SEA-LNG is bullish on the growth trajectory for LNG-fuelled shipping.

By Mike Weber

LNG-fuelled vessel order numbers were strong in 2022 – almost as many as in the previous year, even though LNG prices were high, industry association SEA-LNG said in a report published on January 18. 

Most of the vessels ordered had low slip engines, capable of cutting greenhouse gas emissions (GHG) by up to 23% on a well-to-wake basis, according to SEA-LNG’s View From the Bridge 2022-2023 report.

SEA-LNG contends with DNV’s forecast that the number of LNG-fuelled ships will reach 876 by the end of the decade. “If current growth trends continue, we can expect to see 2-4,000 LNG-fuelled ships in operation by 2030,” the association says.

Around a fifth of the total deadweight tonnage on the order book is LNG dual-fuelled, and in some sectors such as car carriers, there is “a remarkably high degree of LNG penetration.” Latest data from Clarksons shows that 93% of car carriers ordered are LNG dual-fuelled, SEA-LNG said.

“LNG is the only scalable fuel available today for deep-sea shipping that addresses both climate and health challenges,” SEA-LNG said. “Shipowners are investing in the LNG-fuelled fleet with the confidence that LNG infrastructure is already established in key bunkering locations and growing rapidly around the world.”

Decarbonisation will not be a “big bang process,” the association said, with the shipping industry leaping straight from fossil fuels to zero-emission, renewable fuels.

“It is likely to take place incrementally as fuels are gradually decarbonised through the addition of low and zero-emission drop-ins and supplied at scale using existing infrastructure,” it said.

Massive investments are being made in newbuild vessels and supply infrastructure that will impact shipping emissions for the next 25-30 years, the association said. 

“Therefore, it is essential that assessments of alternative marine fuel pathways are made on a like-for-like, or ‘apples with apples’ basis using accurate data,” SEA-LNG said.


Pathway implications

Though there is consensus on reaching the net-zero emissions destination, the implications of the pathway are rarely discussed. “The total pathway emissions associated with many of the alternative fuels being discussed may be much higher than those associated with LNG and its bio- and synthetic variants,” SEA-LNG said.

The association argues that investments in LNG vessels and infrastructure are future-proofed, as those same vessels and infrastructure can be used for cleaner bio-LNG and synthetic LNG in the future at no extra cost.

“Being able to transition safely and easily from fossil fuel to bio-LNG, to renewable synthetic e-LNG means that LNG assets will not become stranded and that vessels ordered today will be able to continue operating within increasingly stringent GHG emissions regulations up to and beyond 2050,” SEA-LNG said.

Bio-LNG, produced from sustainable biomass resources, is commercially available today and output is rising, SEA-LNG said. There are 78 production plants set to be up and running within the EU alone in the next two years, and output should expand tenfold by 2030.

Bio-LNG “supports the circular economy, capturing methane that would otherwise be released into the atmosphere,” SEA-LNG said. “It also helps the global economy begin to cope with another major concern – waste management – thereby promoting the circular economy. The benefits of the LNG decarbonisation pathway via bio-LNG are being recognised by increasing numbers of cargo owners, from car manufacturers to big box and internet retailers.” 

Citing a study by the Maritime Energy and Sustainable Development Centre of Excellence at the Nanyang Technological University in Singapore, SEA-LNG noted that pure bio-LNG could cover up to 3% of the total demand for shipping fuels in 2030 and 13% in 2050.

“If it is considered as a drop-in fuel blended with fossil LNG, bio-LNG could cover up to 16% and 63% of the total energy demand in 2030 and 2050, respectively, assuming a 20% blending ratio,” SEA-LNG said. “In the long term, shipowners who have invested in the LNG pathway will need to shift to e-LNG.”

It is also among the cheapest of the alternative shipping fuels being discussed. It is currently 3-4 times more expensive than conventional LNG regarding bunkering price, but SEA-LNG estimates that the average cost will decline by around 30% by 2050, because of the lowest cost of producing biomethane in large-scale anaerobic digestion plants.

Among the major bio-LNG projects in the works is Titan’s 200,000-mt/yr Port of Amsterdam plant due to start up in 2025 – set to be the world’s largest. Titan will operate the facility in partnership with biogas suppliers BioValue and Linde Engineering.

“If blended as a 10% drop in fuel with LNG, the output of this plant alone could enable almost 50 14,000-teu container vessels to be compliant with FuelEU Maritime’s decarbonisation trajectory for 2040,” SEA-LNG said.

Production of synthetic e-LNG, on the other hand, will depend on how quickly renewable electricity generation is expanded. The same is true for other electro-fuels such as e-methanol and e-ammonia, and synthetic LNG will likely be cost-competitive, SEA-LNG said.

“Discussion of alternative fuels too often compares the green versions of, for example, ammonia and methanol, with fossil, or grey, LNG,” SEA-LNG said. “The reality is that all fuels share a common pathway from fossil-based versions, produced from natural gas (often in the form of LNG) to hydrogen-based, renewable produced synthetic fuels. These synthetic fuels will only become available as and when sufficient renewable electricity and electrolysis capacity comes online to produce them.”

All synthetic fuels such as e-LNG, e-ammonia and e-methanol are derived from hydrogen produced from electrolysis using renewable electricity capacity which SEA-LNG notes “does not exist today.”

Some 70-80% of the cost of producing these fuels is related to renewable hydrogen production. So ultimate cost differentials between the different fuels will be minimal, SEA-LNG said.

“The real differentiator in the long-term costs will be in the supply chain,” the association said. “Here LNG will dominate as the supply chain for e-LNG is the same as the supply chain for bio or conventional LNG. All other fuels need their own dedicated supply chains and the investment will be significant.”

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