Sailing towards a Cleaner Future: LNG Emerges as a Promising Ship Fuel Worldwide

In 2022, the maritime industry handled over 12 billion tons of cargo, accounting for approximately 90% of global trade[1]. This immense volume is managed by more than 100,000 vessels worldwide, primarily powered by conventional fuels like Marine Diesel Oil (MDO), Intermediate Fuel Oil (IFO), and Marine Gas Oil (MGO).

As global focus increasingly shifts towards environmental sustainability, the shipping industry faces mounting pressure to adopt cleaner fuel alternatives. Historically, various initiatives within the industry have aimed to reduce emissions and steer the sector toward the adoption of greener fuels.

As concerns about carbon emissions and air pollution continue to rise, Liquefied Natural Gas (LNG) has emerged as a promising solution for powering ships globally. Let's explore how LNG fuel for ships is steadily gaining momentum, paving the way for a greener maritime future.

Combating climate change: LNG Fuel for Ships

LNG is a cleaner energy source compared to traditional marine fuels like Heavy Fuel Oil (HFO) and Marine Diesel Oil (MDO). It significantly reduces greenhouse gas emissions, including Carbon Dioxide (CO₂), Sulfur Oxides (SO_x), and Nitrogen Oxides (NO_x). This decrease supports global climate change initiatives and improves air quality in coastal and port areas. 

Additionally, LNG is less harmful to marine ecosystems, as it lowers the risk of oil spills and mitigates acidification and eutrophication, fostering healthier ocean habitats. 

[1] UNCTAD

World’s first LNG-fueled Container Ship

Switching to LNG as a fuel offers significant advantages by meeting regulatory requirements, enhancing competitiveness, improving air quality, and reducing greenhouse gas emissions:

1. LNG-fueled vessels can lower their Energy Efficiency Design Index (EEDI) rating by 20%, with a similar reduction in their Carbon Intensity Indicator.
2. Competitive vessel design ensures compliance with upcoming regulations for up to ten years longer than conventional designs.
3. Reduces nitrogen oxides (NOx) emissions by up to 80% and almost eliminates sulfur oxides (SOx) and particulate matter (PM).
4. Greenhouse gas (GHG) emissions can be reduced by up to 23% with modern engine technology.
5. Biogas and drop-in fuels offer pathways to further reducing vessel carbon intensity.

Underlying challenges for LNG-fueled ships

LNG fuel has a low environmental impact, but there are three general disadvantages to using it as a ship's fuel:

1. Installation of engines that can use LNG fuel.
2. Capital investment is required in equipment beyond engines, such as fuel tanks that are two to three times larger than conventional ones and re-liquefaction equipment.
3. The cost of new construction is 15-30% higher compared to vessels using conventional fuels.
   

[2] DNV
[3] MOL

Fueling the shift to LNG powered vessels

Despite these drawbacks, LNG-fueled vessels are expected to grow in market share as environmental regulations become increasingly stringent. The advantages of LNG, such as "zero sulfur content, about 25% reduction in CO2 emissions, and significantly lower nitrogen compound emissions," coupled with its more competitive pricing compared to expensive low-sulfur heavy oil, make it an attractive option.

Investments in infrastructure and retrofitting may seem daunting at first, but the advantages include reduced fuel consumption, lower maintenance costs, and compliance with emission regulations, making LNG the favorable solution.

The ever-growing LNG Fleet

As of April 2024, the global LNG-fueled fleet has experienced steady growth since 2022.

Further, the orderbook trend underscores the maritime industry's commitment to adopting cleaner fuel alternatives and enhancing environmental sustainability.

Global LNG fueled ship orderbook

According to recent reports, LNG could account for 32% of shipping energy demand by 2050 as LNG bunkering facilities gradually expand in several countries.

[4] S&P

As governments, regulatory bodies, and industry stakeholders increasingly prioritize environmental stewardship, LNG is poised to play a crucial role in reducing the carbon footprint of maritime transportation worldwide.

LNG fuel for ships offers operational, financial, and environmental benefits for the maritime sector in India and other parts of the world. This is a time when shipping companies can make informed decisions to embrace LNG as a cost-efficient and sustainable solution for powering their fleets into the future.

Swan LNG Private Limited

As demand for LNG as a fuel will witness growth, India too aims to cut emissions to net zero by 2070.

To meet the rising gas demand in the country, India’s Swan LNG Private Limited (SLPL) is developing a greenfield LNG port project. The project involves developing LNG port facilities using a Floating Storage and Regasification Unit (FSRU) for LNG receipt, storage, regasification, and distribution, with an initial regasification capacity of 5 MMTPA in phase I, off the Jafrabad coast in Gujarat’s Amreli district.

Additionally, there are plans under consideration for expanding the project with two more jetties.

The offtake agreement is already signed by Oil and Gas major players in India namely IOCL, ONGC, GSPC and BPCL for 4.5 MMTPA out of total 5 MMTPA in phase 1. The project is expected to be commissioned by 2024/2025.



Jetty 1 at SLPL LNG plant