Japan and South Korea, the world’s largest ship-building nations behind China, are betting on liquefied natural gas (LNG) as a marine fuel to help cut the cost of transporting everything from containers to crude.
Japan’s Kawasaki Heavy Industries Co. said it’s planning to introduce LNG-powered vessels in three years, while South Korea’s Hyundai Heavy Industries Co., the biggest shipbuilder, won orders in December for five tankers that can run on gas and oil. Using LNG in very large crude carriers would cost about 27 percent less than using fuel oil, according to Nippon Yusen K.K., Japan’s second-largest shipping line.
Liquefied natural gas is emerging as a ship fuel as environmental rules threaten to make oil more expensive. Demand for LNG in ships may reach 24 million metric tons by 2025, according to Lloyd’s Register, a company that certifies vessel seaworthiness. That’s about 10 percent of global LNG trade in 2012. Singapore, which hosted a conference on gas in shipping last week, plans to start providing facilities for LNG fueling by 2015.
“It’s like the night before fuel’s paradigm shift from oil to natural gas,” said Nobumitsu Kambayashi, the director of Kawasaki Heavy Industries. “It will start once the infrastructure for LNG to be sold as marine fuel is ready.”
High-sulfur bunker fuel oil has averaged $620.34 a ton this year in Singapore, according to data compiled by Bloomberg. Liquefied natural gas for delivery to Northeast Asia has fallen 15 percent to $15.15 per million British thermal units, according to data from Energy Intelligence Group’s World Gas Intelligence in New York.
To cut pollution, the International Maritime Organization will require ships to use fuel oil with a maximum sulfur content of 0.1 percent within an Emission Control Area, including the Baltic Sea, the North Sea and North America coastal waters, from 2015. The limit is now 1 percent.
The cap for the remaining area, currently 3.5 percent, will be lowered to 0.5 percent from 2020. The switch will be reviewed in 2018 and deferred to 2025 if deemed to be unrealistic, according to the Maritime Organization plan.
“Our implementation of LNG bunkering depends on when the Maritime Organization’s 0.5 percent-sulfur rule will kick in,” said Yukio Matsukata, the fuel group general manager at Nippon Yusen. based in Chiyoda-Ku, Japan.
Using LNG in a very large crude carrier would cost about $46,282 a day, compared with $63,000 a day for fuel oil, Nippon Yusen said in an April presentation. The gas also has a higher calorific value, the company said.
Bunker fuel oil costs about $700 a ton in Japan, compared with about $634 a ton for LNG, according to Matsukata. A very large crude carrier needs 90 tons of fuel oil each a day, compared with 73 tons of LNG, he said.
Information for this report was contributed by Masumi Suga, Winnie Zhu and Chou Hui Hong of Bloomberg News.
Business, Pages 67 on 07/14/2013