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LNG Bunkering

If you build it, they will come…

‘Chicken and egg’ of LNG power is about to be resolved in the Caribbean…

By Gary Gimson

I suppose it’s a bit like driving an electric car – all very well in theory, but when it comes to the practicalities of day-to-day ownership the idea is less attractive. Your car is apparently eco-friendly, but the downsides include range anxiety and availability of supply.

There are some similarities between electric cars and LNG-powered ships, particularly when it comes to availability of supply.

And then there’s a more general ‘chicken and egg’ conundrum, namely, which comes first – LNG-powered ships or LNG bunker stations? Do vessel owners operate a ship when fuel supplies may be a problem? Conversely, do suppliers of LNG invest in expensive bunker stations when there are no buyers for the fuel? This is the dilemma for the shipping industry.

bunkering

And does it make any economic sense to retrofit a ship to run on LNG, especially when the fuel is comparatively expensive and almost impossible to obtain in the Caribbean? And when currently low oil prices make the case for LNG even more difficult.

So for the moment, the answer must be ‘No’ and MDO remains the best option since new rules were introduced on 1 January 2015 for the United States Caribbean Sea Area. This is one of four IMO-designated emission control areas (EMAs) where the output of sulfur oxides is restricted and which have an impact on the region’s shipping.

But for the time being and in contrast to parts of northern Europe (where there are dedicated LNG bunker barges), LNG supplies are limited in the Caribbean and bunkering points effectively non-existent. Looking just a little ahead, however, the situation is about to undergo a dramatic change, with new LNG bunkering points due to come on stream both in the US Gulf and in the Caribbean.

Launch

For a start, AES Dominicana plans to launch LNG bunkering services across the Americas using its LNG receiving and storage terminal and fuel handling capability in the Dominican Republic and with gas imported from Atlantic LNG in Trinidad. According to a company statement, the combination of AES Dominicana’s ability to procure competitively priced LNG and its ability to deliver small loads of LNG opens the way to cost-effective gas conversion solutions for smaller-load fuel consumers in the region such as vessels. The company’s AES Andres LNG terminal will be ready for reload operations in the third quarter of 2016.

Says AES Dominicana’s George Nemeth: “The facility is also located along many shipping routes ideally positioned to provide LNG bunkering services to vessel owners and operators who are increasingly drawn to LNG as a propulsion fuel.”

Port Fourchon in Louisiana hosted the United States’ first LNG bunkering operation in 2015 from the new Harvey Gulf International Marine facility. Port Fourchon is the largest offshore supply base in the US. The Harvey Gulf facility is multi-use, supplying the company’s own fleet of dual-fuel offshore supply vessels and serving ‘over the road’ vehicles.

JAXPORT in Florida is set to become another supply point for LNG after Pivotal LNG and the California-based energy group WesPac Midstream formed a joint venture to build an LNG bunkering plant close to the new Dames Point Marine Terminal in Jacksonville. The facility should be in operation in 2016 with a dedicated LNG bunker barge to supply the world’s first dual-fuel containerships operated by TOTE Maritime Puerto Rico.

The hope is that if LNG terminals are supported by truck loading facilities, as is the case at Port Fourchon, as well as for the loading of bunker vessels or the direct
bunkering of LNG-fueled vessels, then a basic infrastructure network for the distribution and supply of LNG fuel can be established, thus ensuring an attractive FOB bunker price for LNG.

This looks to be the path ahead in terms of setting up LNG bunkering across the Caribbean. And the Dominican Republic and ports in Louisiana and Florida are leading the way.

 

Payback time

“Based on LNG prices indexed to a projected reference oil price of US$ 100 per barrel, and compared with the use of MGO, the payback time for ships using LNG is between one and three years, depending on specific investment costs, emission control area (ECA) operating time and fuel cost difference.” – World Port Climate Initiative (WPCI)