UK shipping industry considers potential of LNG in emissions cuts
London (Platts)--15Aug2011/114 pm EDT/1714 GMT
The UK's shipping industry is considering the potential of using LNG to
fuel ships as a way of cutting emissions, the British Chamber of Shipping
However, while LNG could offer emissions savings, any large-scale switch
is still some time off, Adrian Lester, marine environment and offshore
spokesman, told Platts.
Lester said that it was "certainly something our members are interested
in," and he noted that Norway was working hard to grow LNG as a ship fuel.
But he said that currently shipowners had questions about switching from
traditional oil bunker fuels to gas.
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He said people were used to oil markets, but were not so certain about
the gas market, and would need some "certainty" about future gas prices to
invest in a gas-fueled ship that could last 30-40 years.
Potential purchasers of a gas-fueled ship might also have concerns about
their ability to sell a ship on to a new buyer after 10-20 years. Anyone
selling an LNG-powered ship would only be able to sell it on to an owner in
an area with LNG infrastructure in place.
But Lester said that LNG could have potential as a ship fuel, especially
for applications where the route was predictable and there was certainty that
fueling opportunities would be in place. For example, ferry services that are
going to operate long-term in northwest Europe might switch to LNG more
easily than ships planned to operate across the world.
The UK now has three LNG terminals, while there is one in Belgium and
the new Gate LNG terminal at Rotterdam is currently commissioning. Although
designed mainly to supply gas to onshore gas networks, such terminals may
also offer bunker possibilities for shipping.
Lester said that "the primary attraction [of LNG] to start with is going
to be the sulfur benefit," although the carbon savings benefit of gas
compared with oil was also a potential gain.
Norway has LNG-fueled ferries and coastal patrol vessels.
At the European Gas Conference in Oslo in June Henrik Madsen, CEO of
shipping classification group Det Norske Veritas, identified international
shipping as a growth market for gas, through using LNG as a bunker fuel for
ferries, cargo ships and tankers.
Madsen said the 90,000 vessels now in the world fleet used around 370
million mt/year of petroleum fuels, which represented a potential market for
LNG of up to 315 million mt, double the amount of energy traded as LNG today.
SHIPPING CONSIDERS EMISSIONS SCHEMES
The carbon saving aspect of using LNG as a shipping fuel may become
increasingly attractive as the shipping industry is forced to pay more
attention to its carbon emissions in coming years.
The European Union is currently bringing aviation into the remit of its
EU Emissions Trading Scheme from 2012, and has indicated to the shipping
industry that if industry does not act to control its own emissions, the EU
will also bring European shipping into the EU trading scheme in the future.
The British Chamber of Shipping last week published two papers on
possible emissions control mechanisms for the global shipping industry.
One paper covers the potential for the International Maritime
Organization to set up a global emissions trading scheme for shipping, and
the second covers the potential for an emissions levy -- or fuel tax -- to be
set up, with the proceeds paid into a fund for use in emissions reduction.
Under a levy scheme a ship using LNG as a fuel might perhaps pay a lower
levy than one using oil.
Lester said that the international industry needed to work on global
carbon reduction plans to avoid the implementation of region-specific
solutions, such as an EU scheme, that could potentially skew trade.
Lester said that trading schemes and levy approaches both had "positive
sides" and "drawbacks." He said that the levy system was initially perceived
by many to be "an awful lot simpler" because it would spare shipowners from
having to get involved in trading. But analysis showed that "quite quickly"
such a levy stopped looking so simple, with complex administration required.
Emissions trading might be simpler scheme to administer, but more
complex for the companies taking part.
Lester said that the British Chamber of Shipping was hoping its reports
would provide material for the international industry to debate.
He said the chamber would also welcome another organization with
relevant expertise providing a paper outlining the possibilities for a third
approach, of efficiency trading, which he said had found some favor in the US.
--Alex Froley, firstname.lastname@example.org