LNG as a marine fuel in the Pacific Northwest

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Daniel Leonard, Vice President, Westmar Advisors Inc.
Daniel Leonard is a senior marine structural engineer and project manager based in Vancouver, Canada.
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Newly upgraded Spirit of Vancouver Island joins Spirit of British Columbia off Tsawwassen terminal – both vessels now operating on liquefied natural gas. Credit: BC Ferries.

There is much anticipation and discussion about the potential for LNG to become a primary marine fuel in the Pacific Northwest region of North America. Two key factors driving this anticipation are increasingly stringent emissions regulations and the availability of LNG. 

Tighter pollution rules by the International Maritime Organization that took effect January 1, 2020, dubbed IMO 2020, will limit the sulphur content of “bunker” fuel on ships to just 0.5 per cent, down from the current 3.5 per cent. Switching vessel propulsion to be driven by LNG will result in compliance with the new guidelines.

There are now 3 small-scale LNG plants without direct marine loading capabilities in production in BC with several more in development. Current and future sources of LNG for marine fuel are expected to come primarily from small-scale plants since the first large-scale LNG plant under construction in British Columbia, LNG Canada will dedicate all LNG production for export overseas.

The expanding availability of LNG and its evolving transportation capability in Washington, Alaska, and British Columbia could mean that it is a viable option to fuel both domestic and international vessels in the Pacific Northwest. There is precedent for using LNG for fuel in this region. FortisBC has been producing LNG in BC for over forty years in Delta, BC and has been trucking LNG fuel for power generation for the past twenty years. And two of the largest marine carriers in British Columbia have begun operating vessels that can be fueled with LNG: BC Ferries and Seaspan Ferries (the LNG is currently loaded from trucks on the vehicle decks of the vessels).

Despite the apparent potential, there are factors that could pose a challenge to speed or magnitude of the adoption of LNG as a marine fuel in the Pacific Northwest. Ready access to cheap hydroelectricity in the Pacific Northwest combined with rapid advancement of battery technology could see the use of LNG as a transition fuel be eclipsed quickly in some scenarios. For example, BC Ferries will soon take receipt of new electric hybrid ferries.  And Washington State Ferries, located immediately to the south and the third largest ferry system in the world, has decided to transition directly to electric ferries and will bypass LNG altogether. Some existing and proposed short service vessel owners are currently converting to, or starting with, electric power (e.g., TransLink in the Metro Vancouver area for the SeaBus service, and potentially Fraser River ferries).

There continues to be a “chicken-and-egg” dilemma when it comes to supply and demand for LNG in the Pacific Northwest. Unless an international carrier that visits the Pacific Northwest with a significant number of vessels and signals to the market that it will require LNG to be supplied there, the infrastructure could continue to lag and may not be able to be ready for the transition. The international vessel bunkering market in the Pacific Northwest is also in competition with ports in Asia and the Pacific coast of Russia. The only large-scale LNG marine bunkering projects currently proposed in British Columbia and the State of Washington are taking longer than expected to develop, due in part to delays in obtaining necessary regulatory approvals.  

In light of these challenges, there are a number of positive factors that will likely work to influence the short and long term prospects for expanded usage of LNG as a marine fuel in the Pacific Northwest. Many of the regulators are ready for a transition to LNG as a marine fuel. Both the Port of Vancouver and the Port of Prince Rupert, both in British Columbia, have updated their ship-to-ship transfer regulations to include LNG. The British Columbia Oil & Gas Commission has developed a design standard for the design of LNG marine terminals, and ship-to-ship LNG bunker technology is currently being proven in many ports globally.

First LNG bunkering delivered concurrent cargo operations in Port of Amsterdam. Credit: Titan LNG.

Large LNG fueled vessels are coming to the west coast in a few years regardless of any other decisions or developments. Much has been made of the many LNG fueled cruise ships that have started service and are on order books. These cruise ships will first be assigned to the premiere routes in the Caribbean and then will be rotated to the Alaskan routes that depart from Seattle, Victoria, and Vancouver. 

There is an abundance of natural gas reserves in the Pacific Northwest and Alberta with available capacities remaining in domestic supply pipelines to major ports in Vancouver, Prince Rupert, Seattle, and Tacoma. 

There exists a significant potential for LNG to become a primary source of marine fuel in the Pacific Northwest over the next several years. The extent of the transition to LNG will depend on several factors, with the most important being potential demand from international fleet bunkering as domestic fleets transition to LNG but also continue to weigh electric options.

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