lng bunkering in the mediterranean - safety4seathere are already some lng bunkering projects in...
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Introduction
So far Europe’s liquefied natural gas (LNG) bunkering
activity has been focused around the north of the
continent, Scandinavia and the Baltics. Pilot projects have
developed in northern Europe, boosted by strong
government support, infrastructure already in place and
new environmental regulations, which came into force in
January.
There could also be huge potential to expand the sector in
the Mediterranean for use in tourism and passenger ferries
and to tap industrial and domestic gas demand in places
which are not connected to gas grids.
Whether the region reaches its LNG bunkering potential
will depend on how expensive it is to build LNG-fuelled
ships, whether the fuel is price competitive with traditional
ones and whether the same environmental regulations in
the north are applied to the Mediterranean as well.
Section 1: Northern Europe’s Success Story
The world’s first LNG-fuelled vessel was the Glutra car and
passenger ferry in Norway, which has been operating
since February 2000.
Fifteen years later the industry is growing rapidly. There are
currently around 50 LNG-fuelled ships (excluding LNG
carriers) in operation worldwide, while another 69 new
building-orders are now confirmed, according to DNV GL
– a maritime and energy sector advisory firm. They range
from passenger ferries to tankers and platform supply
vessels.
Environmental Regulations
DNV GL expects LNG to grow even more rapidly over the
next 5-10 years, with the number of non-LNG carrier
vessels using the fuel approaching 1,000 by 2020.
The main driving force behind this sector development is
expected to be environmental regulations set by the
International Maritime Organization (IMO), which came
into force on January 1, 2015.
The IMO introduced new regulations stating that ships
trading in designated emission control areas (ECAs), which
include the North Sea and Baltic Sea, will have to use fuel
oil with a sulphur content of no more than 0.1% from
January 1, 2015. This is down from a previous limit of 1%.
Shipowners operating in ECAs have three ways they can
adhere to these new emissions regulations. They can
choose to switch to using marine gas oil as a fuel, to fix
scrubber technologies onto their ships - which capture
some of the emissions but at a potential cost of €3-4
million each, according to one industry executive - or they
can switch to cleaner-burning LNG.
Viking Grace - the world’s first large-scale passenger ferry
Viking Grace, launched in January 2013, is the world’s first
large-scale passenger ferry to be powered by LNG. It
operates across the Baltic Sea between Sweden and
Finland for Finland-based ferry company Viking Line.
Kari Granberg, Viking Line’s Project & Technical
Development manager, said the company’s decision to
use LNG as fuel for the ferry was part of its strategy to be
greener but more importantly, because it was cheaper
than using gasoil.
“Heavy fuel oil wasn’t an option after January 1 this year.
Then you would have needed to install a scrubber. The
ship would have been like a chemical factory,” Granberg
said. “We had three options: using heavy fuel oil, installing
a scrubber or using gasoil –which is around 50% more
expensive than heavy fuel oil or LNG.”
The cost of operating in the future
The IMO plans to enforce a 0.5% sulphur limit on ships
globally from January 1, 2020. It will conduct a review in
2018 to decide if this deadline can be extended to 2025.
DNV GL said the speed of which these environmental
regulations are rolled out across the continent will
determine how fast the sector develops. Available gas
supplies and fuel costs will also drive the use of LNG as a
fuel.
LNG uptake is expected to grow fast in the next 5-10 years,
first on relatively small ships operating in areas with
developed gas bunkering infrastructure, where LNG prices
are competitive against heavy fuel oil (HFO) prices.
“To build a vessel is a long term investment of at least 30
years. Payback should be between 10-15 years. So if you
select the wrong fuel it could be disastrous,” Viking Line’s
Granberg said. “Expansion (of the sector) depends on the
price di�erential between di�erent fuels. To make LNG
competitive it needs to be a similar cost to using heavy
fuel oil with scrubbers.”
According to DNV GL the cost of building a new
LNG-fuelled vessel can be up to 30% higher than for
vessels running on conventional fuels. This is because the
technology does not exist on a large enough scale and
there isn’t a widespread infrastructure network yet,
including import terminals, liquefaction plants and
bunkering facilities.
This high capital cost, a lack of confirmed LNG availability
for bunkering and uncertainty over fuel prices has caused
hesitation from some ship owners to switch.
However DNV GL highlights that sticking with
conventional fuels but introducing emissions reduction
technology, such as scrubbers, can also significantly add
to the cost of a ship. These systems are also both space
demanding and can increase a ship’s fuel consumption by
2-3%.
Oil Price Fall
Arthur Barret, Program Director, LNG Bunkering at
engineering firm GTT, said the biggest obstacle preventing
development of the sector is uncertainty related to LNG
pricing.
“Today many ship owners in Europe are turning to
scrubbers, then gasoil. LNG is the third option,” Barret said.
“Many ship owners have a very short term view. They want
to protect themselves from high (fuel) prices but without
locking in investments for years.”
This issue has been brought to the forefront of the debate
on LNG bunkering since European oil prices have almost
halved since July last year, causing heavy fuel oil prices to
fall.
This has made LNG less price-competitive compared to
dirtier oil-derived fuels, removing the incentive for ship
owners to switch.
The role of infrastructure in the LNG sector’s development
A lack of widespread bunkering infrastructure and a
developed supply chain are also obstacles to the sector’s
development.
“Owners will not start using new fuels if infrastructure is
not available, and energy providers will not finance
expensive infrastructure without first securing customers,”
DNV said in a 2014 report named LNG As Ship Fuel: The
Future Today. “Breaking this deadlock will require a
coordinated, industry-wide e�ort and the political will to
invest in the development of new infrastructure.”
LNG infrastructure needs to withstand very low
temperatures. As a result investments in LNG infrastructure
are hefty financial commitments.
Ed de Jong, CEO of LNG Bunkering Service, a commercial
shipping company which has one barge fuelled on LNG
and operates in the Amsterdam-Rotterdam-Antwerp (ARA)
trading hub, expects most northern European
development to happen there.
“In the Baltics there are already around 150 ships operating
on natural gas and going lower into northern Europe we
see a lot of potential,” he said. “We’ve been contacted by
several companies with ships already running on natural
gas or with plans to do so.”
De Jong said that in Rotterdam there is already strong
support for LNG bunkering, available infrastructure and
regulations in place for ship-to-ship transfer. These factors
would all support development in northern Europe.
De Jong said that a bigger obstacle to the sector
developing was the ability to attract financing for projects.
The marine market is under pressure right now. People
aren’t willing to finance new projects and aren’t willing to
loan money,” de Jong said. “Infrastructure costs for LNG
bunkering projects don’t have projects figures (costs) as it’s
a new industry and for the marine market people aren’t
willing to lend money right now. You’ll invest in LNG
bunkering barges when there’s demand.”
LNG Bunkering Potential In The Mediterranean
If the IMO does enforce the 0.5% sulphur limit on ships
globally from January 1, 2020, this will provide a significant
incentive for ship owners in the Mediterranean to start
using LNG as a bunker fuel.
There are already some LNG bunkering projects in
development in the Mediterranean.
Poseidon Med is the first LNG bunkering project in the
Mediterranean and Adriatic Sea, which aims to introduce
LNG as the main fuel for the global shipping industry and
develop a su�cient infrastructure network of bunkering
value chain.
Greek passenger ferry company Anek Lines, based in the
Port of Piraeus, is developing LNG bunkering in the Greek
Archipelago through its participation in the EC-funded
Archipelago-LNG project. The project aims to provide
sustainable maritime transport between the Greek
mainland and its islands. Qatar Petroleum plans to build
LNG bunkering facilities at the port.
Spain's Port of Huelva announced in February 2015 that it
is considering the development of LNG bunkering
facilities, as well as other infrastructure improvements at
the port. The bunkering facilities would be part of a
proposed gas export terminal.
The port said it plans to carry out the project in
conjunction with other ports as well as Spanish company
Enagas.
The port hopes to receive some of the project finance
from the €50 billion (€55.9 billion) Connecting Europe
Facility (CEF) set up by the EC to invest in transport, energy
and digital projects within the European Union.
The O�shore LNG Toscana, Italy’s regasification terminal
O�shore LNG Toscana is a floating o�shore regasification
terminal near Italy.
Francesco Campanale, Financial Planning and Control
Manager at O�shore LNG Toscana, said there is huge
potential to adopt LNG bunkering in the Mediterranean,
but whether this happens will depend on the scope of
environmental regulations, costs and cross-regional
support to jointly develop projects.
Campanale said there’s huge potential in Barcelona,
Valencia and the Canary Islands for local ferries to run on
LNG and for other LNG bunkering infrastructure to be
developed.
