New Shipping Regulation Could Be A Boon For LNG
LNG is hot and it’s likely to become a lot hotter in the coming years, for which LNG producers have the International Maritime Organization (IMO) to thank. Earlier this year, the IMO announced its first ever long-term plan to reduce harmful emissions from maritime transport by introducing much stricter maximum sulfur emission limits. Now, a race is in the making between LNG fueling terminals and gas-powered vessels, and this race will only intensify in the coming months.
From 2020, only vessels using fuels with sulfur content of 0.5 percent or less will be allowed to roam the oceans, as per the IMO’s strategy aimed at cutting total carbon emissions from maritime transport by half by 2050. Those that use fuel with a higher sulfur content—the current limit is 3.5 percent—will only be allowed to remain in operation if they are equipped with emission-clearing equipment, which naturally costs money.
Most ships, Reuters authors Jonathan Saul and Nina Chestney write in a recent story on the topic, currently use fuel oil or marine gasoil, a lighter fuel, but both of these are much higher in sulfur content than LNG. In fact, industry estimates suggest LNG emits up to 90-95 percent less sulfur oxide as well as nitrogen oxide, both toxic and both targeted in the IMO’s strategy.
This sounds like a done deal in favor of LNG, but things are not that simple. For starters, there are just 125 LNG-powered ships in the global fleet, according to DNV GL data. That’s 125 out of 60,000 ships in commercial maritime transport. The total global fleet is some 90,000 vessels. Another 400 to 600 are expected to launch by 2020, but this will still be a tiny portion of the total fleet.
So, what about the emissions-cleaning equipment, the so-called scrubbers that capture sulfur emissions? They can cost anywhere from US$1 million to US$5.7 million, which for many shipowners is unaffordable. Even so, Wartsila, which makes scrubbers, says that by 2020 around 2,000 ships will have them, however expensive they are. Still, 2,000 out of 90,000 is not that much.