Liquefied Natural Gas (LNG) serves as an attractive fuel for ships to meet the stringent environmental regulations enacted by IMO, particularly in sulfur and NOx emissions. Dual-fuelled ships are entering the market. An example is the new generation of LNG containerships introduced by CMA CGM in 2020, which are emitting up to 25% less CO2, 99% fewer sulfur emissions, 99% fewer particulates, and 85% fewer nitrogen oxide emissions than ships using heavy fuel oil (HFO). The orderbooks suggest that by 2025, more than 650 LNG-powered ships of all types will be in operation.
LNG bunkering facilities still remain more the exception rather than the rule. On the one hand, the drivers for ports to provide LNG bunkers is long are extensive. It includes the location of the port relative to an ECA, the number of ship calls at the port, the pricing of LNG fuel comparable to alternative fuel options, the provision of infrastructure and facilities for LNG bunkering, the demand from cruise lines for LNG bunkering, the development of a positive public perception of the port and the status of the port as a major bunker port, and the existence of other competitive bunkering ports along the itinerary. The EU has endorsed a Directive addressing LNG bunkering terminal availability in ports stating that refueling points for LNG at maritime and inland ports of the TEN-T core network should be available by the end of 2025 and 2030, respectively.
On the other hand, it can be argued that LNG may not be the ship fuel of the future as the savings in CO2 compared to fuel oil are quite limited. There are unresolved questions about the impact of methane slip (unburned natural gas) on climate change. Several crucial barriers, such as the lack of bunkering infrastructure and operational standards, slowed down its development. However, rising environmental concerns gave an incentive for the public sector to provide policy support in removing any remaining obstacles. The competitive environment supports the widespread application of LNG as a ship fuel with global LNG supply chains already in place. Still, the use of LNG as a ship fuel is expected to first gain momentum in niche markets, like small ferry routes and regular liner traffic. LNG carriers are pioneers in using LNG as a ship fuel as they typically burn a portion of their boil-off gas. In the longer run, the adoption of LNG as a ship fuel on a global scale rests on three main factors:
- The price differences between LNG, low sulfur fuel (LSFO), and scrubber technology.
- The dynamics in the global emission regulations.
- The availability of LNG bunkering facilities.
In the past decade, investments in LNG bunkering infrastructure in ports have really taken off. Quite a few public port authorities are playing a proactive role in facilitating LNG use as a marine fuel, often in close partnership with industrial actors. Port authorities are also using various types of financial instruments to promote the market development of LNG facilities, for instance:
- Building joint ventures or PPPs with private actors to invest in bunkering facilities.
- Providing funding or applying for subsidies to support investment.
- Developing a differential port tariff favoring ships powered by clean fuels, like LNG
- Providing funding for ship conversion (e.g., in the port of Stockholm).
- If applicable, establishing pilot projects, such as owning LNG-powered port vessels, kick-start LNG market development, and solve the chicken-and-egg problem.