Green Shipping Fuels Myths
The global liquefied natural gas (LNG) tanker fleet inclusive of floating storage units crossed the figure of 772 this year. Although LNG carriers have been capable of utilising boil-of-gas as a fuel for steam turbines for over fifty years it was not till the year 2000 that a non-LNG carrier vessel equipped with gas engines and storage was powered by LNG (LNG-fuelled ferry GLUTRA) .Since then the number of LNG powered crafts has reached 175 LNG-fuelled ships in operation not counting the 600 strong LNG carrier fleet with over 200 ships at the construction stage including deep-sea vessels , cruise ships, container vessels, crude and product tankers and bulk carriers.
Credit ; QatarLNG Global Energy Operator
LNG Chemical Composition
LNG is a clear, colourless and non-toxic liquid that forms when natural gas is cooled to -162ºC (-260ºF). The cooling process shrinks the volume of the gas by 600 times and prevents it from igniting whereby it can be safely stored. At the destination , usually a port , LNG is converted into gas and transported through pipeline to industries to generate heat or electricity. LNG is presently the leading choice for cleaner transport fuel for shipping and heavy-duty road transport being cost-competitive .
Global Oil & Gas Giant
The global oil and gas giant Shell manages three classes of LNG carriers namely :
(i) M-Class vessels capable of carrying 174,000 cbm of LNG. They are twin propulsion vessels fitted with M-type, electronically controlled gas injection (MEGI) engines and can consume heavy fuel oil, marine gas oil or natural gas as fuel. They are fitted with both partial reliquefication systems and sub-coolers.
(ii) Nakilat Q-Max & Q-Flex is longer than 3 football pitches and can transport 266,000 cbm of LNG while a Q-Flex carries up to 216,000 cbm.
(iii) NWS-ClassNWS-class LNG carriers are associated with the Northwest Shelf Project in Australia and managed by Shell Tankers Australia. These vessels typically carry 130,000 cbm of LNG from Australia to customers in Asia.
Biofuels Green Fuels
Biofuels are derived from organic materials and available across diverse geographic locations as the production essentially utilizes local biomass, agricultural by-products and even municipal waste. The IMO and shipping lines need to huddle close to overcome technological, infrastructure and regulatory hurdles to attain a sustainable maritime future .
Credit;MIT Technology Review
Chemical Composition of Hydrogen Fuel
Hydrogen is the most abundant and important element in the universe and consists of a positively charged nucleus (proton) and a negatively charged electron having lowest atomic weight of any element. Under normal conditions hydrogen is a colourless and odourless gas but it can be stored and transported in liquid or gaseous form and its high energy density makes it an ideal fuel source in transport. Hydrogen fuel-cells convert compressed hydrogen from their fuel tanks into electricity and produce only water vapour as emissions. The supply of hydrogen remains limited by the capacity of electrolysis infrastructure and renewable energy sources. Ensuring seamless integration as a fuel warrants strict safety measures including leak detection systems and specialised handling, storage and transportation procedures as hydrogen is highly inflammable. The world’s first liquefied hydrogen carrier (Susio Frontier) went on a maiden voyage from Japan to Australia at the end of the year 2021 where it was loaded with liquified hydrogen .The ship measures 116m with a gross tonnage of 8000t and 1,250 m3 tank capable of transporting hydrogen liquefied at -253 degrees Celsius.
Blue Green Hydrogen
Blue Hydrogen is generated from natural gas with carbon emissions captured and either stored or repurposed being less environmentally harmful yet is reliant on fossil fuels. As the existing natural gas infrastructure is adaptable with carbon capture and storage (CCS) technology hence blue hydrogen is more accessible than green hydrogen .The most common form of hydrogen is grey hydrogen which is produced from natural gas via steam methane reforming without capturing carbon emissions utilizing established natural gas pipeline and processing infrastructure.
