Are LNG-powered ships a viable answer to incoming MARPOL regulations?
April 26, 2017
NewsBase Research (NBR) chairman Gav Don considers whether LNG-powered ships are a viable answer to incoming MARPOL regulations.
Is LNG on the cusp of replacing Liquid Fuels in the market for ship propulsion? A quick glance at the International Convention on Prevention of Pollution from Ships (MARPOL to its friends) might make one think so. MARPOL sets standards for NOx and SOx emissions by marine engines, and it is now in force.
Permitted emissions are graduated in Tiers, according to the age of the ship and its engine speed in RPM, and also by area, with the coasts of (broadly) the US and Europe sitting in the most stringent areas. So how big is the challenge?
International bunkers currently account for about 5% of world Liquids demand, and have reliably added about 100,000 barrels per day to world demand each year, making their demand “upsteps” equal to most large economies. Without going into too much (expensive) detail, some patterns jump out of NBR’s research. First, unlike a Liquids Intensity Curve, which shows how individual economies grow, and then shrink, their Liquids demand over time, Bunkers demand has marched in almost rigid lock-step with global GDP growth for 30 years. Plotting a regression between them shows a Rho (coefficient) of 0.97. The problem of ship emissions is therefore unlikely to be solved by getting rid of ships.
New SOx There are many options for complying with MARPOL that do not require mass write-off of existing ship propulsion plant. The simplest one is to use (more expensive) low-sulphur fuels. With bunkers demand at 4.5m bpd that is a stretch, but expect a small boom for refineries which will invest in hydrotreating plant. That may not be necessary. A Nevada-based early stage company – Alternative Petroleum Techologies – has announced a low temperature de-sulphurisation process that can be applied at bunker sites instead of in refineries. The process is not yet proven at scale, but APT recently raised an undisclosed capital sum from Atlanta-based West Mountain to do just that.
While the industry is waiting there are other routes to SOx and NOx compliance. Selective Catalytic Reduction works to reduce NOx to N2, but only if the operating temperature is kept in a rather tight range – and that still requires a supply of Urea, making it complicated and troublesome.
Another solution is Exhaust Gas Recirculation. NOx generation can be reduced by half, or more, by cooling down the combustion process. That can be achieved either by adding water to the inlet air or by closing inlet valves early. These solutions are all aimed at NOx, but not SOx. A Singapore company – EcoSpec – has developed a patented exhaust washing system (CSNOx) that claims to remove almost all SOx and NOx using just seawater. InnovOil does not have any technical details at the time of writing, so cannot comment in full, but the shipping industry has not embraced CSNOx wholeheartedly yet, or even at all. Canada Steamship Lines installed a CSNOx unit in its 22,000 tonne Spruceglen, but detailed results are not in the public domain, and Caribbean Cruise Lines is also testing a unit.
Liquids stay afloat The biggest solution, and the one that probably gives the Liquids industry the most sleepless nights, is to abandon liquid bunkers altogether and move ship propulsion to LNG. There is no great technical challenge in using methane instead of fuel oil, and methane brings SOx, NOx, CO2 and cost wins, being cheaper and better on all those metrics.
The challenge comes from three directions – first, the shipping industry already owns a very large quantity of conventional Liquids plant, and is not going to write that plant off on a MARPOL whim. So, ship life cycles will mean Liquid bunkers are going to be around for a very long time to come.
Second, ship owners and ship financiers are highly conservative creatures who prefer other people to innovate (and make expensive mistakes) before reluctantly joining in. EcoSpec is probably learning that lesson right now, with a slow take-up of its solution. It is not just the owners who are conservative. Ship personnel would need to acquire a whole set of skills around handling cryogenic liquids which explode violently if allowed to get out of control. Third, there is presently no global marine LNG re-fuelling infrastructure to speak of. So, if you did commission an LNG-fuelled ship today you would be locking yourself to tiny and inconvenient corners of the world shipping market. Port operators will be reluctant to build LNG depots until there is a decent population of customers, and they will also be reluctant to take on a whole new and exciting portfolio of product risk posed by explosive methane. It will take some time for this chicken and egg to decide which goes first.
That said, there are some early movers in LNG powered propulsion. Not surprisingly this comes from two sectors with above-average pressure to be environmental, and with operations that revolve around a single base port – ferries and cruise liners. The Balearia ferry company has two LNG ferries on order to operate on the route joining Spain to Majorca, and Carnival Cruises has three LNG ships on order. In fact 13 of 73 cruise liners currently on order are powered by LNG.
As these operations prove systems, create a pool of trained personnel, demonstrate that risks are manageable, promote the construction of LNG fuel depots, and show cost and environmental savings, others will follow. NBR’s research suggests that the bunkers market will eventually flip into a state in which the majority of ship miles are powered by LNG. That will take longer than MARPOL would like, but not as long as the Liquids industry would. Until then, ship operators will have to use the piecemeal innovations and plant fixes mentioned above.