Small-scale LNG reflects measured growth
Like the rest of the LNG-shipping industry, the small-scale end of the spectrum took a hit last year. Weakening oil and gas prices brought delays and cancellations for several orders for LNG-fuelled vessels and infrastructure to deliver the cryogenic liquid to small-volume users.
Forecasts from earlier in the decade that the LNG-powered fleet would top 1,000 seagoing vessels by 2020 continue to be revised downward. Now, the consensus suggests that the fleet will reach only 600 by then. A fleet of 600 vessels will require some 4 million tonnes per annum (mta) of LNG for fuel, less than 2 per cent of 250 million tonnes shipped globally in 2015.
Small-scale LNG production capacity stands at 20 mta worldwide but most liquefaction plants lie inland and serve only regional customers. LNG for ship bunkers is sourced from large import terminals and a network of coastal distribution terminals is being built to support seagoing deliveries for marine and local fuel.
LNG-powered seagoing fleet
Despite the negative impact of the collapse in energy prices, the long-term prognosis for small-scale LNG shipping and the LNG bunker market is good. The sector logged some significant achievements in 2015.
LNG is now a global commodity that has established a broad base to support new LNG markets, including the transport sector and remote locations not connected to the gas grid. Small-scale activities are gaining momentum from a trickle-down effect.
Following 14 completions last year, the global fleet of LNG-powered seagoing ships that are not LNG carriers stood at 70 vessels as of 1 January 2016. Passenger car ferries and platform-supply vessels (PSVs) are the ship types in which the LNG option has gained most, with 29 and 17 such vessels in service.
There were also contracts for 18 LNG-fuelled seagoing ships placed in 2015, building the orderbook to 87 vessels.
The orderbook features growing numbers of larger ships and non-Norwegian-flag vessels; 19 container ships, 13 gas tankers that are not LNG carriers and seven product/chemical tankers built to be propelled by LNG.
That tally was augmented last year by four 180,000 gross tonne cruise ships and a semi-submersible crane vessel. The fuel-gas system for the latter, to be supplied by TGE, comprises eight vertical Type C LNG fuel tanks and four parallel fuel-gas processing trains.
LNG bunkering is spreading rapidly from its birthplace in Norway. Last year saw the first fuelling of vessels with LNG in Japan, South Korea, India, Italy, the UK, Denmark, Germany, the US and Canada.
Inland waterways
There is also growing interest in LNG fuel to propel inland-waterway vessels, with eight in service and 15 on order. The orderbook comprises a single contract for 15 oil tank barges that Plouvier/Intertrans placed in December. The vessels, chartered to Shell and operating on the Rhine and its tributaries, will be built by Veka. The hulls will be constructed in Poland and the outfitting will take place in the Netherlands.
Key to inland waterway LNG demand will be China. Announcements over the last year suggest that it could order hundreds of LNG-powered vessels for the Yangtze and other rivers. China operates more small-scale LNG liquefaction plants, road tankers and ISO tank containers than any other country.
Clearly, China will establish a substantial gas-powered inland waterway fleet in the years ahead. Although China’s river fleet may not develop as rapidly as first envisaged, it now includes Green 6002, the country’s inaugural LNG-powered inland bulk carrier.
The vessel was delivered by Jiangsu Otsu Heavy Construction to Shanghai Green Power in March 2015 and promises to be the first of many in this class.
Support network
The key drivers for small-scale LNG are environmental, economic and geopolitical. Recent developments, such as the 21st Conference of the Parties to the UN Framework Convention on Climate Change (COP21) held in Paris in December 2015 and the tightening global regime governing ship emissions support using cleaner-burning gas as fuel.
Nevertheless, cost remains a key determinant. Using existing oil-burning engines in tandem with low-sulphur marine diesel oil or with a combination of heavy fuel oil and an exhaust gas scrubber offers a payback period about 50 per cent shorter than for a gas-powered engine.
Government incentives and commitments by energy majors such as Shell and Engie are pushing for greater use of LNG as marine fuel. Norway has taken the lead with its Environmental NOx Agreement, offering exemptions to affiliated enterprises from the fiscal nitrogen oxide (NOx) emissions tax.
Introduced more than a decade ago, the NOx Fund has so far granted support to approximately 80 LNG-fuelled, Norway-flag ships, including current newbuilding contracts. The total equates to 55 per cent of the global in-service and on-order fleet of LNG-powered vessels.
European governments are channelling support for LNG bunkering through the European Commission, which aims to transform the region’s infrastructure into a unified Trans-European Transport Network (TEN-T). Notable recent recipients of TEN-T funding for LNG projects are the LNG Masterplan, covering the region’s inland waterways, and the ports of Rotterdam and Gothenburg.
China’s Ministry of Transport launched its own initiative in December, introducing emission-control zones (ECZs) in three key port areas to reduce levels of atmospheric pollutants, notably sulphur oxides (SOx), from ships.
The US Congress also took action in December, passing an alternative fuel tax credit that will continue to support the use of LNG and compressed natural gas (CNG) as transport fuels over the next two years.
Future fleet
In terms of ship numbers the seagoing LNG-fuelled fleet grew 25 per cent last year. That growth will need to gather pace, rising to just over 50 per cent per annum on average, for the global fleet to reach 600 ships by the end of 2020. Contracting of newbuildings will need to accelerate considerably to reach even that revised milestone.
Perhaps a boost will come later this year, with the entry into service of two of the four dedicated LNG bunker vessels that have so far been ordered – the industry’s first such ships. Also due for delivery this year are three Chinese LNG coastal distribution tankers of 14,000m3-30,000m3 that will raise the global fleet of small-scale LNG carriers to 31 vessels.
INOXCVA successfully completes supply of LNG marine fuel tanks in US
INOXCVA has successfully delivered three 770m3 LNG marine fuel tanks to TGE Marine Gas Engineering (Bonn, Germany) for Crowley Maritime Corporation’s 2400 TEU ConRo ships project at the VT Halter Marine Shipyard in the US.
The tanks are double walled, vacuum insulated Type-C tanks, with a high hold time in excess of 58 days, compared to conventionally insulated LNG tanks which would normally hold up to 10 days.
Once installed on the ConRo vessel, the combined LNG storage would be amongst the largest for LNG fuel gas systems and will support the operation of ME-GI main engine and auxiliary generators on natural gas in order to reduce harmful emissions to the atmosphere.
These ultra large fuel containers, rolled out from INOXCVA’s Kandla facility in India, are equipped with state-of-the-art facilities for the manufacture of such large tanks with a high degree of quality, reliability and quicker lead times required to meet the growing requirement for shorter overall project schedules.
Project partners involved during the critical design, manufacture and supply of the tanks include Crowley (Owner), VT Halter Marine (Shipyard), MAN Diesel & Turbo (Main Contractor), DNV-GL (Class), USCG (Flag Country Authority) and TGE Marine Gas Engineering (Fuel System Designer and INOXCVA’s direct customer).
This follows the recent news that INOXCVA will be providing cryogenics technologies, along with associated equipment and project management, for the upcoming FLNG terminal of LNG BHARAT in the Krishnapatnam Port, India.