“A lot of countries [in the Med] are not connected by
pipeline to the grid, which would benefit from these
facilities. [Supplying] industry would also be a good place
in start,” Campanale said.
”But there needs to be more support from Europe. The
European Commission is much more focused on
developing the north now and most of the finance will be
diverted there,” he added.
“So far there are just small pilot projects in the Baltic
which aren’t su�cient. It’s something that will remain just
in those countries if the euro community won’t aggregate
the projects and join together to support. If we learn from
the experience of northern countries we can do a good
job, ”Campanale said.
Campanale added that by 2020 Valencia, Sardinia and
possibly France could be potential hotspots for
Mediterranean bunkering.
“There are a lot of ferries to the islands. Italy could also
have an important advantage with this. In Sardinia some
places are totally without gas grid connection. They have
industry and production there but don’t have gas. So that’s
something that makes LNG potentially competitive.”
But he said that cross-regional cooperation was needed
between di�erent countries and between northern and
southern Europe.
A lack of infrastructure, particularly in Italy, to provide LNG
bunkering services, was also a large obstacle, he said.
Barret from GTT said he is bearish about the potential for
the sector to expand in the Mediterranean because of the
lack of environmental regulations. However he added that
some ferry companies in Greece and Algeria are looking at
it.
“In the Med there’s no real incentive right now from an
environmental point of view (to adopt LNG). Even if the EU
decide to add 200 nautical miles to borders, ship will just
move along the North African coast instead to avoid the
regulations,” he said.
“We’ve had discussions with some companies but never
seen a real salient project going ahead in the Med. There
are a lot of politics involved and it takes a lot of time and
money to motivate and obtain public funds,” Barret added.
Barret went on to say that infrastructure and public funds
would be needed to get projects o� the ground in the
Mediterranean. From 2020-2025 some infrastructure will
be in place, he said, enabling large container ships to use
LNG as fuel. Development will also depend on crude
prices rendering traditional fuels more expensive than
LNG, he said.
Forecasts
DNV GL said the number of LNG-fuelled ships operating in
2020 will depend heavily on fuel prices. With the LNG
price around 10% above HFO, around 7-8% of new build
ships between 2012- 2020 will be able to run on LNG, it
said. If LNG prices fall to around 30% below HFO, the
uptake of LNG on vessels could rise to 13% - the
equivalent of around 1,000 ships.
If LNG were to tumble 70% below HFO, the share of
LNG-fuelled ships being newly built would be around 30%
of the global total, DNV said.
James Ashworth, lead consultant with TRI-ZEN
International – a consultancy – said the LNG bunkering
sector in the Mediterranean will be boosted by oil prices,
which he expects to rise above $100/bbl again next year,
and a bounty of available gas nearby.
“Half the world’s oil production at the moment is
uneconomical. For the big producers around the world,
like Saudi Arabia, the amount of money needed to pump
into the sector to support their economies is increasing.
It’s una�ordable,” he said.
He added: “There is a lot of gas in the Med. Algeria is a
massive producer and as competition hots up from places
like Australia [to supply LNG globally], some of that extra
gas supply will go into the transport sector.”
Ashworth said that when the IMO tightens environmental
regulations in shipping, and if LNG were to wholly replace
fuel oil in shipping, it would double today’s 250 million
metric tons global LNG demand.
‘By 2020 all major ship ports along the coast of the EU
should o�er LNG bunkering,” he said. ‘Any of the major
ports with gas nearby will be hotspots. Barcelona is already
looking at it and there is potential for using floating LNG
terminals too. The ones who go in first will win out.”
In a 2013 study by Ashworth: LNG Bunkers – Coming Out
Of The Cold, he said the global market for LNG bunkers
will be considerable in 10 years’ time and in the range of
15-20 million tons per year.
Ashworth said the maritime industry has been “asleep at
the helm” in terms of its lack of preparation for the
expansion of LNG bunkering, especially in the wake of
IMO emissions regulations.
He added that Panama, the Mediterranean, the Suez Canal
and Straits of Malacca would make ECA transit virtually
unavoidable for most global shipping tra�c.
“Perhaps with the expectation that the tide of emissions
legislation can, somehow, be pushed back or that ultra
low sulphur diesel will not cost that much more to burn,”
Ashworth said in the report. “They will be disappointed.
The storm of change is coming. This is the wake up call.”
Conclusion
The timeline and strength of environmental regulations
imposed by the IMO will determine whether the LNG
bunkering sector in the Mediterranean will progress as fast
as in northern Europe.
In the short term the use of LNG as a bunker fuel in the
Mediterranean is likely to be limited until environmental
regulations are imposed on ship owners who will only
adopt the fuel if there is su�cient infrastructure,
government support and if LNG prices are low enough to
justify the capital investment needed in new ships.
Cross-regional cooperation, large-scale projects and an
e�cient supply chain with functioning infrastructure will
also be needed to expand the sector.
With cross border cooperation, EU support and
pan-European strategy being a necessity, it would seem
that the first step for LNG bunkering in the Mediterranean
is to come together.
Researched and Produced by:
LNG Bunkering In The Mediterranean http://www.fc-gi.com/ 1
LNG Bunkering In The Mediterranean
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Introduction
So far Europe’s liquefied natural gas (LNG) bunkering
activity has been focused around the north of the
continent, Scandinavia and the Baltics. Pilot projects have
developed in northern Europe, boosted by strong
government support, infrastructure already in place and
new environmental regulations, which came into force in
January.
There could also be huge potential to expand the sector in
the Mediterranean for use in tourism and passenger ferries
and to tap industrial and domestic gas demand in places
which are not connected to gas grids.
Whether the region reaches its LNG bunkering potential
will depend on how expensive it is to build LNG-fuelled
ships, whether the fuel is price competitive with traditional
ones and whether the same environmental regulations in
the north are applied to the Mediterranean as well.
Section 1: Northern Europe’s Success Story
The world’s first LNG-fuelled vessel was the Glutra car and
passenger ferry in Norway, which has been operating
since February 2000.
Fifteen years later the industry is growing rapidly. There are
currently around 50 LNG-fuelled ships (excluding LNG
carriers) in operation worldwide, while another 69 new
building-orders are now confirmed, according to DNV GL
– a maritime and energy sector advisory firm. They range
from passenger ferries to tankers and platform supply
vessels.
Environmental Regulations
DNV GL expects LNG to grow even more rapidly over the
next 5-10 years, with the number of non-LNG carrier
vessels using the fuel approaching 1,000 by 2020.
The main driving force behind this sector development is
expected to be environmental regulations set by the
International Maritime Organization (IMO), which came
into force on January 1, 2015.
The IMO introduced new regulations stating that ships
trading in designated emission control areas (ECAs), which
include the North Sea and Baltic Sea, will have to use fuel
oil with a sulphur content of no more than 0.1% from
January 1, 2015. This is down from a previous limit of 1%.
Shipowners operating in ECAs have three ways they can
adhere to these new emissions regulations. They can
choose to switch to using marine gas oil as a fuel, to fix
scrubber technologies onto their ships - which capture
some of the emissions but at a potential cost of €3-4
million each, according to one industry executive - or they
can switch to cleaner-burning LNG.
Viking Grace - the world’s first large-scale passenger ferry
Viking Grace, launched in January 2013, is the world’s first
large-scale passenger ferry to be powered by LNG. It
operates across the Baltic Sea between Sweden and
Finland for Finland-based ferry company Viking Line.
Kari Granberg, Viking Line’s Project & Technical
Development manager, said the company’s decision to
use LNG as fuel for the ferry was part of its strategy to be
greener but more importantly, because it was cheaper
than using gasoil.
“Heavy fuel oil wasn’t an option after January 1 this year.
Then you would have needed to install a scrubber. The
ship would have been like a chemical factory,” Granberg
said. “We had three options: using heavy fuel oil, installing
a scrubber or using gasoil –which is around 50% more
expensive than heavy fuel oil or LNG.”
The cost of operating in the future
The IMO plans to enforce a 0.5% sulphur limit on ships
globally from January 1, 2020. It will conduct a review in
2018 to decide if this deadline can be extended to 2025.
DNV GL said the speed of which these environmental
regulations are rolled out across the continent will
determine how fast the sector develops. Available gas
supplies and fuel costs will also drive the use of LNG as a
fuel.
LNG uptake is expected to grow fast in the next 5-10 years,
first on relatively small ships operating in areas with
developed gas bunkering infrastructure, where LNG prices
are competitive against heavy fuel oil (HFO) prices.
