some key owners and operators in this area involved both in production and in transporting LNG around.” I. M Skaugen’s Norgas Carriers, for example, has a strong presence in Singapore.
In Asia, LNG is three times the price charged in the US and twice that in Europe, but it is the price advantage of LNG over low sulphur diesel fuels that is really the market to watch, says James Ashworth, lead consultant for Singapore-based business consultancy TRI-ZEN, as it is the only qualifying fuel alternative to LNG outside nuclear to achieve the required sulphur levels post 2020.
Significant investment has been made in LNG infrastructure for land-based applications in Asia, but financing has been traditionally secured against long term supply contracts with gas distributors or power generators. “The market for LNG bunkers will be less predictable and thus more challenging as a basis for investment security. While the means exist for larger players to establish facilities and initiate a market, it could prove difficult for smaller players to secure financing until the LNG bunker market becomes established and understood,” Mr Ashworth says.
Without immediate demand from shipping, Asian ports are not yet investing in LNG infrastructure. “It might take somebody like Maersk to team up with a big storage company such as Vitol. They could then afford to install strategic bunker stations around the world to service the main liner routes,” says Mr Ashworth.
“There are technical challenges associated with LNG bunkering, but these are all well known and understood. What is less well understood and even less defined are the rules and protocols needed for custody transfer of LNG,” he says. The complete avoidance of methane venting to the atmosphere during fuelling operations is imperative and this means that bunker barges will probably require sophisticated reliquefaction equipment or at least pressurised storage tanks dedicated to the management of excess boil off gas.
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material.There is talk within the industry of an ECA being established in the Strait of Malacca but this would have a big impact on world trade and Singapore may not get the required support from Indonesia or Malaysia to implement it. Rumours abound about a Japanese ECA too despite past resistance from Japanese shipowners. The Pearl River delta including Hong Kong is another possibility being discussed and some see Korea, Australia and New Zealand as potential ECA candidates. China has already started with a process of emissions caps and the introduction of LNG bunkering in the Yangtze River.
Captain Rohit Bhatia, managing director of Wade Maritime Consultants
in India, agrees that development of the required regulatory schemes
will be important. “The ports providing LNG bunkering facilities will do
so in partnership with third parties or bunker suppliers. Maritime
regulators like the Maritime and Port Authority of Singapore and the
Directorate General of Shipping in India would have to develop
regulations for both shore-based and ship-to-ship bunkering. In
countries like India, customs rules are very archaic and wrapped around
with a lot of red tape. This is one of the reasons why India has not
grown as a bunkering destination.”
Captain Bhatia’s predictions for the first major LNG bunkering hubs are: Singapore, Hong Kong, Busan, Tokyo Bay and Shanghai. Key challenges will be the introduction of local regulations, the cost of conversion, the availability of tank space on board existing ships and the price of LNG compared to heavy fuel oil, but, even more importantly, Captain Bhatia sees the development of efficient logistics and the exportable surplus of LNG around the world as crucial to the fuel’s future potential. Currently, Singapore is the most advanced Asian country in this endeavour, he says, and like Europe and North America, he believes the designation of more ECAs will play an important role in generating demand for LNG. “LNG bunkering in Asia is likely to be a 2020 vision.”
Singapore has been the first Asian country to take definite action on international LNG bunkering for ocean going vessels. A joint industry project was established earlier this year to investigate the operational feasibility of LNG bunkering in Singapore and Captain M. Segar, group director of the Maritime and Port Authority of Singapore, described the country’s ability to bunker LNG as in line with its commitment to clean and green shipping. “Singapore is taking it very seriously,” says Tim Wilkins, Singapore-based environmental manager for Intertanko. “The Norwegians have been pushing it and we’ve got some key owners and operators in this area involved both in production and in transporting LNG around.” I. M Skaugen’s Norgas Carriers, for example, has a strong presence in Singapore.
In Asia, LNG is three times the price charged in the US and twice that in Europe, but it is the price advantage of LNG over low sulphur diesel fuels that is really the market to watch, says James Ashworth, lead consultant for Singapore-based business consultancy TRI-ZEN, as it is the only qualifying fuel alternative to LNG outside nuclear to achieve the required sulphur levels post 2020.
Significant investment has been made in LNG infrastructure for land-based applications in Asia, but financing has been traditionally secured against long term supply contracts with gas distributors or power generators. “The market for LNG bunkers will be less predictable and thus more challenging as a basis for investment security. While the means exist for larger players to establish facilities and initiate a market, it could prove difficult for smaller players to secure financing until the LNG bunker market becomes established and understood,” Mr Ashworth says.
Without immediate demand from shipping, Asian ports are not yet investing in LNG infrastructure. “It might take somebody like Maersk to team up with a big storage company such as Vitol. They could then afford to install strategic bunker stations around the world to service the main liner routes,” says Mr Ashworth.
“There are technical challenges associated with LNG bunkering, but these are all well known and understood. What is less well understood and even less defined are the rules and protocols needed for custody transfer of LNG,” he says. The complete avoidance of methane venting to the atmosphere during fuelling operations is imperative and this means that bunker barges will probably require sophisticated reliquefaction equipment or at least pressurised storage tanks dedicated to the management of excess boil off gas.
