LNG: “Rolls Royce-ing” Down the River

Speaking about “Green ship design and LNG marine propulsion systems” at the European Gas Conference in Vienna, Austria, Marco Andreola, Technological and Business Development LNG fuelled vessels Campaign Manager at Rolls Royce explained that “Marine” was the second largest division in Rolls Royce, providing integrated system solutions for LNG ships.

For fueling ships, Mr. Andreola said there were many ways to reduce emissions, like hybrid propulsion or advanced hull forms. “We can save more than 20% in consumption to make ships more efficient,” he said.

He noted the drivers for running on LNG. 

“The price of LNG is cheap versus distillates; the availability of LNG; the availability of multi end users.”

Other drivers included regular, repetitive and high frequency voyage routes, stable routes, reasonably short voyages and the potential for fleet renewal.

Andreola said, “Studies suggest that retrofits/conversion as compared to new builds are not economically competitive, except for ships that are quite new.”

Regarding fuel intensive engine utilization, he mentioned tugboats: “It’s difficult to find a business plan that fits with LNG.”

Norway, he said, was scheduling many new build ships that were going to be fuelled by LNG. “Twenty three vessels are already ordered or under construction. In terms of regulation, Norway is one of the first countries implementing LNG for regular trading and coastal vessels,” he reported.

“Things are changing in terms of the LNG supply, with emerging ships that are delivering to more satellite terminals. Gazprom is building satellite terminals - very many of them will be ready and they are thinking about the Mediterranean sea.”

Presently, said Andreola, there were no small scale or satellite terminals in the Mediterranean. He added that he was currently working on a Spanish project.

According to him, ship owners could comply with Emissions Control Area (ECA) standards with three solutions, but that LNG ensured the lowest emission level.

He listed conventional fuel solutions like using a scrubber, or low sulfur fuel.

“The opportunity in the Mediterranean countries is high,” he remarked of LNG, showing the routes within the region. “In Italy, presently, the only way to have it is to bring it from Barcelona.”

Mr. Andreola’s speech took place in the context of a session devoted to LNG as a transportation fuel; he was joined by Valery Nemov, Contract Structuring and Price Formation at Gazprom Export, who said Gazprom sees the bunker fuel and automotive sector demand growth for liquefied natural gas.

Compressed natural gas (CNG), he said, had not reached great success, because of its low energy density, making it necessary to have five times more fuel than usual.

“LNG has an energy density of 2.75 times more compared to CNG,” stated Mr. Nemov. “Public transportation vehicles had to go back for refueling on a daily basis with CNG.”

He said that the automotive sector was a primary driver for natural gas fuel volumes.

The most significant change, according to him, would be in maritime traffic, as new standards on fuels were imposed. 

“They won’t be able to use the fuel they burn on ships,” he noted. “Ship owners can switch to distillates, to LNG or introduce new technology.”

While scrubbers could be used for shipping fuel in the short term, this solution had price implications for the end user.

Mr. Nemov cited Norway as having reached success in LNG bunkering. He also mentioned LNG terminals in Rotterdam and Antwerp.

One delegate from the audience queried him regarding truck owners switching to LNG and how much that would be determined by tax. “Who will pay for it?”

“It’s a ‘chicken and egg,’ situation,” said Nemov, “having to do with agreement between a gas supplier and a trucking enterprise. In future the volume of consumption will be considerable.”

“Would government incentivize LNG as a bunker fuel for lower carbon emissions?” asked another conference participant.

Nemov opined that that would lead to higher fuel prices, and that some manufacturers would be unable to manufacture the LNG according to standards.

He concluded “For most LNG projects the cost is going to be so high, that the price of gas has to be so high to make these projects feasible.”