“To build a vessel is a long term investment of at least 30
years. Payback should be between 10-15 years. So if you
select the wrong fuel it could be disastrous,” Viking Line’s
Granberg said. “Expansion (of the sector) depends on the
price di�erential between di�erent fuels. To make LNG
competitive it needs to be a similar cost to using heavy
fuel oil with scrubbers.”
According to DNV GL the cost of building a new
LNG-fuelled vessel can be up to 30% higher than for
vessels running on conventional fuels. This is because the
technology does not exist on a large enough scale and
there isn’t a widespread infrastructure network yet,
including import terminals, liquefaction plants and
bunkering facilities.
This high capital cost, a lack of confirmed LNG availability
for bunkering and uncertainty over fuel prices has caused
hesitation from some ship owners to switch.
However DNV GL highlights that sticking with
conventional fuels but introducing emissions reduction
technology, such as scrubbers, can also significantly add
to the cost of a ship. These systems are also both space
demanding and can increase a ship’s fuel consumption by
2-3%.
Oil Price Fall
Arthur Barret, Program Director, LNG Bunkering at
engineering firm GTT, said the biggest obstacle preventing
development of the sector is uncertainty related to LNG
pricing.
“Today many ship owners in Europe are turning to
scrubbers, then gasoil. LNG is the third option,” Barret said.
“Many ship owners have a very short term view. They want
to protect themselves from high (fuel) prices but without
locking in investments for years.”
This issue has been brought to the forefront of the debate
on LNG bunkering since European oil prices have almost
halved since July last year, causing heavy fuel oil prices to
fall.
This has made LNG less price-competitive compared to
dirtier oil-derived fuels, removing the incentive for ship
owners to switch.
The role of infrastructure in the LNG sector’s development
A lack of widespread bunkering infrastructure and a
developed supply chain are also obstacles to the sector’s
development.
“Owners will not start using new fuels if infrastructure is
not available, and energy providers will not finance
expensive infrastructure without first securing customers,”
DNV said in a 2014 report named LNG As Ship Fuel: The
Future Today. “Breaking this deadlock will require a
coordinated, industry-wide e�ort and the political will to
invest in the development of new infrastructure.”
LNG infrastructure needs to withstand very low
temperatures. As a result investments in LNG infrastructure
are hefty financial commitments.
Ed de Jong, CEO of LNG Bunkering Service, a commercial
shipping company which has one barge fuelled on LNG
and operates in the Amsterdam-Rotterdam-Antwerp (ARA)
trading hub, expects most northern European
development to happen there.
“In the Baltics there are already around 150 ships operating
on natural gas and going lower into northern Europe we
see a lot of potential,” he said. “We’ve been contacted by
several companies with ships already running on natural
gas or with plans to do so.”
De Jong said that in Rotterdam there is already strong
support for LNG bunkering, available infrastructure and
regulations in place for ship-to-ship transfer. These factors
would all support development in northern Europe.
De Jong said that a bigger obstacle to the sector
developing was the ability to attract financing for projects.
The marine market is under pressure right now. People
aren’t willing to finance new projects and aren’t willing to
loan money,” de Jong said. “Infrastructure costs for LNG
bunkering projects don’t have projects figures (costs) as it’s
a new industry and for the marine market people aren’t
willing to lend money right now. You’ll invest in LNG
bunkering barges when there’s demand.”
LNG Bunkering Potential In The Mediterranean
If the IMO does enforce the 0.5% sulphur limit on ships
globally from January 1, 2020, this will provide a significant
incentive for ship owners in the Mediterranean to start
using LNG as a bunker fuel.
There are already some LNG bunkering projects in
development in the Mediterranean.
Poseidon Med is the first LNG bunkering project in the
Mediterranean and Adriatic Sea, which aims to introduce
LNG as the main fuel for the global shipping industry and
develop a su�cient infrastructure network of bunkering
value chain.
Greek passenger ferry company Anek Lines, based in the
Port of Piraeus, is developing LNG bunkering in the Greek
Archipelago through its participation in the EC-funded
Archipelago-LNG project. The project aims to provide
sustainable maritime transport between the Greek
mainland and its islands. Qatar Petroleum plans to build
LNG bunkering facilities at the port.
Spain's Port of Huelva announced in February 2015 that it
is considering the development of LNG bunkering
facilities, as well as other infrastructure improvements at
the port. The bunkering facilities would be part of a
proposed gas export terminal.
The port said it plans to carry out the project in
conjunction with other ports as well as Spanish company
Enagas.
The port hopes to receive some of the project finance
from the €50 billion (€55.9 billion) Connecting Europe
Facility (CEF) set up by the EC to invest in transport, energy
and digital projects within the European Union.
The O�shore LNG Toscana, Italy’s regasification terminal
O�shore LNG Toscana is a floating o�shore regasification
terminal near Italy.
Francesco Campanale, Financial Planning and Control
Manager at O�shore LNG Toscana, said there is huge
potential to adopt LNG bunkering in the Mediterranean,
but whether this happens will depend on the scope of
environmental regulations, costs and cross-regional
support to jointly develop projects.
Campanale said there’s huge potential in Barcelona,
Valencia and the Canary Islands for local ferries to run on
LNG and for other LNG bunkering infrastructure to be
developed.
“A lot of countries [in the Med] are not connected by
pipeline to the grid, which would benefit from these
facilities. [Supplying] industry would also be a good place
in start,” Campanale said.
”But there needs to be more support from Europe. The
European Commission is much more focused on
developing the north now and most of the finance will be
diverted there,” he added.
“So far there are just small pilot projects in the Baltic
which aren’t su�cient. It’s something that will remain just
in those countries if the euro community won’t aggregate
the projects and join together to support. If we learn from
the experience of northern countries we can do a good
job, ”Campanale said.
Campanale added that by 2020 Valencia, Sardinia and
possibly France could be potential hotspots for
Mediterranean bunkering.
“There are a lot of ferries to the islands. Italy could also
have an important advantage with this. In Sardinia some
places are totally without gas grid connection. They have
industry and production there but don’t have gas. So that’s
something that makes LNG potentially competitive.”
But he said that cross-regional cooperation was needed
between di�erent countries and between northern and
southern Europe.
A lack of infrastructure, particularly in Italy, to provide LNG
bunkering services, was also a large obstacle, he said.
Barret from GTT said he is bearish about the potential for
the sector to expand in the Mediterranean because of the
lack of environmental regulations. However he added that
some ferry companies in Greece and Algeria are looking at
it.
“In the Med there’s no real incentive right now from an
environmental point of view (to adopt LNG). Even if the EU
decide to add 200 nautical miles to borders, ship will just
move along the North African coast instead to avoid the
regulations,” he said.
“We’ve had discussions with some companies but never
seen a real salient project going ahead in the Med. There
are a lot of politics involved and it takes a lot of time and
money to motivate and obtain public funds,” Barret added.
Barret went on to say that infrastructure and public funds
would be needed to get projects o� the ground in the
Mediterranean. From 2020-2025 some infrastructure will
be in place, he said, enabling large container ships to use
LNG as fuel. Development will also depend on crude
prices rendering traditional fuels more expensive than
LNG, he said.
Forecasts
DNV GL said the number of LNG-fuelled ships operating in
2020 will depend heavily on fuel prices. With the LNG
price around 10% above HFO, around 7-8% of new build
ships between 2012- 2020 will be able to run on LNG, it
said. If LNG prices fall to around 30% below HFO, the
uptake of LNG on vessels could rise to 13% - the
equivalent of around 1,000 ships.
If LNG were to tumble 70% below HFO, the share of
LNG-fuelled ships being newly built would be around 30%
of the global total, DNV said.
James Ashworth, lead consultant with TRI-ZEN
International – a consultancy – said the LNG bunkering
sector in the Mediterranean will be boosted by oil prices,
which he expects to rise above $100/bbl again next year,
and a bounty of available gas nearby.
“Half the world’s oil production at the moment is
uneconomical. For the big producers around the world,
like Saudi Arabia, the amount of money needed to pump
into the sector to support their economies is increasing.
It’s una�ordable,” he said.
He added: “There is a lot of gas in the Med. Algeria is a
massive producer and as competition hots up from places
like Australia [to supply LNG globally], some of that extra
gas supply will go into the transport sector.”
Ashworth said that when the IMO tightens environmental
regulations in shipping, and if LNG were to wholly replace
fuel oil in shipping, it would double today’s 250 million
metric tons global LNG demand.
