A new study provides an introduction to the use of Liquefied Natural Gas (LNG) as a marine transportation fuel most applicable to the shipping operations in inland and coastal trade, passenger ferries and the oil&gas offshore support vessel network, primarily in the U.S. The Princeton Sovereign Maritime study analyses the economic viability of three production models for the LNG supply chain and ties this in with the economics of vessel conversion in switching to LNG fuel.
The results based on fair assumptions validate the superior cost advantage of LNG use as marine fuel compared to crude oil – ultra low sulphur distillates for marine assets operating in the emission control areas (ECA) in U.S. waters.
The study concludes that certainty of LNG fuel price and environmental advantage vs. crude oil derivative fuels will enable LNG marine fuel to gain traction in the industry, leading in the next 2-3 years to the evolution of a domestic LNG marine fuel market. It is certain that capital access will be available to support building the infrastructure and LNG distribution networks in the U.S. waterways and accelerate the technical innovations on the marine side.
The price advantage of natural gas is projected to be maintained, domestically, by 2035 mainly due to vast unconventional gas discoveries enabled by the technological innovations of extraction from the “shale” formations in U.S.
Significant fuel cost savings could be realized when retrofitting existing vessels or building new vessels that use natural gas instead of petroleum fuel only (HFO – Heavy Fuel Oil — and MDO – Marine Diesel Oil).
For marine use, there is currently very limited liquefaction infrastructure at or near coastal ports, inland waterways and the Great Lakes that could be utilized to produce and supply LNG as a marine fuel. Current and pending liquefaction projects could support the creation of the marine fuel market locally. Regulatory complexity on the federal level may create opportunities in the development of small fit-for-purpose LNG production plants at the State level.
The study cites US EIA information on natural gas pricing. Including the added cost of LNG production cost, storage, transportation and taxes on fuel delivered, LNG as primary fuel for vessels could maintain a 20% – 30% cost advantage over the distillate diesel fuel, which presents a drastic reduction in annual opex cost to the vessel owner.
Further information is available from Kostas Dimitropoulos, author.
