Global marine fuel trends to 2030

Apr 01 2014


In a report compiled by Lloyd’s Register (LR) and University College London’s Energy Institute, three scenarios for the future of marine fuels in 2030 were highlighted.

The research found that in all scenarios, heavy fuel oil will remain the main fuel for deepsea shipping; LNG will develop a deepsea bunker market share of 11%; low sulphur heavy fuel oil and hydrogen emerge as alternatives in certain scenarios.

Tanker Operator has taken extracts from the report and from the discussion at its launch in London last month.

The study showed that the combination of growth in trade and reduced emissions would require a reduction in fossil fuel dependency and the commencement of a transition to a zero carbon fuel, such as hydrogen.

Global Marine Fuel Trends 2030 provides an insight into future fuel demand for the containership, bulk carrier/general cargo and tanker sectors - representing around 70% of the global shipping industry’s fuel demands.

If world trade grows then so will seaborne tonne/miles of cargo. The report indicated that we can expect strong growth in shipping. With emissions regulations and rising energy costs, shipping decision makers will benefit from a clearer understanding of the potential scenarios for marine fuel demand, LR said when introducing the report.

The three scenarios are:

Status Quo – The world will continue its current growth momentum with some booms and busts over the next 20 years.

Global Commons – A shift to concern over resource limitation and environmental degradation will see a desire for a more sustainable world being developed and fairness in wealth distribution. Governments will find common ground and accelerated economic growth, within a framework of sustainable development, which will follow.

Competing Nations – States act in their own national interest. There will be little effort to forge agreement among governments for sustainable development and international norms. This is a self-interest and zero-sum world with a likely rise in protectionism and slower economic growth.

So what does the marine fuel mix look like for the three types of vessels by 2030? In two words - decreasingly conventional. Heavy fuel oil (HFO) will still be very much around in 2030, but in different proportions for each scenario: 47% in Status Quo, to a higher 66% in Competing Nations and a 58% share in Global Commons, the most optimistic of scenarios for society.

Naturally, a high share of HFO means a significant uptake of emissions abatement technology when global emissions regulations enter into force.

The declining share of HFO will be offset by low sulphur alternatives (MDO/MGO, or LSHFO) and by LNG. This will occur differently for each ship type and scenario.

For example, LNG will reach a maximum 11% share by 2030 in Status Quo.

Interestingly, there is also the entry of Hydrogen as an emerging shipping fuel in the 2030 Global Commons scenario, which favours the uptake of low carbon technologies stimulated by a significant carbon price.

By 2025, it is forecast that 653 deepsea vessels will be using gas as a source of fuel and further in the future, ethane could possibly be used on some large vessels. In the integration of technology, it is not so easy to commercially optimise solutions and methods to overcome this are currently being worked on.

Competence problems

One of the challenges is the lack of competence at the terminal, the receiving vessel and with the bunkering in general.

Where is the competency going to come fromtraining? There is already a huge need for training with 138 LNGCs on order and more to come. This training is needed to ensure a safety regime for gas bunkering, LR warned.

Bunkering is a challenge on its own, LR said. If the shipping industry grows as forecasts predict, there will be a need for twice as much fuel by 2030. However, there could be a gradual decline in fuel demand from 2025 due to greater shipboard efficiency.

More HFO will be needed in 2030, compared with 2010 in all of the three scenarios, LR said. Emissions will growdoubling in less than 20 years. The world’s policy on climate change will be the greatest driver in future fuels, vessel efficiency, etc.

Tom Boardley, LR’s marine director said that the class society is already discussing the future with its clients. In an introduction to the report, he said; “The marine industry is undergoing a transformation. As well as managing today’s rising operational costs and achieving cost effective environmental compliance, ship operators are faced with tomorrow’s ‘big decisions’. Decisions about fuels, technology and whether it is possible to ‘future-proof’ their fleet and assets.

“In addition to providing technical solutions, we are trying to provide the best technical advice to support commercial decision making. It is never just about what is technical possible – decisions have to make commercial sense. The future fuel ‘big decisions’ are not isolated to the marine industry. As a society, we need to consider the risks we want to manage and how to balance future demand for sustainability with our lifestyle ambitions.

“In shipping today, the alternative fuels debate has been dominated by the potential of LNG. But will there be other, potentially viable, options? If we extrapolate the past experience (single engine combusting fossil fuel for the last century) to the future, then perhaps it is not a surprise to anticipate that ships built in 2030 may  not be dramatically different than the ships of today.