‘By 2020 all major ship ports along the coast of the EU
should o�er LNG bunkering,” he said. ‘Any of the major
ports with gas nearby will be hotspots. Barcelona is already
looking at it and there is potential for using floating LNG
terminals too. The ones who go in first will win out.”
In a 2013 study by Ashworth: LNG Bunkers – Coming Out
Of The Cold, he said the global market for LNG bunkers
will be considerable in 10 years’ time and in the range of
15-20 million tons per year.
Ashworth said the maritime industry has been “asleep at
the helm” in terms of its lack of preparation for the
expansion of LNG bunkering, especially in the wake of
IMO emissions regulations.
He added that Panama, the Mediterranean, the Suez Canal
and Straits of Malacca would make ECA transit virtually
unavoidable for most global shipping tra�c.
“Perhaps with the expectation that the tide of emissions
legislation can, somehow, be pushed back or that ultra
low sulphur diesel will not cost that much more to burn,”
Ashworth said in the report. “They will be disappointed.
The storm of change is coming. This is the wake up call.”
Conclusion
The timeline and strength of environmental regulations
imposed by the IMO will determine whether the LNG
bunkering sector in the Mediterranean will progress as fast
as in northern Europe.
In the short term the use of LNG as a bunker fuel in the
Mediterranean is likely to be limited until environmental
regulations are imposed on ship owners who will only
adopt the fuel if there is su�cient infrastructure,
government support and if LNG prices are low enough to
justify the capital investment needed in new ships.
Cross-regional cooperation, large-scale projects and an
e�cient supply chain with functioning infrastructure will
also be needed to expand the sector.
With cross border cooperation, EU support and
pan-European strategy being a necessity, it would seem
that the first step for LNG bunkering in the Mediterranean
is to come together.
2
Researched and Produced by:
2
LNG Bunkering In The Mediterranean
LNG Bunkering In The Mediterranean http://www.fc-gi.com/
Please click here to let us know whether this info is useful
Introduction
So far Europe’s liquefied natural gas (LNG) bunkering
activity has been focused around the north of the
continent, Scandinavia and the Baltics. Pilot projects have
developed in northern Europe, boosted by strong
government support, infrastructure already in place and
new environmental regulations, which came into force in
January.
There could also be huge potential to expand the sector in
the Mediterranean for use in tourism and passenger ferries
and to tap industrial and domestic gas demand in places
which are not connected to gas grids.
Whether the region reaches its LNG bunkering potential
will depend on how expensive it is to build LNG-fuelled
ships, whether the fuel is price competitive with traditional
ones and whether the same environmental regulations in
the north are applied to the Mediterranean as well.
Section 1: Northern Europe’s Success Story
The world’s first LNG-fuelled vessel was the Glutra car and
passenger ferry in Norway, which has been operating
since February 2000.
Fifteen years later the industry is growing rapidly. There are
currently around 50 LNG-fuelled ships (excluding LNG
carriers) in operation worldwide, while another 69 new
building-orders are now confirmed, according to DNV GL
– a maritime and energy sector advisory firm. They range
from passenger ferries to tankers and platform supply
vessels.
Environmental Regulations
DNV GL expects LNG to grow even more rapidly over the
next 5-10 years, with the number of non-LNG carrier
vessels using the fuel approaching 1,000 by 2020.
The main driving force behind this sector development is
expected to be environmental regulations set by the
International Maritime Organization (IMO), which came
into force on January 1, 2015.
The IMO introduced new regulations stating that ships
trading in designated emission control areas (ECAs), which
include the North Sea and Baltic Sea, will have to use fuel
oil with a sulphur content of no more than 0.1% from
January 1, 2015. This is down from a previous limit of 1%.
Shipowners operating in ECAs have three ways they can
adhere to these new emissions regulations. They can
choose to switch to using marine gas oil as a fuel, to fix
scrubber technologies onto their ships - which capture
some of the emissions but at a potential cost of €3-4
million each, according to one industry executive - or they
can switch to cleaner-burning LNG.
Viking Grace - the world’s first large-scale passenger ferry
Viking Grace, launched in January 2013, is the world’s first
large-scale passenger ferry to be powered by LNG. It
operates across the Baltic Sea between Sweden and
Finland for Finland-based ferry company Viking Line.
Kari Granberg, Viking Line’s Project & Technical
Development manager, said the company’s decision to
use LNG as fuel for the ferry was part of its strategy to be
greener but more importantly, because it was cheaper
than using gasoil.
“Heavy fuel oil wasn’t an option after January 1 this year.
Then you would have needed to install a scrubber. The
ship would have been like a chemical factory,” Granberg
said. “We had three options: using heavy fuel oil, installing
a scrubber or using gasoil –which is around 50% more
expensive than heavy fuel oil or LNG.”
The cost of operating in the future
The IMO plans to enforce a 0.5% sulphur limit on ships
globally from January 1, 2020. It will conduct a review in
2018 to decide if this deadline can be extended to 2025.
DNV GL said the speed of which these environmental
regulations are rolled out across the continent will
determine how fast the sector develops. Available gas
supplies and fuel costs will also drive the use of LNG as a
fuel.
LNG uptake is expected to grow fast in the next 5-10 years,
first on relatively small ships operating in areas with
developed gas bunkering infrastructure, where LNG prices
are competitive against heavy fuel oil (HFO) prices.
“To build a vessel is a long term investment of at least 30
years. Payback should be between 10-15 years. So if you
select the wrong fuel it could be disastrous,” Viking Line’s
Granberg said. “Expansion (of the sector) depends on the
price di�erential between di�erent fuels. To make LNG
competitive it needs to be a similar cost to using heavy
fuel oil with scrubbers.”
According to DNV GL the cost of building a new
LNG-fuelled vessel can be up to 30% higher than for
vessels running on conventional fuels. This is because the
technology does not exist on a large enough scale and
there isn’t a widespread infrastructure network yet,
including import terminals, liquefaction plants and
bunkering facilities.
This high capital cost, a lack of confirmed LNG availability
for bunkering and uncertainty over fuel prices has caused
hesitation from some ship owners to switch.
However DNV GL highlights that sticking with
conventional fuels but introducing emissions reduction
technology, such as scrubbers, can also significantly add
to the cost of a ship. These systems are also both space
demanding and can increase a ship’s fuel consumption by
2-3%.
Oil Price Fall
Arthur Barret, Program Director, LNG Bunkering at
engineering firm GTT, said the biggest obstacle preventing
development of the sector is uncertainty related to LNG
pricing.
“Today many ship owners in Europe are turning to
scrubbers, then gasoil. LNG is the third option,” Barret said.
“Many ship owners have a very short term view. They want
to protect themselves from high (fuel) prices but without
locking in investments for years.”
This issue has been brought to the forefront of the debate
on LNG bunkering since European oil prices have almost
halved since July last year, causing heavy fuel oil prices to
fall.
This has made LNG less price-competitive compared to
dirtier oil-derived fuels, removing the incentive for ship
owners to switch.
The role of infrastructure in the LNG sector’s development
A lack of widespread bunkering infrastructure and a
developed supply chain are also obstacles to the sector’s
development.
“Owners will not start using new fuels if infrastructure is
not available, and energy providers will not finance
expensive infrastructure without first securing customers,”
DNV said in a 2014 report named LNG As Ship Fuel: The
Future Today. “Breaking this deadlock will require a
coordinated, industry-wide e�ort and the political will to
invest in the development of new infrastructure.”
LNG infrastructure needs to withstand very low
temperatures. As a result investments in LNG infrastructure
are hefty financial commitments.
Ed de Jong, CEO of LNG Bunkering Service, a commercial
shipping company which has one barge fuelled on LNG
and operates in the Amsterdam-Rotterdam-Antwerp (ARA)
trading hub, expects most northern European
development to happen there.
“In the Baltics there are already around 150 ships operating
on natural gas and going lower into northern Europe we
see a lot of potential,” he said. “We’ve been contacted by
several companies with ships already running on natural
gas or with plans to do so.”
De Jong said that in Rotterdam there is already strong
support for LNG bunkering, available infrastructure and
regulations in place for ship-to-ship transfer. These factors
would all support development in northern Europe.
De Jong said that a bigger obstacle to the sector
developing was the ability to attract financing for projects.
The marine market is under pressure right now. People
aren’t willing to finance new projects and aren’t willing to
loan money,” de Jong said. “Infrastructure costs for LNG
bunkering projects don’t have projects figures (costs) as it’s
a new industry and for the marine market people aren’t
willing to lend money right now. You’ll invest in LNG
bunkering barges when there’s demand.”
