LNG: A Trans-Atlantic Divide

By James Ashworth

There are roughly 8,000 seaports located in 200 countries. Of these, 46 are LNG hopefuls and a mere 15 open for general LNG bunker business today.

The global distribution of available and planned LNG bunker ports is highly skewed towards Europe. There are two reasons for this. With an environmentally sensitive political ethos, a geography that lends itself to significant transport by sea and an abundance of offshore gas, Norway led the way with the North Sea and Baltic Sulfur Emission Control Areas.

It remains the national leader in LNG-fuelled vessels and seaports. Inspired by Norway’s progress, the European Commission put its money where its mouth is under the Trans-European Transport (TEN-T) Network, allocating €26 billion of investment from 2014 to 2020 to cover a variety of land and sea-based initiatives. Under the scheme, all major European Union seaports are expected to offer LNG bunkers by 2020 and inland river and canal ports by 2025.

The North American ECA came into force in August 2012. Since then, it has been left to private enterprise to develop LNG bunkering infrastructure. Predictably, this has led to developments by noteworthy pioneers, some of whom are happy to share their infrastructure but little, so far, dedicated to general shipping.

The message is clear: Accelerated LNG bunker port development is directly related to state or regional funding availability.

A Southern Belle

Port Fourchon in Louisiana, U.S. has made the news recently for hosting the U.S’s first LNG bunkering operation. Port Fourchon is the largest offshore supply base in the U.S., servicing over 90 percent of the Gulf of Mexico's deepwater oil production with over 600 platforms in a 40-mile (64 km) radius. Little surprise, then, that New Orleans-based Harvey Gulf decided to build a dedicated, road-fed, static LNG bunkering terminal to service its growing fleet of “Enviro” LNG dual-fuelled offshore support vessels (OSVs) in Port Fourchon. Harvey Gulf’s Enviro OSV fleet has adopted a “cradle to grave” environmental approach, including an energy-efficient hull design and construction from reusable materials.

Meanwhile, in 2012, TOTE Maritime ordered two of the world’s first containerships to run on LNG. The ships, known as the Marlin Class, are now nearing completion at the General Dynamics NASSCO shipyard in San Diego, California, with the first ship expected to enter Jones Act service between Jacksonville, Florida and San Juan, Puerto Rico later this year, followed by the second in early 2016.

TOTE will also retrofit its Orca Class CON-RO ships serving the Tacoma-Anchorage route with Wärtsilä dual-fuel engines. TOTE has ordered the U.S.’s first LNG bunker barge for Tacoma, and Florida’s JAXPORT (Jacksonville) is likely to offer LNG bunkering in the near future.

Jacksonville-based Crowley will also put two new LNG dual-fuelled box ships on its Florida-Puerto Rico route. Crowley recently announced it will consolidate operations in JAXPORT, and it will be interesting to see whether JAXPORT decides to develop bespoke or general LNG bunkering capability.

A Rebounding Europe

Although still in its early days, northern Europe appears headed out of the doldrums, buoyed by a low euro, growing exports and a €1.1 trillion ($1.3 trillion) quantitative easing program in the Eurozone by the European Central Bank (ECB). The maritime sector is being boosted additionally by the European Commission’s TEN-T program.

Initiatives are plentiful. Seeking enhanced energy independence, Lithuania’s Klaipedos Nafta has taken recent delivery of a LNG Floating Storage Regasification Unit (FSRU) from the Hyundai yard in Ulsan, South Korea. The 170,000 m3 vessel has been named, poignantly, Independence. Now moored in Klaipeda, it is undergoing fabrication of the regasification unit by Germany's Bomin Linde LNG.

Bomin Linde will also work, together with the terminal's operator, to operate as a regional breakbulking hub and to develop the use of LNG as marine fuel in the Baltic Sea. An import deal for U.S. LNG is under negotiation. Additionally, Lithuanian LNG importer Litgas has said it was considering a cooperation with Norway's Statoil in developing bunkering services in the Baltic Sea.

The Gate LNG terminal in Rotterdam has announced that it is modifying its jetties to be able to offer transhipment services in the second half of 2015. LNG will be unloaded at one jetty and loaded at the other without the LNG passing by the storage tanks with a flow rate of 1,000 up to 12,500 m3/h. Both jetties can serve LNG carriers from around 5,000 m3 up to Qatar-max type of vessel.

Gate terminal has increased its services to include truck loading and reloading and acceptance of small vessels. A dedicated small-scale third jetty is also under construction. Gate aims to strengthen its role in linking large-scale and small-scale LNG markets in Northwest Europe.

Supported by Gate Terminal’s initiative, Shell has commissioned its first seagoing bunker vessel to operate out of Rotterdam.

Asian Enigmas

Asia has generally been slow to wake up to the potential for LNG as a marine fuel, based in part on high LNG pricing. But the biggest obstacle is undoubtedly a tendency to procrastination and indecision. Even the world’s biggest bunker port, Singapore, does not currently offer LNG as a marine bunker option two years after opening its first LNG import terminal.

But there are two notable exceptions, South Korea and China. Road-fed LNG refuelling capability is provided by KOGAS to Asia's first LNG-powered passenger ship, Econuri, in Incheon. The Port of Ulsan can also offer equivalent services and is now actively considering installing permanent facilities. Although there is no direct state involvement, the players are all state-owned organizations with access to funding needed to keep South Korea ahead of the game.

LNG bunkering is also growing in China. China is set to own up to one quarter of the world’s commercial fleet by 2030, increasing its carrying capacity from nine billion tons to 19-24 billion tons a year. Since 2010, Chinese shipping companies have commissioned 30 dual-fuel vessels at the rate of 10 per year, including the world's first tugboats operated on diesel-LNG engines. Commercial LNG bunkering is already available at the Yangtze River ports of Zhoushan and Nanjing.

Chinese consumers, alarmed by poor air quality levels, particularly in big cities, are becoming increasingly vocal in their concerns. Whilst power generation and especially coal-fuelled utilities are the main culprit, shipping concentrations are coming increasingly under the spotlight. The Chinese government has already encouraged the adoption of LNG as a fuel on the Yangtze River, a major transport artery running through China’s heartland, in response to concerns about air pollution from river-borne traffic.

Concern by Hong Kong citizens has encouraged the authorities to adopt new emissions controls in Hong Kong waters. Logically and with a number of LNG import terminals planned or built, we can predict that LNG as a marine fuel will be encouraged in the near future.

Japan is not immune from the China phenomenon. Of total airborne emissions in the Japanese port of Kobe, 10 percent are marine-derived. It can reasonably be assumed that similar levels are found in other major port regions such as Tokyo Bay. Japan is currently the biggest LNG importer in the world, twice as big as second-place South Korea. Inevitably, its use in marine transport will grow over the coming years.

Following in the footsteps of United Arab Shipping Company (UASC) in 2014, Japan’s Mitsui O.S.K. Lines has announced recently that the company has signed a deal for construction of six LNG Ready 20,000teu container ships with Korea’s Samsung Heavy Industries to serve its Asia-Europe routes.

Such increasing demand will stimulate ports and service providers into offering LNG bunkers. It will also create demand in other parts of Asia and in the world’s major container arteries such as the Malacca Strait, the Suez Canal, the Mediterranean (especially with extended ECA-type regulations applying to the European Union coastline by 2020) and the Panama Canal.

There is a pressing need to establish a LNG bunkering presence in Southeast Asia. The vessels are coming. Whoever is first will anchor their place in the LNG bunkering world. Those that miss this boat will be bypassed. - MarEx

James Ashworth is Lead Consultant for Singapore-based business consultancy TRI-ZEN.