How Liquid Natural Gas May Revolutionize Shipping, And Make Goods Cheaper

At a noisy, bustling shipyard 20 miles south of Istanbul, the world’s second-ever tugboat powered by liquefied natural gas sits at the end of a pier, awaiting its first water trial.

“Then it’s off to Norway,” said with no little pride Ruchan Civgin, the contracts manager at Sanmar Shipyard, of the 115-foot vessel. “The first boat left in January.”

Further south along the Marmara Sea coast, another shipbuilder is rolling out LNG-powered fish-feed vessels, used to transport feed for fish farms, for international markets.

These ships may be the vanguard of a global boom in LNG-powered shipping, produced by the explosion in U.S. fracking and by new international emissions restrictions. Liquid natural gas may end up turning global shipping on its head, as shipping companies look for an edge in their battle to cut costs and reduce carbon footprints.

The world as we know it today would not exist without the behemoths that traverse the high seas. An astonishing 80 percent of global trade is carried by ship: the Nikes on your feet, the gasoline in your car, the Toyota Prius in your driveway all came on container ships.

In February, San Diego-based TOTE Shipholdings ordered the world's first LNG-powered container ships. It also plans to convert its fleet of four ships to LNG power. “The biggest driver is the environmental benefits of LNG,” said Ben Christian, TOTE project manager.

In January, the Mississippi-based Gulf Coast Shipyard Group launched the first of six LNG dual-fuel offshore supply vessels, the first of their kind in the Gulf of Mexico.

And in Europe, French operator Brittany Ferries recently ordered a massive, 2,500-passenger LNG-powered passenger ferry expected to enter service in 2017. General Electric (NYSE:GE) and petroleum giant Royal Dutch Shell (LON:RDSA) are also looking to get in on the act.

Fuel typically amounts to 70 percent of the overall cost of moving a container ship from A to B; most ships today run on cheap, dirty bunker fuel. It's a dense oil residue said to contain 2,700 times more toxic sulfur than vehicular fuels. According to studies cited by the watchdog group Transport & Environment, air pollution from shipping causes 50,000 deaths in Europe alone every year. Regulations to be introduced by the International Maritime Organization next year and in 2020 will make high-sulfur fuels, such as bunker fuel, illegal for use in ships sailing in numerous emission-control zones around the world.

Enter LNG, which, unlike bunker fuel, contains no harmful sulfur dioxide, emits 26 percent less carbon dioxide, and produces almost zero smoke.

According to Tim Delay, vice president of fuels for liquid natural gas distributor Pivotal LNG, a unit of AGL Resources Inc. (NYSE:GAS), gas contains more energy than bunker fuel. In the U.S., he said, this works out to around $100 per metric ton cheaper than bunker fuel.

"The relative low price of natural gas and LNG compared to current high residual bunker and distillate fuel prices in the U.S and Europe has added to the attractiveness of LNG," wrote Frederick Adamchak, an adviser at New York-based brokerage Poten & Partners, in an industry publication last year.

America is also flush with gas: the U.S. Energy Information Administration estimates there’s enough of it underground to last 92 years at expected demand.

And yet, of the 87,000 vessels that make up the global fleet today, LNG ships number just 50. So why isn't everybody converting their ships to a cheaper, abundant, cleaner fuel?

LNG presents challenges: building and converting ship engines takes time and is expensive. That's an important consideration in an industry where profit margins, hit hard by overcapacity after the global financial crisis, have shrunk in recent years.

Hundreds of LNG bunkering and refueling facilities will also have to be built at ports around the world.

“As of today, the infrastructure of LNG supply is limited and installation of LNG engines is an expensive investment. But LNG might be a viable solution for new-built container vessels sometime in the future when the infrastructure is in place,” said Mikkel Elbek Linnet, a spokesman for shipping giant Maersk Line, a unit of Denmark-based AP Moeller Maersk A/S (CPH:MAERSK-A).

Analysts say the number of ships converted to LNG will increase 20-fold by 2020. But in some cases, it's possible to reduce emissions and improve fuel consumption by using recycled engine heat and more efficient engines, rather than invest in an LNG conversion.

