‘LNG is not a transition fuel, it’s a fuel in transition’

In an exclusive interview with Future Fuels, Steve Esau, Chief Operating Officer, SEA-LNG, shares his views on how Liquified Natural Gas (LNG) can be a potential alternative fuel for maritime industry.

Recently, the new build orders for LNG-powered ships have been on the rise. Is this because there are no readily available alternative fuels for bunkering other than LNG? Or is it because the fuel has more benefits to decarbonize maritime industry?

The growth in orders for LNG-powered ships shows that the industry acknowledges the clear benefits that LNG offers, while also recognising that, because it’s readily available, these benefits can start today. This growth is set to continue; DNV, a SEA-LNG member, recently forecasted that by 2028 there will be at least 864 LNG-fuelled and LNG-ready vessels in the global fleet.

One key benefit that shipowners and operators recognise is that fossil LNG reduces shipping emissions right now. According to Sphera’s 2nd lifecycle GHG emission study on the use of LNG as a marine fuel, on a well-to-wake (WtW) basis, LNG offers a 23% cut in greenhouse gas emissions over oil-based marine fuels. The study also reaffirmed that LNG combustion in modern engines produced next to no emissions of SOx, NOx or particulate matter. LNG improves local air quality for seafarers, dockworkers and port communities and is safe. Other alternatives are challenged by issues, such as toxicity and flammability, which will need to be addressed before they can be safely used as marine fuels.

Shipowners and operators increasingly recognise that LNG infrastructure is more established than alternatives. It can already safely be bunkered, stored and transported worldwide. By the end of 2022, LNG bunker vessels will be operating in northern Europe, the Mediterranean, USA, Canada, South Korea, Japan, Malaysia, China, Singapore, Brazil, South Africa and Australia. In January 2022 LNG bunkering was available at 141 ports worldwide and Clarksons forecasts that this will grow to 170 ports by the end of 2022.

Existing infrastructure can transport, store and deliver carbon-neutral bio-LNG and renewable synthetic LNG (or e-LNG) without any modifications or additional investment. Meanwhile, these fuels can also be dropped into LNG-powered vessels or blended with fossil LNG without any changes required. Being able to transition to these fuels means owners won’t end up with stranded assets. Ultimately, shipping stakeholders are investing in LNG because it provides a low risk, incremental pathway for decarbonisation, one which is already underway and offers other benefits along the way.

Being a multi-sector industry coalition to demonstrate the benefits of LNG as a marine fuel. Do you think LNG has the potential to be an effective alternative fuel for fossil fuels in shipping industry in the years to come?

We are transparent about the fact that, despite its strong emissions reductions, traditional LNG is a fossil fuel. However, it’s important to note that LNG is not a transition fuel, it’s a fuel in transition. This evolution to bioLNG and renewable synthetic LNG can gradually replace fossil fuels in the years to come.

BioLNG can be produced from domestic and agricultural waste capturing methane that would otherwise be vented into the atmosphere; and the waste streams from bioLNG production can support the circular economy. It is commercially available right now, with suppliers in Europe, for example, quoting prices for delivery in Rotterdam, the biggest marine fuel bunkering hub in Europe, and several North Sea and Baltic Sea ports.

Biomethane production is growing rapidly in regions such as Europe and North America. And supplies of bioLNG for maritime are forecast to rise dramatically as businesses like Wärtsilä, Biokraft, Gasum, Titan and CMA CGM step in to increase production capacity. For example, SEA-LNG member – Titan – recently announced a partnership with Attero and Nordsol on an EU-backed bio-LNG production plant, which it says will produce around 2,400 ton/year of bio-LNG by 2023. Further waste to energy production discussions are already underway across the shipping industry, although timescales for replacing fossil fuels depend on policy and regulations.

Renewable synthetic LNG is carbon neutral. It is produced from hydrogen and biogenic carbon dioxide, or carbon dioxide taken directly from the atmosphere. Renewable hydrogen is made by splitting water into oxygen and hydrogen, using electrolysis, powered by renewable electricity. All of the processes required in the production of synthetic LNG are technologically mature — the main focus is now on driving down the cost of renewable electricity and hydrogen electrolysis – which is the same challenge facing all other alternative, synthetic fuels, such as e-methanol and e-ammonia.

There are plants already operational today, such as the Audi e-fuel plant in Werlte, north Germany, and others planned such as the Wallumbilla Renewable Methane Demonstration Project run by Southern Green Gas in Australia, using solar power to create synthetic methane.

