Sustainability has become a hot topic in the world of logistics and supply chain management. Some companies embrace this value for ethical reasons.  

Others are leveraging sustainability measures to appeal to consumers, who are increasingly aware of environmental practices. In fact, a recent Forrester study published in Forbes revealed that 32% of U.S. consumers “prioritize companies that are actively reducing their impact on the environment.”i  

Finally, many companies are pursuing sustainability measures to stay compliant with regulations. For example, the International Maritime Organization’s low-sulfur mandate required many companies to reduce sulfur oxide emissions by changing fuels or adopting new technology.

One of the trends we’re seeing in sustainability is a move toward liquified natural gas (LNG)-fueled ships. Only about 18 LNG-fueled vessels were ready for use in 2010, one estimate suggests that number might be as high as 1,000 by 2030. ii  

The Maritime Executive reported that 13% of the ships ordered today are LNG-fueled, with that number expected to rise. iii As a result, analysts are estimating that the volume of LNG trade will increase 21% by the year 2025. iv  With all the attention on sustainability, it’s no surprise shipping lines are going big on LNG-fueled vessels. In this article, we’ll explore this trend and its implications for the future of ocean freight.  

The Appeal of LNG as Marine Fuel 

Liquified natural gas offers several advantages to steamship lines as an alternative fuel to standard bunker fuel (Heavy Fuel Oil or HFO), including: 

Reduced Emissions

As we mentioned, sustainability throughout the supply chain is an ideal that’s becoming more and more important to companies and their consumers.  

 And with good reason: Sulphur oxide emissions from ships have been linked to asthma, pulmonary, cardiovascular, respiratory diseases, and premature deaths, according to data from the IMO.v  

When compared to conventional marine fuels, LNG offers a much cleaner alternative. Using LNG fuel results in: 

  • A reduction of as much as 95% of sulfur oxides and fine particle matter.  
  • A 90% reduction of nitrogen oxide emissions. 
  • A 25% reduction in carbon dioxide emissions. vi 

Assistance in Meeting 2030 IMO Targets

The IMO 2020 regulations, which limit sulfur oxide (SOx) emissions from all ships, were the first step in the organization’s overall plan to reduce greenhouse gases. As a result of these regulations, many steamship lines moved to low-sulfur fuels or installed “scrubbers” that clean exhaust gas. 

However, the IMO has also set a target to achieve a 40% reduction in greenhouse gases by 2030. Estimates suggest that low-sulfur fuels alone won’t be enough to reach these goals. By moving to LNG-fueled vessels, steamship lines will get a jump on compliance with the 2030 target. 

Financial Advantages

With LNG-powered ships, many steamship lines will be able to secure lower prices for fuel, as compared to heavy fuel oil (HFO) and low-sulfur fuel.  

Additionally, many financial institutions are rewarding steamship lines who are moving to LNG-fueled vessels. For example, take the Poseidon Principles, a collaboration between lending institutions and the shipping industry. In order to incentivize the shipping industry to invest in greener vessels, they’ve put together a set of guidelines intended to make it easier to secure loans for environmentally-friendly ships. vii In other words, companies who align themselves proactively with the IMO’s 2030 targets might be rewarded in the form of easier access to financing.  

The Challenges Around LNG as Marine Fuel 

Despite all of these benefits, there are a few challenges associated with using LNG to fuel a ship. 

Less Room for Cargo

First and foremost, LNG-fueled ships require bigger fuel tanks that can be as much as two-thirds larger than their bunker fuel counterparts. viii In the simplest terms, these larger tanks mean less available cargo space, which translates to lost revenue for the steamship line. 

Higher Capital Investment

Additionally, LNG-fueled ships are more expensive to build, largely due to the additional infrastructure and technology required to handle the fuel. Some estimates put this number at 15-30% higher.ix In other words, steamship lines will need to sink more capital into this new technology, which could mean a cash crunch for some.  

Bunkering Infrastructure

Finally, any ships adopting newer fuel technology will face some challenges when it comes to re-fueling. Where it comes to LNG bunkering facilities, Europe has led the charge, with Asia following at a slightly slower pace.x However, today, there are more than 100 LNG bunkering solutions in operation globally,xi with many more projected to meet increasing demand. As LNG fuel continues to grow in popularity, steamship lines will have more and more bunkering locations to choose from, although options may be more limited in the near future. 