Methanol
Methanol, a tried and tested fuel in various transportation sectors, emerges as a formidable contender in the maritime industry’s quest for sustainable alternatives yet the success of methanol is contingent upon the adoption of renewable production pathways.Besides widespread availability on account of varied utilization across diverse industrial processes it can be obtained from natural gas or renewable resources such as biomass, carbon dioxide and renewable power. A word of caution that methanol poses safety hazards and its hazardous nature necessitates careful handling to mitigate risks of inhalation or skin absorption and its nearly invisible flame during combustion presents challenges for fire detection emphasizing the need for advanced fire suppression equipment .
Credit;Bloomberg
Ammonia Hazardous Entailing Additional Infrastructure Costs
Around 175 million tonnes of ammonia is produced annually and its supply chain is established yet its chemical properties of being caustic and hazardous may ensue in environmental contamination .For successful integration of ammonia as a green fuel bunkering facilities capable of withstanding ammonia’s corrosive properties, specialized storage tanks and production facilities geared toward green ammonia production are an intrinsic requirement. Promoting any green fuel for the shipping sector has to factor availability of the fuel and supply chain, safety, low cost and infrastructure requirements of each fuel crucial in the transition to green fuels. Addressing the technological, infrastructural and regulatory challenges requires global collaboration and in the end who will bear the financial burden of the transition from fossil fuels to green fuels.On the one hand Qatar’s major 4.92 million tons-per-year deal to supply Korea Gas Corp (KOGAS) which expires this year followed by a 2.1 mtpa supply deal due to expire in 2026. Japan’s LNG demand is however declining as it reverts to nuclear reactor restarts, renewable energy and a slow down in its economy. Japan’s LNG imports plummeted to 66 million metric tons in 2023 from 83 tons in 2018.
LNG Carrier Companies
The leading LNG shipping companies are Nakilat which is a Qatari shipping company involved in energy transportation possessing one of the biggest LNG fleets in the world consisting of 69 LNG carriers. It operates a floating storage regasification unit, 4 VLGCCs and 24 LNG carriers. Besides sea-borne transportation of LNG Nakilat operates a shipyard in Ras Laffan providing vessel repair and fabrication services.The company has the distinction of transporting 883 LNG cargoes in the year 2023 comprising almost 78 million MT of LNG and destinations were 97 ports.Another significant LNG carrier is MISC Berhad (Malaysia International Shipping Corporation) a subsidiary company of Petronas and a renowned shipping line in Malaysia. The MISC boasts a fleet of 31 LNG carriers having a capacity of around 2.7 million m3.
Credit;Sabah Post
EU Regulatory Restrictions on Carbon Emissions
Large vessels travelling between EU ports will have to pay for emissions this year onwards as the European Union (EU) regulatory restrictions kick in. The International Energy Agency forecasts ammonia as providing 45% of shipping fuel demand by 2050.Large shipping lines such as Danish Maersk prefer methanol as fuel and has demonstrated its seriousness by ordering 19 dual powered ships. China’s shipping line COSCO and France’s CMA CGN are vying to convert their ships to green fuel power. Maersk aims for 25% of its ocean-going cargo to be transported with green by the year 2030 requiring some six million tonnes a year of green methanol and is entering into ventures with methanol producers to obtain methanol by next year while insisting on stringent requirements for fuel feedstocks. The 175 member states of the International Maritime Organization (IMO) which oversees the global shipping industry are keen to bring their climate strategy , mandating a 50% cut in greenhouse gas emissions by 2050 , and are inclined to arrive at a carbon price to make fossil fuels non- competitive.
Credit; EconoTimes
LNG Cargo Imports at Port Qasim & Import Agreements
Pakistan’s LNG terminals are located at Port Qasim . Pakistan annually imports 108 LNG cargoes from Qatar under two G2G agreements or 9 LNG vessels a month at Port Qasim .The 9 LNG cargoes are divided into 5 monthly cargoes @ 13.37 per cent of the Brent and 4 monthly cargos @ 10.2 per cent of the Brent. A long term agreement with ENI also imports 1 LNG cargo. Presently there are 2 LNG terminals and plans were afoot to construct 2 additional LNG terminals at Port Qasim after Federal Government approval was secured by the Ministry of Energy and Ministry of Maritime.