LNG is the only commercially available and alternative marine fuel today. Do you think the fuel will remain a contender in the bunkering market after the commercial advent of future fuels like methanol, ammonia and green hydrogen?

It is important to compare alternative fuels on a like-for-like basis, so while, in the long-term, fossil LNG may be less of a long-term contender for decarbonisation than e-methanol and e-ammonia, bioLNG and renewable synthetic (or e-LNG) are likely to play a key role in zero-carbon shipping.

The adoption of a fuel pathway will not occur as a big-bang effect, with a sudden switch to new fuels and propulsion systems. The process is likely to be incremental, relying on the build-out of renewable electricity, electrolysis and fuel production capacity.

This is where the ability to blend bioLNG and/or renewable synthetic LNG with traditional LNG at any ratio is so valuable. It allows ship operators to gradually introduce these zero-emission fuels in line with availability and as regulations become increasingly stringent.

Analysis from SEA-LNG performed last year determined that for every 10% of bio-LNG dropped in and blended with LNG as a marine fuel, a vessel can achieve two extra years’ compliance with the Annual Efficiency Ratio (AER) curve used to secure preferable funding under the Poseidon Principles.

While a basket of fuels is likely to be used in shipping’s decarbonisation, this gradual transition using drop-in LNG fuels, existing infrastructure and assets is likely to be lower risk and less costly. This makes the LNG pathway, including renewable synthetic LNG, a highly attractive option for ship owners regardless of what other fuels are available.

Considering the ongoing initiatives for developing eco-friendly fuels, do you think the IMO’s CO2 emissions target of 2050 is attainable?

Whether the International Maritime Organisation’s (IMO) 2050 targets are attainable depends on many variables, particularly other regulations and fiscal policies. What we can be certain of is that, in order to achieve IMO2050, clear regulation and collaboration along the maritime value chain will be key.

What are the main challenges in the transition to zero carbon – and what solutions have caught your attention?

The scaling up production of alternative fuels, ensuring sufficient investment of infrastructure and co-ordination of the investment between the onshore and offshore are key challenges to realise zero-carbon shipping.

However, bioLNG as marine fuel stands out compared to competitors as it is available now, production is scaling, the infrastructure to transport and bunker it and the shipping assets to use it exist. Established suppliers are using their expertise and international networks to secure bioLNG off-take contracts and develop global supply chains. Advanced waste-to-energy production discussions are already underway across the shipping industry, although timescales will depend on policy and regulations.

What needs to be done to create international consensus on decarbonization of shipping Industry?

The level of investment supporting the LNG route to maritime decarbonisation – more than one third of tonnage in the new build order book is LNG fuelled – indicates many shipowners already agree on the leading alternative fuel pathway today. However, it is unlikely that there will ever be complete consensus on alternative marine fuels. This is partially because different fuels or technologies may be superior for different vessel types and their unique operating profiles.

In order to create more consensus, it is vital that all actors have access to objective data and fact-based analysis. Regulators, the industry, investors and NGOs must compare apples with apples. This means transparently analysing the benefits and downsides of alternative fuels, on a like-for-like basis. Fossil fuels should be compared against fossil fuels; biogenic fuels should be compared against biogenic fuels; and synthetic fuels should be compared against synthetic fuels.

Analysis of a fuel’s impact on the environment must also be compared on a full life-cycle basis. In shipping that means on a well-to-wake basis for fossil fuels, “waste-to-wake” basis for biogenic fuels and “wind turbine-to-wake” basis for synthetic fuels. If these rules are followed, properly informed-decisions can be made on maritime decarbonisation.

Regulations will play a key role in creating a level playing field. Goal-based and technology-neutral policies are needed to ensure equal opportunities for innovation for all low and zero-carbon marine fuels.

While it’s still early days for energy transition in shipping, do you envisage a single solution for all vessel types, or do you expect a variety of solutions to emerge?

Decarbonisation of shipping is likely to require a basket of fuels and propulsion systems. It is unlikely to be a case of one size fits all – different vessel types and shipping routes will require different solutions. More energy efficient designs and technologies must be used in combination with alternative fuels and in combination with operational efficiency improvements.

Given the previously mentioned benefits that LNG, bioLNG and renewable synthetic LNG offer, we expect that they will play a key role in maritime decarbonisation.