LNG: The alternative cost-effective marine fuel solution

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Paulo Moreira, Economist (PhD Student), Universidade Aberta
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Shipping plays a crucial role in enabling economic development as it responds to the needs of the organization, functioning of the economy and society as well as improving the conditions and quality of life of the population. However, this argument underestimates the real costs. For all ship types, the main engines (propulsion) are the dominant fuel consumers essentially burning residual fuel oil (HFO), which has harmful health and environmental impacts as well as accounts for approximately 3.1% on average for global greenhouse gases (GHGs) worldwide.

For coastal countries like Portugal, although marine emissions occur mostly far from shore, prevailing wind directions pollutants can spread for over hundreds of kilometres with clear implications for the air quality in regions far away from the coastline. Hence, the importance of the introduction of Liquefied Natural Gas (LNG) as an energy end-use fuel for marine purposes, following the European Union recommendation for the adoption of such a fuel in the maritime sector.

LNG as an alternative marine fuel reduces:

  • Greenhouse gas emissions
  • Health problems
  • Impacts over materials, crops and ecosystems

As well as this, LNG also complies with all current and anticipated environmental legislation targets. However, to obtain a level playing field between the different fuels at society level it is necessary to internalise the externalities - those costs that are imposed on third parties without their consent - to weigh the real costs the society has to bear from each option. This is because social costs are not borne by transport operators or users, but by society as a whole.

This can be achieved by means of developing a voyage-base model analysis to test real-world effects from the adoption of LNG opposed to other two oil-based fuelled ships. The report “Liquefied Natural Gas as an alternative fuel: A voyage-based model”, considers three feeder vessels burning different fuels in a round trip comparison between two main continental Portuguese ports. Given the inputs (fuel consumption, speed, distance, etc) and the outputs (emissions per pollutant per roundtrip) multiplied by external damage costs per pollutant, it is possible to calculate the impacts to society.

After the negative externalities compared with the benefits have been quantified and monetised, the results show that both HFO and marine gas oil (MGO) fuelled ships are not cost-effective solutions, even equipped with scrubbers and selective catalytic reduction devices. A switch to LNG is not the “silver bullet” that will change the fossil paradigm at once but, from the viewpoint of the society as a whole, LNG is the most environmentally friendly alternative and cost-effective solution as a transition fuel for maritime applications.

Even when not considered as an end solution, external costs’ quantification shows that LNG’s contribution to the field of final energy consumption and mitigation measures is consistent with real-world efficiency gains. Although it addresses a regional basis level, this methodology should be applied elsewhere.

The full-length article can be found here. 

Share your insights and join the conversation: What would you identify as the key benefits of using LNG as marine fuel? Leave your comment below. 

If you are interested in sharing your industry knowledge on topics such as 'LNG Shipping - Ship Design & Build', submit your abstract today, before the deadline on the 23rd February, for a chance to speak at Gastech 2018. 

Image courtesy of Paulo Moreira