Decline in RNLG Consumption
Recently Reliquified Natural Gas (RLNG) consumption has witnessed a sharp decline of 150 million cubic feet (MMCF) monthly attributed to lower GDP growth in the country and reduced industrial activities as the country’s power sector has conveyed reluctance to lift its allocated gas volumes. Factors responsible for reduced demand for LNG are rising electricity tariffs and tendency to opt for solar energy. The cost of imported LNG is much higher then locally produced gas as LNG is sold to the consumer at $13 per mmbtu. Investments of local oil and gs exploration companies (upstream) have been jeopardised on account of slashing of indigenous gas supplies and imports of LNG imports awarded priority.
State Owned Entities to Pick up Losses
Faced with a glut of LNG Pakistan is likely to formally request Qatar to reschedule LNG cargoes due for import in the calendar year 2025 to January 2026 under the flexible clause. Confusion persists in the energy sector as while Qatar as a supplier or supplier allows Pakistan to sell 13 cargos in the open market under the agreements there is no clause under which 13 more cargos could be halted by Qatar as selling the LNG cargo destined to reach Pakistan in the open market below the price agreed with Pakistan Pakistan State Oil (PSO) would incur loss on every cargo. At the same time to mange the heating requirement 12 LNG cargoes would be need to be made available during the peak winter season each in December 2024 and January 2025. Pakistan LNG Limited (PLL) LNG cargo from ENI will be rescheduled for December 2024.
LNG Pricing Controversy
The controversy about the pricing formula of LNG entered into by the government of Pakistan with Qatar as a 15-year contract obfuscates the underlying cause of Pakistan’s perpetual energy crisis. According to the State Bank data for financial year 2016-17 Pakistan imported $1.2 billion of LNG. This is less than the $2.7 billion spent on crude oil and $6.3 billion on refined petroleum products. It is conveniently argued that locally produced gas is costlier than imported gas. Today LNG is being bought at a landed cost of almost $11 per MMBtu. The price of natural gas is expressed in dollars per 1 million British thermal units or MMBtu. The Petroleum Policy of 2001 capped locally produced gas at $2.9 per MMBtu. This was raised to $5 in 2012. The LNG pricing is not directly related to internationally accepted benchmarks such as the Brent Crude and the contract multiplier is a technical co-efficient at 13.37% of Brent Crude Oil Price, translating into $6.68 per MMBtu, assuming oil is $50 (around 75-80% of the oil price).
Offshore E&P Exploration
The initial high costs of investing in shale gas technology can be paid off in 5 years in Pakistan. Offshore blocks in Pakistan are available for exploration at no security risk. However, the Petroleum Policy is inexplicably allowing marginally higher profits and returns compared to onshore without considering that investment costs for offshore are in the ratio of 1:10. Once Pakistan’s offshore sedimentary basins of Indus and Makran are explored (one block on an average will incur an expenditure of say $500 million) it will be ascertained what the hydrocarbon reserves and potential is and whether the import of LNG is justified or not. Despite being a major gas producer Iran does not possess proprietary technology for LNG and its export as cryogenic technology and alloys capable of withstanding temperatures in the range of -1300C can only be obtained from the West. Similarly there is no technology transfer involved in the process of LNG import into Pakistan.
Authored by Nadir Mumtaz
Sources/Credit
https://www.thenews.com.pk/print/1244070-pakistan-asks-qatar-to-shift-5-lng-cargoes-to-2026
https://tribune.com.pk/story/2496712/govt-seeks-to-cut-lng-imports-from-qatar
https://thefridaytimes.com/09-Mar-2018/should-we-be-importing-lng
https://sea-lng.org/why-lng/global-fleet/
https://www.marineinsight.com/know-more/lng-shipping-companies/
https://sea-lng.org/why-lng/global-fleet/ European Hydrogen Safety Panel
Leave A Comment