LNG Bunkering Potential In The Mediterranean
If the IMO does enforce the 0.5% sulphur limit on ships
globally from January 1, 2020, this will provide a significant
incentive for ship owners in the Mediterranean to start
using LNG as a bunker fuel.
There are already some LNG bunkering projects in
development in the Mediterranean.
Poseidon Med is the first LNG bunkering project in the
Mediterranean and Adriatic Sea, which aims to introduce
LNG as the main fuel for the global shipping industry and
develop a su�cient infrastructure network of bunkering
value chain.
Greek passenger ferry company Anek Lines, based in the
Port of Piraeus, is developing LNG bunkering in the Greek
Archipelago through its participation in the EC-funded
Archipelago-LNG project. The project aims to provide
sustainable maritime transport between the Greek
mainland and its islands. Qatar Petroleum plans to build
LNG bunkering facilities at the port.
Spain's Port of Huelva announced in February 2015 that it
is considering the development of LNG bunkering
facilities, as well as other infrastructure improvements at
the port. The bunkering facilities would be part of a
proposed gas export terminal.
The port said it plans to carry out the project in
conjunction with other ports as well as Spanish company
Enagas.
The port hopes to receive some of the project finance
from the €50 billion (€55.9 billion) Connecting Europe
Facility (CEF) set up by the EC to invest in transport, energy
and digital projects within the European Union.
The O�shore LNG Toscana, Italy’s regasification terminal
O�shore LNG Toscana is a floating o�shore regasification
terminal near Italy.
Francesco Campanale, Financial Planning and Control
Manager at O�shore LNG Toscana, said there is huge
potential to adopt LNG bunkering in the Mediterranean,
but whether this happens will depend on the scope of
environmental regulations, costs and cross-regional
support to jointly develop projects.
Campanale said there’s huge potential in Barcelona,
Valencia and the Canary Islands for local ferries to run on
LNG and for other LNG bunkering infrastructure to be
developed.
“A lot of countries [in the Med] are not connected by
pipeline to the grid, which would benefit from these
facilities. [Supplying] industry would also be a good place
in start,” Campanale said.
”But there needs to be more support from Europe. The
European Commission is much more focused on
developing the north now and most of the finance will be
diverted there,” he added.
“So far there are just small pilot projects in the Baltic
which aren’t su�cient. It’s something that will remain just
in those countries if the euro community won’t aggregate
the projects and join together to support. If we learn from
the experience of northern countries we can do a good
job, ”Campanale said.
Campanale added that by 2020 Valencia, Sardinia and
possibly France could be potential hotspots for
Mediterranean bunkering.
“There are a lot of ferries to the islands. Italy could also
have an important advantage with this. In Sardinia some
places are totally without gas grid connection. They have
industry and production there but don’t have gas. So that’s
something that makes LNG potentially competitive.”
But he said that cross-regional cooperation was needed
between di�erent countries and between northern and
southern Europe.
A lack of infrastructure, particularly in Italy, to provide LNG
bunkering services, was also a large obstacle, he said.
Barret from GTT said he is bearish about the potential for
the sector to expand in the Mediterranean because of the
lack of environmental regulations. However he added that
some ferry companies in Greece and Algeria are looking at
it.
“In the Med there’s no real incentive right now from an
environmental point of view (to adopt LNG). Even if the EU
decide to add 200 nautical miles to borders, ship will just
move along the North African coast instead to avoid the
regulations,” he said.
“We’ve had discussions with some companies but never
seen a real salient project going ahead in the Med. There
are a lot of politics involved and it takes a lot of time and
money to motivate and obtain public funds,” Barret added.
Barret went on to say that infrastructure and public funds
would be needed to get projects o� the ground in the
Mediterranean. From 2020-2025 some infrastructure will
be in place, he said, enabling large container ships to use
LNG as fuel. Development will also depend on crude
prices rendering traditional fuels more expensive than
LNG, he said.
Forecasts
DNV GL said the number of LNG-fuelled ships operating in
2020 will depend heavily on fuel prices. With the LNG
price around 10% above HFO, around 7-8% of new build
ships between 2012- 2020 will be able to run on LNG, it
said. If LNG prices fall to around 30% below HFO, the
uptake of LNG on vessels could rise to 13% - the
equivalent of around 1,000 ships.
If LNG were to tumble 70% below HFO, the share of
LNG-fuelled ships being newly built would be around 30%
of the global total, DNV said.
James Ashworth, lead consultant with TRI-ZEN
International – a consultancy – said the LNG bunkering
sector in the Mediterranean will be boosted by oil prices,
which he expects to rise above $100/bbl again next year,
and a bounty of available gas nearby.
“Half the world’s oil production at the moment is
uneconomical. For the big producers around the world,
like Saudi Arabia, the amount of money needed to pump
into the sector to support their economies is increasing.
It’s una�ordable,” he said.
He added: “There is a lot of gas in the Med. Algeria is a
massive producer and as competition hots up from places
like Australia [to supply LNG globally], some of that extra
gas supply will go into the transport sector.”
Ashworth said that when the IMO tightens environmental
regulations in shipping, and if LNG were to wholly replace
fuel oil in shipping, it would double today’s 250 million
metric tons global LNG demand.
‘By 2020 all major ship ports along the coast of the EU
should o�er LNG bunkering,” he said. ‘Any of the major
ports with gas nearby will be hotspots. Barcelona is already
looking at it and there is potential for using floating LNG
terminals too. The ones who go in first will win out.”
In a 2013 study by Ashworth: LNG Bunkers – Coming Out
Of The Cold, he said the global market for LNG bunkers
will be considerable in 10 years’ time and in the range of
15-20 million tons per year.
Ashworth said the maritime industry has been “asleep at
the helm” in terms of its lack of preparation for the
expansion of LNG bunkering, especially in the wake of
IMO emissions regulations.
He added that Panama, the Mediterranean, the Suez Canal
and Straits of Malacca would make ECA transit virtually
unavoidable for most global shipping tra�c.
“Perhaps with the expectation that the tide of emissions
legislation can, somehow, be pushed back or that ultra
low sulphur diesel will not cost that much more to burn,”
Ashworth said in the report. “They will be disappointed.
The storm of change is coming. This is the wake up call.”
Conclusion
The timeline and strength of environmental regulations
imposed by the IMO will determine whether the LNG
bunkering sector in the Mediterranean will progress as fast
as in northern Europe.
In the short term the use of LNG as a bunker fuel in the
Mediterranean is likely to be limited until environmental
regulations are imposed on ship owners who will only
adopt the fuel if there is su�cient infrastructure,
government support and if LNG prices are low enough to
justify the capital investment needed in new ships.
Cross-regional cooperation, large-scale projects and an
e�cient supply chain with functioning infrastructure will
also be needed to expand the sector.
With cross border cooperation, EU support and
pan-European strategy being a necessity, it would seem
that the first step for LNG bunkering in the Mediterranean
is to come together.
3
Researched and Produced by:
3
LNG Bunkering In The Mediterranean
LNG Bunkering In The Mediterranean http://www.fc-gi.com/
Please click here to let us know whether this info is useful
Introduction
So far Europe’s liquefied natural gas (LNG) bunkering
activity has been focused around the north of the
continent, Scandinavia and the Baltics. Pilot projects have
developed in northern Europe, boosted by strong
government support, infrastructure already in place and
new environmental regulations, which came into force in
January.
There could also be huge potential to expand the sector in
the Mediterranean for use in tourism and passenger ferries
and to tap industrial and domestic gas demand in places
which are not connected to gas grids.
Whether the region reaches its LNG bunkering potential
will depend on how expensive it is to build LNG-fuelled
ships, whether the fuel is price competitive with traditional
ones and whether the same environmental regulations in
the north are applied to the Mediterranean as well.
Section 1: Northern Europe’s Success Story
The world’s first LNG-fuelled vessel was the Glutra car and
passenger ferry in Norway, which has been operating
since February 2000.
Fifteen years later the industry is growing rapidly. There are
currently around 50 LNG-fuelled ships (excluding LNG
carriers) in operation worldwide, while another 69 new
building-orders are now confirmed, according to DNV GL
– a maritime and energy sector advisory firm. They range
from passenger ferries to tankers and platform supply
vessels.
Environmental Regulations
DNV GL expects LNG to grow even more rapidly over the
next 5-10 years, with the number of non-LNG carrier
vessels using the fuel approaching 1,000 by 2020.
The main driving force behind this sector development is
expected to be environmental regulations set by the
International Maritime Organization (IMO), which came
into force on January 1, 2015.
The IMO introduced new regulations stating that ships
trading in designated emission control areas (ECAs), which
include the North Sea and Baltic Sea, will have to use fuel
oil with a sulphur content of no more than 0.1% from
January 1, 2015. This is down from a previous limit of 1%.