“If, however, this steady technological progress was to be, somehow, accelerated, or overturned, then some amazing technology could be around the corner. How long will it take for a new technology/fuel to be assimilated and to become ‘business as usual’, or even to replace the current mainstream options?

“The answers are not immediately evident and, as we demonstrated in Global Marine Trends 2030, there is never a single and well defined future. The marine industry has before demonstrated the ability to make the right decisions in times of uncertainty – through a combination of past experience, intuition and talent.

“What is perhaps different today are the rapidly changing environmental challenges, new regulatory policies and the fuel/technology choices available to address the challenge and comply with regulation,” he said.

The report’s main objective was to unravel the landscape of fuels used by commercial shipping over the next 16 years, the authors said.

The problem has many dimensions: a fuel needs to be available, cost-effective, compatible with existing and future technology and compliant with current and future environmental requirements.

Included are fuels ranging from liquid fuels used today (HFO, MDO/MGO) to their bioalternatives (bio-diesel, straight vegetable oil) and from LNG and biogas to methanol and hydrogen (derived both from Methane, or wood biomass). Engine technology includes 2- or 4- stroke diesels, diesel-electric, gas engines and fuel cells.

A wide range of energy efficiency technologies and abatement solutions (including sulphur scrubbers and selective catalytic reduction for NOx emissions abatement) compatible with the four ship types are included in the modelling. The uptake of these technologies influences the uptake of different fuels.

Regulations include current and future emission control areas (ECAs), energy efficiency requirements (EEDI) and carbon policies (carbon tax). Oil, gas and hydrogen fuel prices are also linked to the three scenarios.

Contrary to common perception, containerships are not the segment with the highest share of LNG - it is the chemical/ product tankers, with LNG making up 31% of its fuel mix by 2030 in Status Quo.

Segments with the higher proportion of small ships see the highest LNG uptake. It is also a matter of perspective: from a non-existent share of the marine market in 2010, LNG will have 5-10% share in 20 years.

The authors are not saying that LNG will not be the fuel of the future. But that seeing new ships built with LNG today (many of which in niche markets/short-sea shipping) and overturning the marine fuel landscape in less than a ship’s lifetime are two entirely different discussions. Methanol does not appear in the fuel mix in any considerable quantities by 2030.

While the fuel mix indicates a declining share of HFO, filled by alternative options, in 2030 the demand for HFO will be at least the same (in Status Quo) if not 23% higher (in Global Commons) compared to its 2010 levels. But, with the overall fuel demand doubling by 2030, other fuels will see a higher rate of growth to meet this demand.

The fuel choice and scenarios are shown to create differences in energy efficiency technology take-up, design and operating speed.

Low technology take-up occurs in Status Quo and Competing Nations, although installed power reduces, due to reductions in design speed. Greater installed power reduction occurs in Global Commons, due to the combination of design speed reductions and greater efficiency technology take-up. 

Typically, the installed power in Global Commons is operated at higher engine loads, resulting in marginally   higher average operating speeds when compared with the other scenarios. This is due to the greater technical efficiency of the Global Commons fleet.

As the most profitable fuel and machinery change over time and between scenarios, this in turn impacts the optimum operating speed, with higher fuel prices and less energy efficient (eg older) ships operating at lower speeds when compared with the newer ships of the same ship type and size.

Despite improvements in design and operational efficiency and current/future policies, CO2 emissions from shipping will not decrease in 2030. Status Quo will see its emissions doubling, due to the increase in trade volume combined with the moderate carbon policy and the low uptake of low carbon fuels. Global Commons is following a similar trend but then decreasing post 2025, thanks to carbon policy and the uptake of Hydrogen. Competing nations will see the smallest growth in emissions.

Despite the lack of carbon policy, the smaller trade volume, high energy prices and, predominantly, the high uptake of bio-energy, result in the lowest increase of CO2 emissions than any other scenario (56%).

The lower emissions associated with this scenario seem attractive but come at the cost of lower growth in the shipping industry, higher operating costs and less global trade.

Furthermore, in 2030, in Competing Nations and Status Quo, emissions remain on an upwards trajectory and the global fleet remains similar to the fleet in 2010 with the industry poorly positioned to weather any policy or macroeconomic storms in the period 2030- 2050.

