LNG as fuel is spreading into worldwide shipping

LNG as a ship fuel has been discussed in shipping for approximately five years now. Nevertheless, the first non-gas-carrier to run on LNG – the Glutra – was a ferry and came into service in Norway as early as in 2000.

It lasted for 13 years until the first LNG-fuelled vessels not operating in Norwegian waters came into service in 2013. Now, LNG as a ship fuel is spreading into worldwide commercial shipping.

Today, more than 50 LNG-fuelled ships are in service and six of them operate outside Norway. this year was the irst time that the order book for LNG-fuelled ships contained more ships than the number of ships in operation using LNG as fuel. Approximately 70 ships are on order and only around one-third of them will operate in Norway. Another one-third will operate in the US while the rest will operate in Europe outside Norwegian waters.

Over the next few years, ferries will continue to play an important role in the growth of the LNG-fuelled fleet. Ships like Fjordline’s Stavangerfjord and Bergensfjord are the high end of this market. For vessels not operating on dedicated trades, it is still difficult to ensure the supply of LNG. Ferries operating on dedicated trades can handle the fuel supply much more easily than cargo vessels that operate worldwide. In addition, the existing sulphur and NOx requirements in North America and Europe and the related high cost of low-sulphur fuels already make LNG an attractive cost efficient solution.

In 2020, IMO intends to limit the worldwide sulphur content of ship fuel to 0.5\% weight. DNV GL evaluations conclude that this will lead to fuel costs of about 80\% of the MGO price. With this price level, LNG will become a very competitive solution for all ships. However, IMO will not make its inal decision on whether the limit is to come into force in 2020 or 2025 until 2018 because it has subjected the 0.5\% limit to a feasibility review that takes into account the worldwide availability of low-sulphur fuel in 2020. So it may be business as usual for more than ten years? this will be the case in many parts of the world but not in European waters.

EU has already decided to implement the 0.5\% sulphur requirement in 2020 regardless of the IMO decision. this means that a large part of the Mediterranean will be sulphur-restricted from 2020 onwards.

DNV GL predicts that 1,000 vessels will operate on LNG in 2020 and these will need four million tonnes of LNG as fuel. In 2020, we expect approximately 250 LNG-fuelled vessels to come into service. this will be approximately 9\% of all newbuildings. On the other hand, 91\% of all newbuildings will not be built to use LNG. It is obvious that these 91\% should at least be “LNG ready” to ensure that they can have successful commercial operations during
their lifetime. DNV GL helps ships be really LNG ready through its LNG ready service, which is modularised and includes modules for the review of documents in the
early project phase. Approval In Principle certification during the design phase is also part of the service.

By making a newbuilding LNG ready with classapproved designs and preparations for later, cost-efficient retrofitting for LNG fuel, shipowners can reserve their final decision and delay the major investment until a point in time when the terms are favourable and the risk level is acceptable. the moderate upfront effort and investment will pay off in terms of increased flexibility and tradability, a prolonged commercial lifetime and higher second-hand value.
the minimum upfront investments to prepare for a retrofit are related to:

• Installing a main engine, and possibly auxiliary engines, which can be converted to dual fuel (DF)
  
• ensuring sufficient electric generator capacity for auxiliary gas equipment
  
• Identifying the location and allocation of space for the LNG fuel tanks and processing system, bunkering stations and ventilation system
  
• considering designing and fitting foundations and supporting structure for the LNG tanks and processing unit the initial investment cost for this scenario is relatively very low. the later retrofit cost will be mainly driven by the cost of converting the main and auxiliary engines,

in addition to the LNG tank investment.

A concept design and to some extent also a detailed design for the LNG system and arrangement need to be prepared in order for the ship to be LNG ready. The LNG ready service takes the process all the way from the business case and concept stage to the initial
design stage where normal class activities take over. The design work has limited value if it has not been thoroughly reviewed by a classification society. DNV GL recommends shipowners to undertake an Approval in Principle for LNG ready ships to confirm compliance with current and expected future regulations.
Source: DNV GL