Shipowners operating in ECAs have three ways they can
adhere to these new emissions regulations. They can
choose to switch to using marine gas oil as a fuel, to fix
scrubber technologies onto their ships - which capture
some of the emissions but at a potential cost of €3-4
million each, according to one industry executive - or they
can switch to cleaner-burning LNG.
Viking Grace - the world’s first large-scale passenger ferry
Viking Grace, launched in January 2013, is the world’s first
large-scale passenger ferry to be powered by LNG. It
operates across the Baltic Sea between Sweden and
Finland for Finland-based ferry company Viking Line.
Kari Granberg, Viking Line’s Project & Technical
Development manager, said the company’s decision to
use LNG as fuel for the ferry was part of its strategy to be
greener but more importantly, because it was cheaper
than using gasoil.
“Heavy fuel oil wasn’t an option after January 1 this year.
Then you would have needed to install a scrubber. The
ship would have been like a chemical factory,” Granberg
said. “We had three options: using heavy fuel oil, installing
a scrubber or using gasoil –which is around 50% more
expensive than heavy fuel oil or LNG.”
The cost of operating in the future
The IMO plans to enforce a 0.5% sulphur limit on ships
globally from January 1, 2020. It will conduct a review in
2018 to decide if this deadline can be extended to 2025.
DNV GL said the speed of which these environmental
regulations are rolled out across the continent will
determine how fast the sector develops. Available gas
supplies and fuel costs will also drive the use of LNG as a
fuel.
LNG uptake is expected to grow fast in the next 5-10 years,
first on relatively small ships operating in areas with
developed gas bunkering infrastructure, where LNG prices
are competitive against heavy fuel oil (HFO) prices.
“To build a vessel is a long term investment of at least 30
years. Payback should be between 10-15 years. So if you
select the wrong fuel it could be disastrous,” Viking Line’s
Granberg said. “Expansion (of the sector) depends on the
price di�erential between di�erent fuels. To make LNG
competitive it needs to be a similar cost to using heavy
fuel oil with scrubbers.”
According to DNV GL the cost of building a new
LNG-fuelled vessel can be up to 30% higher than for
vessels running on conventional fuels. This is because the
technology does not exist on a large enough scale and
there isn’t a widespread infrastructure network yet,
including import terminals, liquefaction plants and
bunkering facilities.
This high capital cost, a lack of confirmed LNG availability
for bunkering and uncertainty over fuel prices has caused
hesitation from some ship owners to switch.
However DNV GL highlights that sticking with
conventional fuels but introducing emissions reduction
technology, such as scrubbers, can also significantly add
to the cost of a ship. These systems are also both space
demanding and can increase a ship’s fuel consumption by
2-3%.
Oil Price Fall
Arthur Barret, Program Director, LNG Bunkering at
engineering firm GTT, said the biggest obstacle preventing
development of the sector is uncertainty related to LNG
pricing.
“Today many ship owners in Europe are turning to
scrubbers, then gasoil. LNG is the third option,” Barret said.
“Many ship owners have a very short term view. They want
to protect themselves from high (fuel) prices but without
locking in investments for years.”
This issue has been brought to the forefront of the debate
on LNG bunkering since European oil prices have almost
halved since July last year, causing heavy fuel oil prices to
fall.
This has made LNG less price-competitive compared to
dirtier oil-derived fuels, removing the incentive for ship
owners to switch.
The role of infrastructure in the LNG sector’s development
A lack of widespread bunkering infrastructure and a
developed supply chain are also obstacles to the sector’s
development.
“Owners will not start using new fuels if infrastructure is
not available, and energy providers will not finance
expensive infrastructure without first securing customers,”
DNV said in a 2014 report named LNG As Ship Fuel: The
Future Today. “Breaking this deadlock will require a
coordinated, industry-wide e�ort and the political will to
invest in the development of new infrastructure.”
LNG infrastructure needs to withstand very low
temperatures. As a result investments in LNG infrastructure
are hefty financial commitments.
Ed de Jong, CEO of LNG Bunkering Service, a commercial
shipping company which has one barge fuelled on LNG
and operates in the Amsterdam-Rotterdam-Antwerp (ARA)
trading hub, expects most northern European
development to happen there.
“In the Baltics there are already around 150 ships operating
on natural gas and going lower into northern Europe we
see a lot of potential,” he said. “We’ve been contacted by
several companies with ships already running on natural
gas or with plans to do so.”
De Jong said that in Rotterdam there is already strong
support for LNG bunkering, available infrastructure and
regulations in place for ship-to-ship transfer. These factors
would all support development in northern Europe.
De Jong said that a bigger obstacle to the sector
developing was the ability to attract financing for projects.
The marine market is under pressure right now. People
aren’t willing to finance new projects and aren’t willing to
loan money,” de Jong said. “Infrastructure costs for LNG
bunkering projects don’t have projects figures (costs) as it’s
a new industry and for the marine market people aren’t
willing to lend money right now. You’ll invest in LNG
bunkering barges when there’s demand.”
LNG Bunkering Potential In The Mediterranean
If the IMO does enforce the 0.5% sulphur limit on ships
globally from January 1, 2020, this will provide a significant
incentive for ship owners in the Mediterranean to start
using LNG as a bunker fuel.
There are already some LNG bunkering projects in
development in the Mediterranean.
Poseidon Med is the first LNG bunkering project in the
Mediterranean and Adriatic Sea, which aims to introduce
LNG as the main fuel for the global shipping industry and
develop a su�cient infrastructure network of bunkering
value chain.
Greek passenger ferry company Anek Lines, based in the
Port of Piraeus, is developing LNG bunkering in the Greek
Archipelago through its participation in the EC-funded
Archipelago-LNG project. The project aims to provide
sustainable maritime transport between the Greek
mainland and its islands. Qatar Petroleum plans to build
LNG bunkering facilities at the port.
Spain's Port of Huelva announced in February 2015 that it
is considering the development of LNG bunkering
facilities, as well as other infrastructure improvements at
the port. The bunkering facilities would be part of a
proposed gas export terminal.
The port said it plans to carry out the project in
conjunction with other ports as well as Spanish company
Enagas.
The port hopes to receive some of the project finance
from the €50 billion (€55.9 billion) Connecting Europe
Facility (CEF) set up by the EC to invest in transport, energy
and digital projects within the European Union.
The O�shore LNG Toscana, Italy’s regasification terminal
O�shore LNG Toscana is a floating o�shore regasification
terminal near Italy.
Francesco Campanale, Financial Planning and Control
Manager at O�shore LNG Toscana, said there is huge
potential to adopt LNG bunkering in the Mediterranean,
but whether this happens will depend on the scope of
environmental regulations, costs and cross-regional
support to jointly develop projects.
Campanale said there’s huge potential in Barcelona,
Valencia and the Canary Islands for local ferries to run on
LNG and for other LNG bunkering infrastructure to be
developed.
“A lot of countries [in the Med] are not connected by
pipeline to the grid, which would benefit from these
facilities. [Supplying] industry would also be a good place
in start,” Campanale said.
”But there needs to be more support from Europe. The
European Commission is much more focused on
developing the north now and most of the finance will be
diverted there,” he added.
“So far there are just small pilot projects in the Baltic
which aren’t su�cient. It’s something that will remain just
in those countries if the euro community won’t aggregate
the projects and join together to support. If we learn from
the experience of northern countries we can do a good
job, ”Campanale said.
Campanale added that by 2020 Valencia, Sardinia and
possibly France could be potential hotspots for
Mediterranean bunkering.
“There are a lot of ferries to the islands. Italy could also
have an important advantage with this. In Sardinia some
places are totally without gas grid connection. They have
industry and production there but don’t have gas. So that’s
something that makes LNG potentially competitive.”
But he said that cross-regional cooperation was needed
between di�erent countries and between northern and
southern Europe.
A lack of infrastructure, particularly in Italy, to provide LNG
bunkering services, was also a large obstacle, he said.
Barret from GTT said he is bearish about the potential for
the sector to expand in the Mediterranean because of the
lack of environmental regulations. However he added that
some ferry companies in Greece and Algeria are looking at
it.
“In the Med there’s no real incentive right now from an
environmental point of view (to adopt LNG). Even if the EU
decide to add 200 nautical miles to borders, ship will just
move along the North African coast instead to avoid the
regulations,” he said.
“We’ve had discussions with some companies but never
seen a real salient project going ahead in the Med. There
are a lot of politics involved and it takes a lot of time and
money to motivate and obtain public funds,” Barret added.