Maersk Line is doing just that with the launch last year of the first of a fleet of 20 massive ‘Triple E’ container ships, slow-sailing giants -- the longest ships in the world at 400 meters (1,312 ft) -- that recycle engine heat. Maersk says they will consume approximately 35 percent less fuel per container than some smaller vessels.

However, many major ports have already started the move to gas. The Belgian port of Antwerp, Europe’s second-busiest container port after Rotterdam in the Netherlands, expects to open bunkering facilities for LNG-powered ships at the end of next year. In February, ground was broken on America's first such facility at Port Fourchon, La.

TOTE Shipholdings wouldn’t say how much it expected to save by using LNG on its container carriers working the Jacksonville - Puerto Rico route.

But on a grander scale, vessels running on American LNG operating intercontinental routes could potentially save hundreds of thousands of dollars per journey. With gas prices forecast to remain steady for at least the next five years, cheaper shoes and cars may not be far off for North American consumers.

Thanks for another in a long line of informative energy posts, thackney !

Having said that, allow me to be the first to offer an unsubstantiated opinion re the following:

According to studies cited by the watchdog group Transport & Environment, air pollution from shipping causes 50,000 deaths in Europe alone every year.

I would think that the gas cloud would spread over a wider area, and being heavier than air would stay close to the ground, thus being more of a danger of a huge fireball.
Gasoline and crude oil, being a liquid at room temp, would stay relatively in one place limiting the damage.................

, and being heavier than air would stay close to the ground,

Methane is much lighter than air. Unless trapped inside a building it quickly dissipates. Methane gas has to be diluted down to 15% concentration before it will ignite. By the time you get significant quantities diluted that much, it is well up in the air.

Much of Gasoline vaporizes into heavier than air gases.

Hydrogen is the one to watch out for with a leak.

It is flammable over a wide range of concentrations, 4% to 75%.
It will detonate at 18% to 54% by volume.
It will detonate without being confined.
It will leak out of the tightest seams and connections.

It is mitigated somewhat by being so light. It dissipates fairly quickly.

Corection - It will detonate at 18% to 59% by volume.

Hydrogen also requires very little energy for ignition. It’s easy to ignite, and is flammable over a wide range of concentrations.

~LNG won’t even ignite, it has to be warmed to a vapor first. The methane vapor has to be diluted down to 15% concentration with air before it will ignite.~

Indeed, they are an explosion hazards in case of any minor fuel leak. I wouldn’t ever used one on high seas because of storms, waves etc.

I guess the decades of LNG carriers, running on LNG vaporized, have just all been lucky.

Another thing is a price issue. LNG is not cheap at all and for that reason is not ever competitive with pipeline delivered gas in Europe.

You imagine cost = equals price? LNG is already being imported into Europe. It is economic to convert to LNG, Transport and Vaporize. Pipelines don't provide enough gas to Europe and Asia to meet their demands.

Indeed, they are an explosion hazards in case of any minor fuel leak. I wouldn’t ever used one on high seas because of storms, waves etc. Another thing is a price issue. LNG is not cheap at all and for that reason is not ever competitive with pipeline delivered gas in Europe. It can’t beat oil as a boat fuel in that department as well. Sounds like another green blunder.

Welcome to FR and spend some time reading basic engineering before posting. Having an opinion devoid of reality is the realm of liberalism.

I have a homework assignment for you. All the information is available with google. Why is a standard automobile fuel tank more dangerous than LNG?

There is really nothing you posted that has any truth to it, but I will endeavour to direct you in the right direction. Do you have a clue of what Gazprom charges per therm?

Indeed, they are an explosion hazards in case of any minor fuel leak

You are misinformed. The LNG trade has been running for fifty years. In fact the first contract was for LNG from Algeria to the UK in 1964. During which time not a single LNG carrier has been lost. The worst accident was in a Japanese port when a Kaverner- Moss type carrier ran aground and ripped 600 ft of its hull. The vessel was off-loaded to a sister ship without further incident. The only fire aboard an LNG vessel was a lightning strike on a vent stack which was quickly put out.

LNG vessels use the boil-off from the cargo tanks in their own boilers so this technology of dual fired ships boilers is long established.

In addition these carriers have methane detectors all over them and purging systems which remove air from void spaces around the cargo tanks.

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