Carbon emission cuts key catalyst for LNG bunkering: Bernhard Schulte

Reuters News
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Posted: Oct 27, 2016 7:22 AM

By Mark Tay

SINGAPORE (Reuters) - Global efforts to cut carbon dioxide emissions will be key for the adoption of liquefied natural gas (LNG) as a marine fuel, German shipowner and ship-management firm Bernhard Schulte said.

Shipping emits around 1 billion tonnes of carbon dioxide (CO2), accounting for about 2.5 percent of global greenhouse gas emissions, but this can be cut by about 75 percent if ships take measures like switching to the cleaner burning fuel LNG, a study by the International Maritime Organisation (IMO) shows.

The sector is likely to be forced to make changes once the European Commission implements a monitoring, reporting and verification (MRV) system for CO2 emissions for ships from 2018, Angus Campbell, Bernhard Schulte's corporate director of energy projects, told Reuters in an interview.

The MRV initiative is seen as a prelude to the introduction of a carbon tax for shipping, Campbell said on the sidelines of the Singapore International Energy Week.

"If you are a shipowner and you are burning liquid hydrocarbon fuels (diesel, fuel oil), you don't have any options. Neither distillates nor scrubbers can reduce your CO2 footprint," Campbell said, adding shipowners would have to pay the carbon tax or switch to cleaner fuels like LNG or methanol.

LNG-powered vessels, which produce less CO2 than existing vessels powered by traditional marine fuels, could be adopted by shipowners that renew their aging fleets, Campbell added.

CHALLENGES AHEAD

There are currently around 790 LNG-fuelled ships operating and on order, ship brokers said. That compares with nearly 97,000 merchant and passenger ships in service or on order.

"For existing ships, LNG is not a particularly viable option. To retrofit is very expensive," Campbell said, adding that the adoption of the new technology will be seen in new ships fitted with dual-powered engines.

These engines will allow shipowners "to run on distillates before the LNG infrastructure catches up and then switch to a cleaner more competitive fuel once it does", he added.

But shipowners are hesitant to invest in new technology for fear of not having the infrastructure needed, Campbell said.

A fuel-switch would impose extra costs on an already troubled sector, which has seen high-profile defaults like South Korea's Hanjin as well as cases of stranded ships with crew left onboard ships unpaid and unsupplied.

A change, however, is slowly taking place as governments around the world promote LNG bunkering, Campbell said, referring to Singapore's plan to start LNG bunkering in the first quarter of 2017.

The dialogue around switching to LNG is also gaining pace with the IMO expected to this week rule on whether to impose a global cap on maritime sulfur dioxide emissions from 2020 or 2025.

(Reporting by Mark Tay, additional reporting by Keith Wallis; Editing by Himani Sarkar)