Barret went on to say that infrastructure and public funds
would be needed to get projects o� the ground in the
Mediterranean. From 2020-2025 some infrastructure will
be in place, he said, enabling large container ships to use
LNG as fuel. Development will also depend on crude
prices rendering traditional fuels more expensive than
LNG, he said.
Forecasts
DNV GL said the number of LNG-fuelled ships operating in
2020 will depend heavily on fuel prices. With the LNG
price around 10% above HFO, around 7-8% of new build
ships between 2012- 2020 will be able to run on LNG, it
said. If LNG prices fall to around 30% below HFO, the
uptake of LNG on vessels could rise to 13% - the
equivalent of around 1,000 ships.
If LNG were to tumble 70% below HFO, the share of
LNG-fuelled ships being newly built would be around 30%
of the global total, DNV said.
James Ashworth, lead consultant with TRI-ZEN
International – a consultancy – said the LNG bunkering
sector in the Mediterranean will be boosted by oil prices,
which he expects to rise above $100/bbl again next year,
and a bounty of available gas nearby.
“Half the world’s oil production at the moment is
uneconomical. For the big producers around the world,
like Saudi Arabia, the amount of money needed to pump
into the sector to support their economies is increasing.
It’s una�ordable,” he said.
He added: “There is a lot of gas in the Med. Algeria is a
massive producer and as competition hots up from places
like Australia [to supply LNG globally], some of that extra
gas supply will go into the transport sector.”
Ashworth said that when the IMO tightens environmental
regulations in shipping, and if LNG were to wholly replace
fuel oil in shipping, it would double today’s 250 million
metric tons global LNG demand.
‘By 2020 all major ship ports along the coast of the EU
should o�er LNG bunkering,” he said. ‘Any of the major
ports with gas nearby will be hotspots. Barcelona is already
looking at it and there is potential for using floating LNG
terminals too. The ones who go in first will win out.”
In a 2013 study by Ashworth: LNG Bunkers – Coming Out
Of The Cold, he said the global market for LNG bunkers
will be considerable in 10 years’ time and in the range of
15-20 million tons per year.
Ashworth said the maritime industry has been “asleep at
the helm” in terms of its lack of preparation for the
expansion of LNG bunkering, especially in the wake of
IMO emissions regulations.
He added that Panama, the Mediterranean, the Suez Canal
and Straits of Malacca would make ECA transit virtually
unavoidable for most global shipping tra�c.
“Perhaps with the expectation that the tide of emissions
legislation can, somehow, be pushed back or that ultra
low sulphur diesel will not cost that much more to burn,”
Ashworth said in the report. “They will be disappointed.
The storm of change is coming. This is the wake up call.”
Conclusion
The timeline and strength of environmental regulations
imposed by the IMO will determine whether the LNG
bunkering sector in the Mediterranean will progress as fast
as in northern Europe.
In the short term the use of LNG as a bunker fuel in the
Mediterranean is likely to be limited until environmental
regulations are imposed on ship owners who will only
adopt the fuel if there is su�cient infrastructure,
government support and if LNG prices are low enough to
justify the capital investment needed in new ships.
Cross-regional cooperation, large-scale projects and an
e�cient supply chain with functioning infrastructure will
also be needed to expand the sector.
With cross border cooperation, EU support and
pan-European strategy being a necessity, it would seem
that the first step for LNG bunkering in the Mediterranean
is to come together.
4
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LNG Bunkering In The Mediterranean
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Introduction
So far Europe’s liquefied natural gas (LNG) bunkering
activity has been focused around the north of the
continent, Scandinavia and the Baltics. Pilot projects have
developed in northern Europe, boosted by strong
government support, infrastructure already in place and
new environmental regulations, which came into force in
January.
There could also be huge potential to expand the sector in
the Mediterranean for use in tourism and passenger ferries
and to tap industrial and domestic gas demand in places
which are not connected to gas grids.
Whether the region reaches its LNG bunkering potential
will depend on how expensive it is to build LNG-fuelled
ships, whether the fuel is price competitive with traditional
ones and whether the same environmental regulations in
the north are applied to the Mediterranean as well.
Section 1: Northern Europe’s Success Story
The world’s first LNG-fuelled vessel was the Glutra car and
passenger ferry in Norway, which has been operating
since February 2000.
Fifteen years later the industry is growing rapidly. There are
currently around 50 LNG-fuelled ships (excluding LNG
carriers) in operation worldwide, while another 69 new
building-orders are now confirmed, according to DNV GL
– a maritime and energy sector advisory firm. They range
from passenger ferries to tankers and platform supply
vessels.
Environmental Regulations
DNV GL expects LNG to grow even more rapidly over the
next 5-10 years, with the number of non-LNG carrier
vessels using the fuel approaching 1,000 by 2020.
The main driving force behind this sector development is
expected to be environmental regulations set by the
International Maritime Organization (IMO), which came
into force on January 1, 2015.
The IMO introduced new regulations stating that ships
trading in designated emission control areas (ECAs), which
include the North Sea and Baltic Sea, will have to use fuel
oil with a sulphur content of no more than 0.1% from
January 1, 2015. This is down from a previous limit of 1%.
Shipowners operating in ECAs have three ways they can
adhere to these new emissions regulations. They can
choose to switch to using marine gas oil as a fuel, to fix
scrubber technologies onto their ships - which capture
some of the emissions but at a potential cost of €3-4
million each, according to one industry executive - or they
can switch to cleaner-burning LNG.
Viking Grace - the world’s first large-scale passenger ferry
Viking Grace, launched in January 2013, is the world’s first
large-scale passenger ferry to be powered by LNG. It
operates across the Baltic Sea between Sweden and
Finland for Finland-based ferry company Viking Line.
Kari Granberg, Viking Line’s Project & Technical
Development manager, said the company’s decision to
use LNG as fuel for the ferry was part of its strategy to be
greener but more importantly, because it was cheaper
than using gasoil.
“Heavy fuel oil wasn’t an option after January 1 this year.
Then you would have needed to install a scrubber. The
ship would have been like a chemical factory,” Granberg
said. “We had three options: using heavy fuel oil, installing
a scrubber or using gasoil –which is around 50% more
expensive than heavy fuel oil or LNG.”
The cost of operating in the future
The IMO plans to enforce a 0.5% sulphur limit on ships
globally from January 1, 2020. It will conduct a review in
2018 to decide if this deadline can be extended to 2025.
DNV GL said the speed of which these environmental
regulations are rolled out across the continent will
determine how fast the sector develops. Available gas
supplies and fuel costs will also drive the use of LNG as a
fuel.
LNG uptake is expected to grow fast in the next 5-10 years,
first on relatively small ships operating in areas with
developed gas bunkering infrastructure, where LNG prices
are competitive against heavy fuel oil (HFO) prices.
“To build a vessel is a long term investment of at least 30
years. Payback should be between 10-15 years. So if you
select the wrong fuel it could be disastrous,” Viking Line’s
Granberg said. “Expansion (of the sector) depends on the
price di�erential between di�erent fuels. To make LNG
competitive it needs to be a similar cost to using heavy
fuel oil with scrubbers.”
According to DNV GL the cost of building a new
LNG-fuelled vessel can be up to 30% higher than for
vessels running on conventional fuels. This is because the
technology does not exist on a large enough scale and
there isn’t a widespread infrastructure network yet,
including import terminals, liquefaction plants and
bunkering facilities.
This high capital cost, a lack of confirmed LNG availability
for bunkering and uncertainty over fuel prices has caused
hesitation from some ship owners to switch.
However DNV GL highlights that sticking with
conventional fuels but introducing emissions reduction
technology, such as scrubbers, can also significantly add
to the cost of a ship. These systems are also both space
demanding and can increase a ship’s fuel consumption by
2-3%.
Oil Price Fall
Arthur Barret, Program Director, LNG Bunkering at
engineering firm GTT, said the biggest obstacle preventing
development of the sector is uncertainty related to LNG
pricing.
“Today many ship owners in Europe are turning to
scrubbers, then gasoil. LNG is the third option,” Barret said.
“Many ship owners have a very short term view. They want
to protect themselves from high (fuel) prices but without
locking in investments for years.”
This issue has been brought to the forefront of the debate
on LNG bunkering since European oil prices have almost
halved since July last year, causing heavy fuel oil prices to
fall.
This has made LNG less price-competitive compared to
dirtier oil-derived fuels, removing the incentive for ship
owners to switch.
The role of infrastructure in the LNG sector’s development
A lack of widespread bunkering infrastructure and a
developed supply chain are also obstacles to the sector’s
development.
