Posted: August 14th, 2022

Economic Analysis of LNG as a Marine Fuel to Support the Energy Transition

Economic Analysis of LNG as a Marine Fuel to Support the Energy Transition

Liquefied natural gas (LNG) is a low-carbon fuel that consists mainly of methane. It is produced by cooling natural gas to -162°C, which reduces its volume by 600 times and makes it easier to store and transport. LNG has been used as a marine fuel for several years, especially in regions where strict emission regulations apply, such as the Baltic Sea and the North Sea. However, with the introduction of the International Maritime Organization (IMO) global sulphur cap of 0.5% in 2020, the demand for LNG as a marine fuel is expected to increase significantly, as it offers a cost-effective and environmentally friendly alternative to conventional fuels.

LNG as a marine fuel has several advantages over heavy fuel oil (HFO) or marine gas oil (MGO). First, it reduces greenhouse gas (GHG) emissions by up to 23% with modern engine technology, according to a study by DNV . This is mainly due to the lower carbon content and higher efficiency of LNG compared to other fuels. Second, it eliminates sulphur oxide (SOx) emissions and reduces nitrogen oxide (NOx) emissions by up to 80%, as well as particulate matter (PM) emissions. This helps to comply with the IMO regulations and improve the air quality in port areas. Third, it offers a competitive price compared to other compliant fuels, especially in regions where LNG infrastructure is well developed and supply is abundant. The price of LNG is also less volatile than that of oil-based fuels, as it is linked to natural gas markets rather than oil markets.

However, LNG as a marine fuel also faces some challenges and limitations. One of them is the availability and accessibility of LNG bunkering infrastructure, which is still limited in some parts of the world. Although the number of LNG bunkering facilities and vessels has increased significantly in recent years, there is still a need for more investment and coordination among stakeholders to ensure a reliable and safe supply chain for LNG . Another challenge is the technical complexity and additional costs associated with the design, construction and operation of LNG-fuelled vessels. LNG requires more space and weight for storage than conventional fuels, which may affect the cargo capacity and stability of the vessel. LNG also requires special equipment and systems, such as cryogenic tanks, fuel gas supply systems, boil-off gas management systems and dual-fuel engines, which increase the capital expenditure (CAPEX) and operational expenditure (OPEX) of the vessel . Moreover, LNG as a marine fuel does not fully address the issue of GHG emissions reduction in the long term, as it still emits CO2 and methane during combustion and leakage. Therefore, there is a need for further research and development on alternative fuels that can achieve net-zero emissions, such as bio-LNG, synthetic LNG or hydrogen.

In conclusion, LNG as a marine fuel is a viable option for shipowners and operators who want to comply with the IMO regulations and reduce their environmental impact while maintaining their economic competitiveness. However, LNG as a marine fuel also requires careful consideration of the technical, operational and financial aspects involved in its adoption. Furthermore, LNG as a marine fuel should be seen as a transitional solution rather than an ultimate one, as it does not eliminate GHG emissions completely. Therefore, the maritime industry should continue to explore and invest in other low-carbon or zero-carbon fuels that can support the energy transition in a more sustainable way.

Bibliography

: DNV (2021) ‘LNG as marine fuel’, available at: https://www.dnv.com/maritime/insights/topics/lng-as-marine-fuel/index.html (accessed 16 January 2024).

: American Bureau of Shipping (2020) ‘LNG as Marine Fuel’, available at: https://ww2.eagle.org/content/dam/eagle/advisories-and-debriefs/sustainability-whitepaper-lng-as-marine-fuel.pdf (accessed 16 January 2024).

: North of England P&I Association (2019) ‘LNG as a Marine Fuel’, available at: https://www.nepia.com/publications/lng-as-a-marine-fuel/ (accessed 16 January 2024).

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