LNG the best current bunker alternative: study
LNG is currently the most technically and commercially viable alternative to traditional bunker fuels, although there is no silver bullet to meet the IMO's 2030 and 2050 emissions targets, according to a study carried out by consultant Channoil and shipbroker EA Gibson.
The IMO's goals consist of a 40pc cut in carbon emissions in the maritime sector by 2030, from 2008 levels, and a reduction of at least 50pc by 2050.
From a commercial standpoint, the cost savings delivered by LNG — compared with 0.5pc sulphur fuel oil, or very low-sulphur fiel oil (VLSFO) — are already nearly enough to offset the additional $14mn of investment required to equip a very large crude carrier (VLCC) with the dual-fuel technology needed to use LNG, the study said.
Based on current prices, a VLCC would save $4,368/day by running on LNG instead of VLSFO, the study said. This is slightly less than the cost saving of around $5,000/d required to recoup investment in dual-fuel technology over a 15-year period, which is the typical length of time before a tanker of that size is considered too old to be chartered at full price. The small deficit could be closed by lower newbuilding costs and cheaper LNG prices as bunkering infrastructure improves and LNG freight rates decrease, the study said.
LNG could also become highly beneficial from a cost perspective if any of the proposed carbon levies on the shipping industry were to be enacted, because LNG emits 10-20pc less CO2 than VLSFO. The most advanced of these proposed levies — the EU's proposal to include greenhouse gas (GHG) emissions from ships of over 5,000 gross tonnes in its emissions trading system (EU ETS) by 1 January 2022 — would see a VLCC save $6,420/d by running on LNG rather than VLSFO, the study estimates.
If trading firm Trafigura's suggestion to apply a carbon levy on emissions above a threshold based on the IMO's targets were to be realised, the study projects that VLCCs would save as much as $21,460/d by using LNG rather than VLSFO.
The study also looked at the use of biofuels as alternative bunker fuels. But despite these being logistically viable, it concluded that the additional costs involved compared with VLSFO and LNG make them an unattractive option, even if shipping is added to the EU ETS.
If shipping is to reduce its carbon emissions by 50pc by 2050 and still grow as an industry, it will need to cut its average carbon intensity by 70pc, according to the study. But the CO2 savings delivered by LNG do not meet this goal on their own, and a number of lower-carbon options are also being explored, including methanol, ammonia and hydrogen, it said. But the study notes that the typical production methods for methanol and ammonia are carbon-intensive, and development would be needed in order to scale up "green" production. The supply chain for hydrogen, which is seen by many in the industry as a likely long-term bunker fuel solution, is currently much less developed than LNG, it said.
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