US Report Identifies Opportunities for LNG-Powered Marine Vessels

| USA

The American Clean Skies Foundation (ACSF) commissioned a review of the US maritime market opportunities for natural gas, for which a report is now available. The study offers an in-depth look at the challenges and prospects for converting U.S. marine vessels to liquefied natural gas (LNG), highlights how the maritime industry can benefit from low prices and low emissions.

In essence the report states the potential take up of LNG bears consideration. Two main drivers of the potential for LNG to be used as a marine fuel in the U.S. are identified:

  1. “historically low natural gas prices (coupled with rising oil prices) have opened up a significant price gap between LNG and traditional marine fuels, which results in vessel fuel cost savings after conversion to LNG operation; and
  2. the need to reduce NOx, PM, and SOx emissions from marine vessels, particularly within the North American and Caribbean Sea ECAs.”

The report says that, based on the current forecasts, natural gas delivered for production of LNG is now at least 70% less expensive on an energy equivalent basis than marine residual fuel and 85% less expensive than marine distillate fuel, with the cost advantage likely to get even better over time. That said, the economics will hinge on three factors: vessel fuel use, delivered LNG prices and vessel conversion costs.

Government intervention may be required to help offset first-mover disadvantages, justified in the context of greater availability of domestically available and cleaner LNG for all forms of transportation.

Targeting vessels with high fuel consumption is a good starting point. The report identifies early candidates for conversion: large towing tugs and articulated tug-barges (ATB), medium-to-large car and passenger ferries, and Great Lakes bulk carriers. A 150-ton tug can burn more than 400,000 gallons of fuel a year, while a 1,000-ton ferry can burn almost 700,000 gallons, and a Great Lakes bulk carrier can burn 2 million gallons annually.

The report also recognises “the economic and regulatory equations are changing”. The imposition upon ship operators to comply with stricter EPA emissions regulations effective 2016, will come at significant cost and will broaden the scope for consideration of switching to LNG. Since LNG is naturally low in sulfur, it can be used to comply with fuel sulfur restrictions.

The report, entitled Natural Gas for Marine Vessels – U.S. Market Opportunities (April 2012) was prepared for the ACSF by economists and engineers from M.J. Bradley & Associates LLC (M.J.B. & A) with guidance by ACSF staff. Established in 2007 as a not-for-profit organisation, ACSF seeks to advance America’s energy independence and a cleaner, low-carbon environment through expanded use of natural gas, renewables, and efficiency.

(This article compiled using information from ACSF and the report)

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