Despite these challenges, for all the advantages named earlier, many steamship lines continue to move forward with LNG-powered vessels. LNG-fueled tugboats, cruise ships, container ships, RORO vessels, dredgers, and more are all either in the water or in production around the world.  

For those with interests in the Pacific corridor, Pasha Hawaii is currently adding two new LNG ships to their fleet. Since many of our customers are active in the Pacific, here’s an inside look at these new additions to the Hawaii shipping lane. 

Pasha Adds LNG-Fueled Vessels in Pacific Shipping Lanes 

At the end of 2021, Pasha Hawaii will welcome the first of two LNG-fueled container ships into its fleet, M/V George III. This vessel will be the first LNG container ship to call on the West Coast and the first to service Hawaii, making it one of the most environmentally-friendly ships engaged in Jones Act Hawaii trade. 

George III and Pasha’s second LNG-fueled vessel, M/V Janet Marie, were built by Keppel AmFELS at their Brownsville, Texas shipyard. The Janet Marie is expected to enter service in mid-2022.  

Rendering of George III

Operating fully on Liquefied Natural Gas (LNG) from day one in service, the two new Jones Act-qualified containerships will be joining the Pasha fleet.

“Both vessels will be ready to operate on LNG fuel from day one,” noted Kelly Dennison, Vice President of Marketing & Public Affairs at Pasha Hawaii. “Additionally, they’ll be equipped to run on either conventional or LNG fuel, which will offer flexibility and reliability during their Pacific voyages.” 

Dennison also shared that the shipping line has seen increased demand as the Hawaii economy recovers from the pandemic. “Commercially, we’re excited about the additional capacity for reefers and dry 45s for each sailing,” she noted.  The additional capacity will support the anticipated growth and demand for refrigerated cargo capability that Pasha has seen along this corridor. 

LNG: The Fuel of the Future  

Finally, the shipbuilding industry is also experimenting with other sustainable methods for powering ships. Norway recently received the world’s first hydrogen ferry. The country is also home to several all-electric ferries.xii However, these technologies aren’t suited for long distances. Ultimately, this leaves LNG fuel as the leading alternative to conventional fuel when it comes to moving ocean freight—for now. Many in the industry will be keeping tabs on this emerging technology to evaluate its long-term potential to bring more sustainable solutions to the ocean freight industry.  

Looking for more efficient and sustainable strategies for your supply chain? Our experts would be happy to help. Just reach out to us for a complimentary consultation, and we’ll take a holistic look at your supply chain—together. 

i https://www.forbes.com/sites/forrester/2021/01/21/empowered-consumers-call-for-sustainability-transformation/?sh=498deb572042

ii .https://www.reuters.com/article/oil-appec-bunker/lng-fuelled-tankers-to-more-than-double-by-2030-petronas-exec-idUKL4N2GD0SK; https://www.mol-service.com/blog/lng-as-ships-fuel

iii https://www.maritime-executive.com/editorials/the-outlook-for-lng-in-2021

iv https://www.mol-service.com/blog/lng-as-ships-fuel

v https://www.imo.org/en/MediaCentre/HotTopics/Pages/Sulphur-2020.aspx

vi https://www.marineinsight.com/tech/10-noteworthy-lng-fueled-vessels/; https://www.bbc.com/news/uk-scotland-51114275; https://www.elengy.com/en/lng/lng-an-energy-of-the-future.html

vii https://www.poseidonprinciples.org/

viii https://shipinsight.com/articles/lng-as-a-marine-fuel-its-hazards-and-benefits/

ix https://www.wsj.com/articles/shipping-companies-banking-on-gas-carriers-as-lng-demand-grows-11552555800; https://www.mol-service.com/blog/lng-as-ships-fuel

x https://www.ship-technology.com/features/lng-bunkering-facilities-around-the-world/

xi https://www.dnv.com/maritime/insights/topics/lng-as-marine-fuel/market-update.html

xii https://www.offshore-energy.biz/worlds-1st-hydrogen-powered-ferry-delivered; https://www.theexplorer.no/solutions/ampere–the-worlds-first-electric-car-and-passenger-ferry/; https://www.bbc.com/news/uk-scotland-51114275

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