“All tanker owners considering LNG for newbuilding” – DNV GL

Mar 18 2021

Catrine Vetereng, global director for tankers with DNV GL, said, “all tanker owners considering new building today are considering LNG fuel,” in a talk about how the tanker market is adapting to future expectations.

“All tanker owners considering new building today are considering LNG fuel,” said Catrine Vetereng, vice president and global segment director tankers, DNV GL, in a DNV GL webinar in October about how the tanker industry is adapting to future expectations.


“I believe the tanker segment has been through a tremendous change in 30 years, from having a bad reputation of rust buckets and oil spills. I can now say the tanker segment is one of the best operated segments,” she said.


The tanker sector has had a busy time in the past few years from an environmental perspective, thinking about ballast water and scrubbers, but the biggest decisions are yet to come, she said.


Ballast water installations are still underway. “It will take a couple of years before a majority will be installed,” she said.


DNV GL calculates that 20 per cent of tankers have scrubbers now installed, which rises to 32 per cent of VLCCs and 34 per cent of handy size ships.


Ms Vestereng was asked if she thinks more scrubbers will be ordered for ships.


She noted that the fuel costs (growing differential in price with high sulphur and low sulphur fuels) indicate that there may be a second wave of scrubber installations. But it also does not sound like the greenest option. A scrubber also means increased fuel consumption, she said.


“Personally I have a hard time seeing we will have a second wave of scrubbers for tankers, particularly when we consider the new requirements from charterers and other stakeholders. I feel all the actors will shift not necessarily towards scrubbers,” she said.


The decision for tanker operators coming up about how to meet IMO’s 2050 requirements, and other requirements related to greenhouse gas, is the “the most complicated and biggest decision,” she said.


DNV GL is curious to see what the more detailed requirements from IMO will look like.


IMO’s Intersessional Working Group on Reduction of GHG Emissions from Ships plans to submit a draft resolution to the Marine Environmental Protection Committee (MEPC) session 75, with further proposals. MEPC 75 was previously scheduled for 30 March to 3 April 2020, but now planned to happen remotely on Nov 16-20, 2020.


There have been proposals for an “Energy Efficiency Existing Ship Index” (EEXI), setting energy efficiency requirements for existing ships, which may be mandatory power limitation on ships.


Ms Vetereng showed data of where the EEXI level is proposed to sit from the beginning of 2023, and where the current VLCC fleet is.


“There are a lot of owners that [would] need to do something with their ship in order to comply with new regulations,” she said. “The most likely remedy is energy power limitation or shaft power limitation.”


Another possibility is tightening the requirements for SEEMPs (Ship Energy Efficiency Management Plans), which all ships are required to have, measuring the fuel efficiency of a ship in operation and gauging the effect of any changes, such as through improved voyage planning, more frequent propeller cleaning, waste heat recovery.


DNV GL also sees a number of other actors “entering the scene” and driving a tightening up of requirements, such as financial institutions signing up to the “Poseidon Principles”.


Ms Vetereng showed where today’s ships sit in terms of the “Poseidon Principals” trajectory. This is consistent with the IMO’s ambition for GHG emissions from international shipping to peak as soon as possible and to reduce the total annual GHG emissions by at least 50% by 2050 compared to 2008, but set individually for different ship types.


She mentioned the Sea Cargo Charter, which is a group of charterers making a commitment to track carbon emissions from vessels they charter, and show how the emission reduction trajectory aligns with IMO’s ambitions.


Ms Vestereng was asked which might have the strongest force for decarbonisation, out of EU Emission Trading Scheme, IMO regulation, or the Sea Cargo Charter.


“I would like to say IMO, but what we see now - with Sea Cargo Charter - it seems they are tightening-in a bit quicker than IMO. EU is kind of pushing as well, I don't know, I think it’s quite a totality,” she said.


Tanker designs

Ms Vetereng presented what has been seen so far in terms of new tanker designs.


We have seen shuttle tankers from AET and Altera, which use LNG as a primary fuel. They can use evaporates from the cargo (volatile organic compounds) and mix it with the LNG and use it for propulsion. The vessels have batteries to provide supplementary power.


Together with an energy efficient gas-electric propulsion system, these vessels have been described as “the most environmentally friendly shuttle tankers ever built.”


“They are already 2030 proof,” she said.


“The implementation of LNG fuelled tankers is increasing day by day,” she said. “Last year, we have seen a lot of new orders.”


There are currently 12 MR tankers operating on methanol fuel, and 10 more under order. Although whether they comply with the IMO trajectory depends on how the methanol is produced, she said. It is possible to make completely decarbonised methanol (if the carbon in the methanol is taken from a source which would otherwise emit it to the atmosphere).


“The fuels are going to be a lot more expensive in the future,” she said.


Air lubrication, under a tanker’s hull, “is starting to become a mature technology,” she said.


Another area with growing interest is wind assisted propulsion.


Using batteries onboard for certain propulsion purposes, such as dynamic positioning, “is a pretty wise option if you have a small chemical tanker, or on shuttle tankers”. This approach is named “hybridisation,” because it uses batteries together with an engine, like on a “hybrid” car.


One further option tanker operators might consider is having a different hull shape, “kind of V-shaped”, which reduces the amount of ballast required – the vessel is more stable when unladen.


“The tanker industry is too conservative to consider such a concept,” she said. “But we see more V-shaped hulls for smaller vessels.”


“Waste heat recovery is also a technology that's important.”


Navigating the landscape

So how should tanker operators find their pathway through the choices?

In the past, designs have been considered purely from a safety and efficiency perspective  - if the ship is able to carry the required cargo cost effectively and safely, with minimum OPEX and downtime.


This is changing. “What we see today, the future proof concept is even more important,” she said.


Anyone looking at a newbuilding needs to analyse what kind of carbon trajectory they want to follow, taking into consideration the vessel, its trading profile and bunkering locations, so which fuels it could be dependent on, and whether they are available.


If you are going for LNG power (dual fuel), you need to work out how big a store of LNG you will need onboard, and how you plan to refuel (by ship to ship transfer or in port).


Different fuel options and energy efficiency measures have different costs, so this all leads to a different result for CAPEX and OPEX.


You also need to consider what you will do if SEEMP turns stricter.


“In our calculation LNG fuel turns out to be a very good intermediate fuel,” she said.


“You can draw your environmental performance and your trajectory. You can plot out your options, and consider how long you are going to keep your vessels and plan out how to move forward with the new fuel when that eventually arrives.”


In summary, the move to more environmentally friendly vessels has been going a bit slow, but “what we see now, the pace is increasing.”


“So we are looking forward to having a lot of discussions with tanker owners on how to build and operate a future proof vessel.”


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