In contrast, in Global Commons the sector’s emissions peak (in 2025) and then start a downwards trajectory that should assist in a more stable and sustainable long-term growth in shipping, trade growth and global economic development.

When discussing future policies and shipping CO2 emissions, it is worth considering the author’s assumptions for calculating them, which is that GHG emissions come from the CO2 released in fuel combustion activities of the vessels during their operation. However, if LNG, bio-fuels and hydrogen take a greater role in the shipping, it would be important to consider emissions associated with upstream processes and for non-CO2 emissions, for example methane slip.

This could show that fuels which, on the basis of operational emissions alone, appear attractive have significant wider impacts. This is important when developing mitigation policies.

The authors use the Global Transport Model (GloTraM) to analyse the role and demand for different fuels and technologies. GloTraM combines multi-disciplinary analysis and modelling techniques to estimate foreseeable futures of the shipping industry. The model starts with a definition of the global shipping system in a baseline year (2010) and then evolves the fleet and its activity in response to external drivers (changing fuel prices, transport demand, regulation and technology availability).

GloTraM undertakes an in-depth analysis of the existing fleet, along with the economics of technology investment and operation in the shipping industry. This approach ensures that the model closely resembles the behaviour of the stakeholders within the shipping industry and their decision-making processes to ensure realistic simulation of their likely response to external factors such as a carbon price.

The decision-making process to determine technical and operational specifications of newbuild and existing ships are driven by the shipowner’s profit maximisation and regulatory compliance.

Interaction

An important feature of GloTraM is its representation of the interaction between technical and operational specifications and the inclusion of technology additionality and compatibility. For example, some technologies are optimised for a given ‘design speed’ but their savings may reduce as operating speed reduces, or increases, or that there could be incompatibilities between certain exhaust treatment solutions (wet scrubbers) and engine efficiency modifications (waste heat recovery).

Other examples include the interaction between speed and wind assistance fuel savings (higher percentage of fuel saved for lower average speeds), or the incompatibility of certain combinations of hydrodynamic devices that might be used to improve the flow through the propeller and over the control surfaces.

These interactions are often overlooked using conventional marginal abatement cost curve based approaches but are taken into account within GloTraM.

Another important element of GloTraM is the attention paid to characterising the fleet’s operational parameters in the baseline year. In 2010, a large number of ships were slow steaming due to the conditions in the shipping markets. This affects both energy demands and the energy and cost savings potentials of technology.

Satellite AIS data is used to produce calibrations of the operational speeds in each ship type and size category for the baseline year and operational speed is modified at each timestep as a function of the evolving market conditions and fuel prices, the authors explained. Drawing the line between conventional and alternative marine fuels is often a matter of interpretation and viewpoint. What is considered alternative today may be conventional in the near future.

For consistency, in this report the conventional marine fossil fuels are represented by one category of marine distillates (MDO/MGO) and two categories of residual fuel of different sulphur contents (HFO and LSHFO). The alternative fuels considered include LNG, methanol, hydrogen and biomass-derived products equivalent, or substitutes for the options mentioned.

Each of the main machinery and fuel combinations are selected by GloTraM by considering their profitability over time. These plots are displayed for a baseline ship design (the technical and operational specification of the 2010 fleet) and therefore these results are only intended to be indicative of the relative advantages of the fuel/machinery options modelled.

There are other differences, as for each timestep the ship’s technology and operational specification is also varied. Therefore, the global profit maximisation for all three parameters (fuel/machinery choice, speed and take-up of technical and operational abatement and energy efficiency interventions) can result in a different fuel/machinery being selected than those for the baseline ship.

In these plots, the report displays the competitiveness of four fuel/machinery combinations in Status Quo for chemical/product tankers of two different sizes, to illustrate the evolution of profitability over time.

In the examples provided overleaf, it can be seen that for the smallest ship, MDO/MGO and 4-stroke diesel is initially more competitive but this is overtaken by LNG while the hydrogenfuel cell combination competitiveness also increases.

On the larger ship, the conventional HFO and 2-stroke diesel combination remains the most profitable, with LNG overtaking MDO/MGO as the second most profitable option.

The profitability changes over time because of the fuel price and carbon price evolution.

There are also interesting differences between different ship sizes, due to the different engine sizes (and costs) and the impact of fuel storage volume (eg hydrogen) on the ship’s payload.



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