80
LNG
INDUSTRY
MARCH
2016
Building LNG-ready vessels
for future scenarios
In a very different, but highly significant, project, in
early November 2015, Crowley christened the first of
four new, Jones Act 50 000 DWT product tankers. Built
by Philly Shipyard Inc., the
Ohio
is the first tanker ever to
receive the ABS LNG-Ready Level 1 approval, meaning
that Crowley has the option to convert the tanker to LNG
propulsion in the future.
ABS published the
Guide for LNG Fuel Ready Vessels
in
2014. The LNG-ready endorsements allow ship owners and
yards the flexibility to limit their initial investment, while
planning for the future conversion to dual-fuel or
gas-powered combustion engines.
A strategy that reflects future regulatory requirements
can help ship owners prepare for ever-increasing
environmental controls, while saving time and money by
considering basic gas-fuelled ship requirements during the
preliminary design, thereby minimising the potential
changes during the future conversion.
Although Crowley foresees the future possibility of more
widespread adoption of LNG as fuel, it claims that the
certainty of the change in all segments of the shipping
industry and the timing of such a switch remains unclear at
present.
Unlike liner services working between a limited number
of ports or geographic regions, these tankers trade widely all
over the US. Crowley says that the infrastructure required,
specifically the supply of LNG bunkers, is not currently
available in all of the varied areas that these ships might
operate, and the timing of future availability of LNG still
remains vague.
The company believes that, due to the high CAPEX on
equipment, such as the LNG tanks, dual-fuel engines, and
fuel gas supply systems, it is not economically feasible to
perform the full dual-fuel modification on vessels that may
not be able to utilise LNG for some years.
Instead, the company, working together with the
shipyard and ABS, decided to prepare for the future by
performing the functional level engineering, planning to a
significant extent the full modification, and then deciding
which limited elements were cost effective to install initially.
In order to reduce the expected time for a future
modification and to avoid future damage to the cargo tank
linings, the decision was made to install the underdeck
structure necessary to support the future installation of the
LNG tanks on deck, amongst other smaller modifications.
Crowley says that the technical challenge in building
LNG-ready capability into the tankers was to create an
LNG-ready design that, if ultimately implemented, would
cause the least amount of future work and rework, and
thereby facilitate a shorter out-of-service interval for such a
retrofit.
The company claims that the future sites of the LNG
tanks and other equipment were selected not only for
system functionality, but also to avoid as far as possible
existing interferences that would cost time and money to
rework. For maximum flexibility, the tankers can utilise up to
three on-deck LNG type C storage tanks, depending on what
range under LNG power is determined as necessary.
Economic considerations for
LNG as fuel
As Crowley’s experience indicates, the economics of
LNG-ready operations are multi-faceted. CME says that a
thorough understanding of the incremental cost of dual-fuel
vs diesel-only and the estimated payback period are critical.
There are many variables that go into the conversion of a
vessel to run on LNG, and the costs that are circulating the
industry vary widely. As a result, CME believes that it makes
sense for ship owners to build their new vessels to
LNG-ready class, even if they decide that investing in a fully
LNG capable vessel is not prudent today.
Under its model, CME provides the financing for the
owner to take the next step to be LNG-fuelled at no upfront
cost to the ship owner. This offsets the most expensive
items in the LNG system – the tanks and the fuel gas supply
system – because the engine prices are well known and are
less of a barrier to the decision. The potential loss of cargo
space also needs to be taken into account, but, with an
efficient design, this should be an issue that can be
accounted for.
As to payback, CME believes that the period will ebb and
flow with the spread between LNG and MGO prices. The
company adds that the forward price of marine fuels is
unknown, especially for diesel products, and that, in one
year, there has been a greater than 50% drop in prices in
many regions.
However, the company predicts that there will be an
abundant supply of natural gas in North America and
expects LNG prices to remain steadily low and the spread
between LNG and MGO to widen.
CME holds that making the upfront investment in LNG
provides an affordable option to burn LNG if diesel prices
rise again over the next 25 years, which is likely. The
company also emphasises the environmental benefit of
LNG.
Overcoming infrastructure
constraints
Despite the work being done to build the necessary
infrastructure, the developing state of LNG bunkering in the
US is still perceived as a barrier to the broader adoption of
LNG as fuel, irrespective of the regulatory drivers.
Operators, such as Harvey Gulf, have found it necessary
to develop their own land-based infrastructure rather than
rely on third-party installations as they would for
Figure 5.
A second LNG-powered offshore supply vessel
(OSV),
Harvey Power
, has entered service for Harvey Energy.
