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Opportunities for norway’s lng cluster in australasia

Det Norske Veritas has completed a joint industry project mapping out LNG bunkering possibilities in Singapore and is looking at similar opportunities in Australia. The hope is that these projects will stimulate the use of LNG fuelled vessels, opening up...

Liquefied natural gas (LNG) has become a more popular choice among shipowners as a cleaner marine fuel because of increasingly stricter environmental requirements and potential costs savings. LNG offers 20-25% less CO2 and greenhouse gas emissions than heavy fuel oil and nearly 100% reduction of SOx, NOx, and particulates, as well as less maintenance costs over the life of the vessel.

But there are challenges, particularly within LNG bunkering. The most common barrier is insufficient local LNG supply and immature bunkering infrastructure, along with a lack of regulatory schemes for both shore-based and ship-to-ship bunkering, according to Norwegian shipping classification company DNV. In addition, there needs to be a simultaneous development of the entire value chain to lower the investment risks for stakeholders.

“I think it comes down to financials,” says Henning Mohn, head of section at the DNV Clean Technology Centre based in Singapore. “You have to have a pretty good forecast before you start investing in this…So the question will be when will these (large LNG-fuelled) ships come? Of course, shipowners hesitate to build them until there is enough LNG around and LNG providers wait building bunkering possibilities until there are ships.”

LNG Bunkering in Singapore

DNV is hoping to lower the threshold for building LNG bunkering facilities in Singapore and Australia through two joint industry projects (JIP) in 2012. It completed the first with the Maritime and Port Authority of Singapore and 21 industry partners earlier this year. So far, the project has resulted in 38 concrete recommendations to the Singapore authorities and has sparked the creation of a follow-up joint development project led by DNV.

Singapore is seen as a key market as the world’s largest marine fuel bunkering port and hub for one of the most frequent routes of the South East Asia container feeder trade. The country aims to become the first in the world for large scale bunkering of LNG and is in the process of building a large LNG import facility for completion by June 2013.

One hope is that a jetty at this LNG import terminal could be used for maritime bunkering solutions, in parallel with the terminal’s main purpose as provider of energy to power intensive industries there. There is a large gas demand in the Singapore land-based sector for power plants and cooking gas, which is currently imported via pipeline from Malaysia. LNG would give Singapore a more secure energy mix as it would enable the country to source gas from others such as Qatar, Indonesia and Australia.

“Singapore wants to be the first main port offering LNG to ships,” says Mohn. “It also wants to offer other marine fuels than only heavy marine fuel oil and diesel.”

The JIP works by providing a platform for the consortium to collaborate, share knowledge, and identify solutions to the issues faced by this sector. The partners in the Singapore project included BG Group, Energy Markets Authority, Fearnleys, Gas Supply Pte, Hong Lam Marine, I.M. Skaugen, IHI Corporation, Innovation Norway, Keppel Offshore & Marine Technology Centre, Land Transport Authority, Maritime and Port Authority, Mitsui & Co., Norgas, NYK Line, Rolls Royce Marine, Shell, Singapore LNG Corporation, SPT Marine Services and Star Cruises.

Fueling Vessels Down Under

The next step is to map out possibilities in Australia. DNV set up a four-month joint industry project in August together with nine key members of the Australian maritime, port and energy sectors. Its purpose is to cover the infrastructure and regulatory requirements, as well as assess the potential benefits and risks faced by energy majors, ports and ship owners considering LNG fuelled vessels.

Part of the knowledge from the Singapore project will be transferred to the Australian study. In fact, some of the same companies have participated on both JIPs, namely Rolls Royce and DNV, which manages the Australia project. Co-sponsored with the Australian Maritime Safety Authority, the other partners include BOC Limited (Linde Group), Farstad Shipping, Ports Australia, SVITZER, Swire Pacific Offshore Operations, Teekay Shipping, and Woodside Energy.

By the end of 2012 the group will have delivered a gap analysis and map of legal and infrastructural challenges and opportunities. The project will also produce internal and external reports covering improvements and recommendations on the needed steps in the LNG fuel domain in Australia. The study focuses in particular on tugs and offshore supply vessels, which require smaller volumes of LNG.

Australia is seen as an interesting market because of the huge amount of gas reserves discovered there recently. The country will be one of the world’s largest LNG exporters in a number of years, according to Mohn. Most of the gas is exported to Japan and China. In addition, there is a marine protection area around the Great Barrier Reef that would benefit environmentally from having marine traffic fuelled by LNG rather than heavy fuel oil in case of a marine casualty.

“This is the first time someone does such a study in Australia, so we are breaking some new ground here,” says Mohn.

Norway is the only country in the world that offers LNG bunkering. At present there are 25 LNG fuelled ships operating in the Norwegian Emission Control Area and benefits from bunkering from shore facilities along the west coast. However, its LNG cluster can offer its expertise across the whole value chain.

For a detailed list of Norway’s LNG cluster see DNV report “Opportunity Assessment of the South East Asian market for LNG Shipping and Distribution.”

(Photo 1.LNG-powered Offshore Supply Vessel Viking Princess was delivered from Kleven Shipyard in September 2012 for Eidesvik Offshore. The two are pioneers in the construction of gas-powered vessels and built the world’s first gas-supply vessel Viking Energy in 2003. Credit: Eidesvik/Tom Gulbrandsen, 2.The 10,000 cubic metre multi-gas carrier Norgas Innovation is one of I.M. Skaugen’s six LNG capable gas carriers. Credit: I.M. Skaugen/Norgas)