Liquefied Natural Gas (LNG)

Liquefied Natural Gas

Liquefied natural gas (LNG) is considered as technically viable fuel for the commercial ships considering research from last 10 years. The driving forces for exponential growth in the number of ships using LNG as the fuel are the fuel prices and environmental legislation, LNG is feasible as maritime fuel based on the two important forces that are the

  • Emission regulation suggests that LNG as best complying
  • Expected prices in future when oil and natural gas are compared suggesting an inclination towards natural gas and thus suggesting LNG

Combating local emissions from shipping is twofold when viewed in light of plan by International Maritime Organisation. First is reduction in SOx emissions from new built as well as existing ships that operate within emission control areas that are the sea areas that have stricter controls implemented in order to minimise the emissions of SOx, NOx, ODS and VOC from the ships. Second is the reduction in NOx emissions from the ships that are new built and are operating within international waters. These requirements have to be followed in full force from 2015 for SOx emissions and from 2016 for NOx emissions.

Three Options For Ship Owners

There are three options left for the ship owners for the existing fleets if they wish to continue trade in the emission control areas that include switching to low sulphur fuel, install the scrubber as the purification system using exhaust fan and switch to Liquefied natural gas (LNG). there are fewer choices for new build ships that are delivered after 2016 as they can switch to LNG fuel or install selective catalyst reduction system that cleanses the exhaust gas of NOx that is the better system than scrubbers used for cleaning SOx.

It is difficult to quantify the price differences of various fuels as the drivers related to the differences are difficult to predict. Analysts fail to predict the prices of oil and natural gas as separate entities. It is important that relative differences in the two fuel sources is forecasted based on the entire lifecycle of ship so that the decision can be based on better total economic performance of these fuel sources. Despite difficulties in forecast of future prices, natural gas is perceived to be cheaper than oil when considered in long term on an average per energy content. This is because there are more reserves of natural gas as compared to oil that need to be developed implying lower production costs of natural gas as compared to that of oil because of scarcity of reserves and difficulties in extracting. It remains important to note that only thing that matters to the economics of future shipping is the uncertain difference in future fuel prices.

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