The global sulphur cap of 0.5%, which the International Maritime Organization (IMO) will implement between 2020 and 2025 is expected to accelerate the adoption of LNG as fuel for shipping globally, provided that bunkering infrastructure is available. Corresponding developments for LNG bunkering and phasing-in of LNG fuelled ships have already started, although not in Australia.
Aside from the global sulphur cap, seaborne carriage from Australia may soon be exposed to IMO’s Emission Control Areas (ECAs) in North America and North Europe. In these areas, the sulphur cap in marine fuel is set to 0.10% from 2015.
Using LNG as marine fuel completely eliminates SOx and particulate matter emissions, nets a 15% reduction in greenhouse gas (GHG) emissions and diminishes emissions of NOx by 85-90% in the case of four stroke engines.
There is increasing interest in LNG as a maritime fuel in South East Asia and the Asia-Pacific region, and recent discoveries of abundant supply of natural gas has fuelled this relevance in Australia. While the DNV study is primarily focusing on the offshore supply vessel (OSV) and tug segments, LNG as a marine fuel is also relevant in other shipping segments with higher specific energy consumption per ship.
The Australian annual natural gas consumption is about 26.5 billion cubic meters, while the total Australian production is escalating. By the end of this decade, Australia may rival Qatar as the world’s largest exporter of LNG. Around 70% of the world’s LNG capacity currently under construction is in Australia. Australia’s gas production is projected to quadruple in 2034-2035, driven by the growth of our LNG export industry.
A recent Commonwealth Scientific and Industrial Research Organisation (CSIRO) study concludes that approximately 30% of anthropogenic nitrogen oxide emissions and 20% of sulphur oxides generated in the Australian region may come from shipping. Australian Shipping Association (ASA) reports that shipping in Australia accounts for 1.6 M tonnes CO2 emissions annually, corresponding to approx. 500,000 tonnes of marine fuel combusted in Australian waters.
Assuming this fuel has an average sulphur content of 1%, the annual corresponding SOx and NOx emissions are about 10,000 tonnes and 30,000 tonnes, respectively. A complete switch to LNG as fuel would have reduced GHG emissions by about 15% net, SOx by nearly 100% and NOx by about 85%.
The DNV study addresses LNG bunkering with respect to the status and need for infrastructure and regulations for the OSV/Tug industry in several key Australian ports. The following summary presents the current LNG bunkering related condition in Australia:
- There is worldwide imperative to move to cleaner marine fuel, and this imperative is supported by international regulation.
- There are no legal show stoppers today in Australia for starting up LNG bunkering.
- However, there are no key drivers promoting LNG fuelled ships at a Commonwealth, State or Territory level.
- Significant developments of LNG bunkering will probably not occur before a charterer, port, cargo owner or third party logistics provider actively initiates LNG as fuel.
- Contrary to the situation in Europe and North America, Australia has not implemented ECA emission regulations. Moreover, the LNG price is relatively high.
- Financial analysis demonstrates that LNG can be an economically attractive solution under certain circumstances.
- Australia has already small-scale LNG production facilities and companies are actively expanding small-scale LNG distribution. This LNG is currently offered to industry and power plants etc., but is not yet used to provide LNG bunkering to ships.
- As Australia has abundant natural gas reserves, no Australian port has yet fully implemented LNG supply capacity. However, large ports like Darwin, Dampier, Gladstone, Melbourne, Newcastle and Sydney can all be good candidates for facilitating LNG bunkering.
Location of the Australian ports considered in this study
- Distribution and filling by trucks is recognized as one of the preferred options to bunker LNG, especially for pilot projects. This solution has been used in Norway for many years.
- Australia already has a CNG (compressed natural gas), fuelled ship, the bulk carrier Accolade II of Adelaide. She has been in operation for nearly 30 years without significant problems.
- Local initiatives such as State of Western Australia’s desire of 15% domestic use of natural gas produced, and State of Queensland’s strong desire for protecting the Great Barrier Reef may both point towards LNG as maritime fuel.
- Throughout the course of the project partners with different roles in the LNG supply chain tied bonds and got an improved understanding of the advantages and disadvantages of LNG fuelled shipping.
Other findings include the following:
- There is a limited regulatory framework for LNG bunkering in Australia.
- There are many international standards and recommended practises that can supplement local standards in developing good practice for all aspects of using LNG as fuel.
- Australia can benefit from the on-going ISO work on LNG bunkering standards, from the new IMO IGF code covering the technical, safety and training aspects of LNG as a fuel and from the STCW Convention.
- LNG fuelled tug and OSV’s operations may in turn trigger (or be triggered by) larger LNG consumption by oceangoing LNG fuelled merchant vessels e.g. iron ore and coal bulk ships.
- LNG can become an attractive solution provided that the right LNG price and pricing structure is established. Charterers’ potential request for use of LNG as fuel may boost the development.
- The additional building costs for LNG fuelled ships can in some cases be recovered within attractive payback periods.
Truck to ship LNG bunkering procedures
In order to move ahead with LNG fuelled shipping in Australia joint efforts are needed by Governmental bodies, State Authorities, Port Authorities, and the maritime industry including ship owners, operators and fuel suppliers. Much of the lacking procedures will be covered if Australia adopts the upcoming revision of the IMO IGF code and the ISO
bunkering standard (TC 67/WG 10).
1. The Australian regulatory framework for LNG bunkering should be strengthened using existing and upcoming international standards and codes.The DNV’s study key recommendations include the following:
2. Specific attention is needed to give uniform local requirements on:-
- Bunkering guidelines
- Technical design requirements
- Manning, responsibilities and training
- Emergency preparedness and response
- LNG supply chain to avoid operational disruptions
- Possibility for simultaneous LNG bunkering and goods/passenger loading/ unloading
- Standardisation of bunkering equipment and system interfaces
- Vapour gas management
- Bunkering licensing
3. While awaiting (a) and (b), operators can use existing standards in conjunction with site and operation-specific risk analysis, procedures and training.
4. A financial supporting regime should be considered in case of introduction of emission regulations.
5. Active use of tendering documents to phase in LNG fuelled local shipping.
6. Rewards for green shipping first movers.
Source: DNV
Officer of the Watch 
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