“Owners will not start using new fuels if infrastructure is
not available, and energy providers will not finance
expensive infrastructure without first securing customers,”
DNV said in a 2014 report named LNG As Ship Fuel: The
Future Today. “Breaking this deadlock will require a
coordinated, industry-wide e�ort and the political will to
invest in the development of new infrastructure.”
LNG infrastructure needs to withstand very low
temperatures. As a result investments in LNG infrastructure
are hefty financial commitments.
Ed de Jong, CEO of LNG Bunkering Service, a commercial
shipping company which has one barge fuelled on LNG
and operates in the Amsterdam-Rotterdam-Antwerp (ARA)
trading hub, expects most northern European
development to happen there.
“In the Baltics there are already around 150 ships operating
on natural gas and going lower into northern Europe we
see a lot of potential,” he said. “We’ve been contacted by
several companies with ships already running on natural
gas or with plans to do so.”
De Jong said that in Rotterdam there is already strong
support for LNG bunkering, available infrastructure and
regulations in place for ship-to-ship transfer. These factors
would all support development in northern Europe.
De Jong said that a bigger obstacle to the sector
developing was the ability to attract financing for projects.
The marine market is under pressure right now. People
aren’t willing to finance new projects and aren’t willing to
loan money,” de Jong said. “Infrastructure costs for LNG
bunkering projects don’t have projects figures (costs) as it’s
a new industry and for the marine market people aren’t
willing to lend money right now. You’ll invest in LNG
bunkering barges when there’s demand.”
LNG Bunkering Potential In The Mediterranean
If the IMO does enforce the 0.5% sulphur limit on ships
globally from January 1, 2020, this will provide a significant
incentive for ship owners in the Mediterranean to start
using LNG as a bunker fuel.
There are already some LNG bunkering projects in
development in the Mediterranean.
Poseidon Med is the first LNG bunkering project in the
Mediterranean and Adriatic Sea, which aims to introduce
LNG as the main fuel for the global shipping industry and
develop a su�cient infrastructure network of bunkering
value chain.
Greek passenger ferry company Anek Lines, based in the
Port of Piraeus, is developing LNG bunkering in the Greek
Archipelago through its participation in the EC-funded
Archipelago-LNG project. The project aims to provide
sustainable maritime transport between the Greek
mainland and its islands. Qatar Petroleum plans to build
LNG bunkering facilities at the port.
Spain's Port of Huelva announced in February 2015 that it
is considering the development of LNG bunkering
facilities, as well as other infrastructure improvements at
the port. The bunkering facilities would be part of a
proposed gas export terminal.
The port said it plans to carry out the project in
conjunction with other ports as well as Spanish company
Enagas.
The port hopes to receive some of the project finance
from the €50 billion (€55.9 billion) Connecting Europe
Facility (CEF) set up by the EC to invest in transport, energy
and digital projects within the European Union.
The O�shore LNG Toscana, Italy’s regasification terminal
O�shore LNG Toscana is a floating o�shore regasification
terminal near Italy.
Francesco Campanale, Financial Planning and Control
Manager at O�shore LNG Toscana, said there is huge
potential to adopt LNG bunkering in the Mediterranean,
but whether this happens will depend on the scope of
environmental regulations, costs and cross-regional
support to jointly develop projects.
Campanale said there’s huge potential in Barcelona,
Valencia and the Canary Islands for local ferries to run on
LNG and for other LNG bunkering infrastructure to be
developed.
“A lot of countries [in the Med] are not connected by
pipeline to the grid, which would benefit from these
facilities. [Supplying] industry would also be a good place
in start,” Campanale said.
”But there needs to be more support from Europe. The
European Commission is much more focused on
developing the north now and most of the finance will be
diverted there,” he added.
“So far there are just small pilot projects in the Baltic
which aren’t su�cient. It’s something that will remain just
in those countries if the euro community won’t aggregate
the projects and join together to support. If we learn from
the experience of northern countries we can do a good
job, ”Campanale said.
Campanale added that by 2020 Valencia, Sardinia and
possibly France could be potential hotspots for
Mediterranean bunkering.
“There are a lot of ferries to the islands. Italy could also
have an important advantage with this. In Sardinia some
places are totally without gas grid connection. They have
industry and production there but don’t have gas. So that’s
something that makes LNG potentially competitive.”
But he said that cross-regional cooperation was needed
between di�erent countries and between northern and
southern Europe.
A lack of infrastructure, particularly in Italy, to provide LNG
bunkering services, was also a large obstacle, he said.
Barret from GTT said he is bearish about the potential for
the sector to expand in the Mediterranean because of the
lack of environmental regulations. However he added that
some ferry companies in Greece and Algeria are looking at
it.
“In the Med there’s no real incentive right now from an
environmental point of view (to adopt LNG). Even if the EU
decide to add 200 nautical miles to borders, ship will just
move along the North African coast instead to avoid the
regulations,” he said.
“We’ve had discussions with some companies but never
seen a real salient project going ahead in the Med. There
are a lot of politics involved and it takes a lot of time and
money to motivate and obtain public funds,” Barret added.
Barret went on to say that infrastructure and public funds
would be needed to get projects o� the ground in the
Mediterranean. From 2020-2025 some infrastructure will
be in place, he said, enabling large container ships to use
LNG as fuel. Development will also depend on crude
prices rendering traditional fuels more expensive than
LNG, he said.
Forecasts
DNV GL said the number of LNG-fuelled ships operating in
2020 will depend heavily on fuel prices. With the LNG
price around 10% above HFO, around 7-8% of new build
ships between 2012- 2020 will be able to run on LNG, it
said. If LNG prices fall to around 30% below HFO, the
uptake of LNG on vessels could rise to 13% - the
equivalent of around 1,000 ships.
If LNG were to tumble 70% below HFO, the share of
LNG-fuelled ships being newly built would be around 30%
of the global total, DNV said.
James Ashworth, lead consultant with TRI-ZEN
International – a consultancy – said the LNG bunkering
sector in the Mediterranean will be boosted by oil prices,
which he expects to rise above $100/bbl again next year,
and a bounty of available gas nearby.
“Half the world’s oil production at the moment is
uneconomical. For the big producers around the world,
like Saudi Arabia, the amount of money needed to pump
into the sector to support their economies is increasing.
It’s una�ordable,” he said.
He added: “There is a lot of gas in the Med. Algeria is a
massive producer and as competition hots up from places
like Australia [to supply LNG globally], some of that extra
gas supply will go into the transport sector.”
Ashworth said that when the IMO tightens environmental
regulations in shipping, and if LNG were to wholly replace
fuel oil in shipping, it would double today’s 250 million
metric tons global LNG demand.
‘By 2020 all major ship ports along the coast of the EU
should o�er LNG bunkering,” he said. ‘Any of the major
ports with gas nearby will be hotspots. Barcelona is already
looking at it and there is potential for using floating LNG
terminals too. The ones who go in first will win out.”
In a 2013 study by Ashworth: LNG Bunkers – Coming Out
Of The Cold, he said the global market for LNG bunkers
will be considerable in 10 years’ time and in the range of
15-20 million tons per year.
Ashworth said the maritime industry has been “asleep at
the helm” in terms of its lack of preparation for the
expansion of LNG bunkering, especially in the wake of
IMO emissions regulations.
He added that Panama, the Mediterranean, the Suez Canal
and Straits of Malacca would make ECA transit virtually
unavoidable for most global shipping tra�c.
“Perhaps with the expectation that the tide of emissions
legislation can, somehow, be pushed back or that ultra
low sulphur diesel will not cost that much more to burn,”
Ashworth said in the report. “They will be disappointed.
The storm of change is coming. This is the wake up call.”
Conclusion
The timeline and strength of environmental regulations
imposed by the IMO will determine whether the LNG
bunkering sector in the Mediterranean will progress as fast
as in northern Europe.
In the short term the use of LNG as a bunker fuel in the
Mediterranean is likely to be limited until environmental
regulations are imposed on ship owners who will only
adopt the fuel if there is su�cient infrastructure,
government support and if LNG prices are low enough to
justify the capital investment needed in new ships.
Cross-regional cooperation, large-scale projects and an
e�cient supply chain with functioning infrastructure will
also be needed to expand the sector.
With cross border cooperation, EU support and
pan-European strategy being a necessity, it would seem
that the first step for LNG bunkering in the Mediterranean
is to come together.
5
Researched and Produced by:
5
LNG Bunkering In The Mediterranean
LNG Bunkering In The Mediterranean http://www.fc-gi.com/
Please click here to let us know whether this info is useful