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2019 October 31

The fleet hits the gas

Liquefied natural gas (LNG) will become one of the most popular types of fuel in the nearest 15-20 years. However, a number of infrastructure, shipbuilding and regulatory issues are to be solved for its introduction. This and other issues have been discussed at the 3rd “LNG Fleet and LNG Bunkering in Russia” conference.

Gas overthrows diesel

Access to vast deposits of gas gives Russia a natural competitive advantage in promotion of gas fuel, Igor Tonkovidov, President and CEO of Sovcomflot, one of the world’s leading tanker fleet operators, said when greeting the participants of the conference. According to him, results of using Sovcomflot tankers fueled by LNG for more than a year confirms its economic advantages versus diesel fuel in emission control areas (ECAs) with tough sulphur cap of 0.1% in force from 2015.

“During the summer navigation period this year, several Sovcomflot vessels have successfully completed commercial voyages across the Northern Sea Route while using only LNG fuel for the entire length of it. During these voyages, we have tested the operation of tanker fuel systems and vessel machinery in low temperatures of the Arctic, and used a new deep-water route through the northern part of the East Siberian Sea. With these voyages, Sovcomflot has once again demonstrated its commitment to using cleaner-burning fuel for operations in the Arctic. We are confident that using LNG fuel for vessels trading in Emission Control Zones such as the North and Baltic Seas is economically more viable than using standard MDO. Our experience of operating large-capacity LNG-fuelled tankers for more than a year shows that that using LNG as a primary fuel achieves a 30 per cent reduction in CO2 emissions compared with similar vessels powered by traditional heavy fuel”, said Igor Tonkovidov.

Nevertheless, a number of infrastructure, shipbuilding and regulatory issues are to be solved for a large-scale introduction of LNG as a marine fuel.

Construction of LNG-powered ships

As a rule (with some exceptions) it is reasonable to use LNG as a marine fuel for new vessels designed specially for that purpose (or hybrid and dual-fuel ships). However, construction costs are much higher for such ships compared to conventional vessels (running on oil products) of the same type (up to 30% depending on the type of ship).

Since shipping is a low-margin business while capital expenses for fleet renovation are high, a possibility of privileges and subsidies for ship owners building new ships powered by LNG is under consideration in Russia.

According to Aleksandr Poshivai, deputy head of Rosmorrechflot, it is supposed to cover the difference between the construction costs of conventional ships and similar ships running on LNG, provide privileges to companies using LNG-powered ships when holding competitions for the right to sign state and municipal contracts. Besides, subsidies are suggested to cover part of interest rates on loans taken for the purchase of LNG-powered ships as well as property tax privileges and exempt from VAT and customs dues on imported equipment needed for construction of shipyards and for ship owners acquiring LNG-powered ships, particularly through leasing.

Similar privileges are offered to companies owning on-shore facilities for storage and supply of LNG.

These measures are proposed for inclusion in the state programme focused on using natural gas as fuel.

Although in most cases it is more reasonable to build a new fleet powered by LNG, some ships can be converted to LNG.

When speaking at the conference, Peter Anssems, Sales Manager, Sales East and South-East Europe, Damen Shipyards Group, Damen subdivisions succeed in repair of LNG-powered ships and in conversion of ships to LNG. The company converted a 8,500-cbm dredger to dual-fuel LNG/MGO propulsion. The ship returned to work 23 months after contract signing. This period included the works on designing and preparations.

As for LNG bunkering infrastructure, Russia has proceeded with some projects: Cryogas-Vysotsk terminal has been in operation from spring 2019 with the KS Portovaya terminal (Vyborg District of the Leningrad Region) to be put into operation in the nearest future. Besides, Gazprom is set to build such terminals in the Black Sea with the link to the Mediterranean Sea and in the Sea of Japan with the link to the Pacific transport routes.

In is turn, Gazpromneft Marine Bunker is going to put into operation three LNG bunkering ships in the North-Western region between 2021 and 2030. The first LNG tanker of 5,800 cbm in capacity is already under construction with its commercial operation to begin in Q2’2021. Two more LNG bunkering ships are to be built with the assistance of Damen which is currently building a 6,000-cbm LNG bunkering ship.

The law is harsh

A package of special regulations is required for creation of a fleet running on LNG.

According to Yury Kostin, Director of Department of State Policy for Marine and River Transport, Russia is developing rules and standards for using liquefied natural gas (LNG) as a marine fuel. RS rules for classification and construction of ships set technical requirements for ships using natural or petroleum gas as a fuel.

Amendments have been introduced into the rules of Russian River Register and RRR rules for classification and construction of ships, rules for technical supervision during construction of ships and manufacture of materials and products for ships using natural or petroleum gas as a fuel.

Moreover, Gazpromneft Marine Bunker has initiated the drafting of standard “Ships and marine technologies. Requirements for bunkering of vessels using liquefied natural gas as a fuel”. This standard describes requirements set for bunkering ships and ships being bunkered, regulates technological processes and procedures of bunkering, describes design requirements for fuel supply systems, outlines recommendations on personnel training, reporting and paperwork.

As Sergey Sotskov, Principal Specialist, LNG Marine Transportation and Storage Technology Department, Russian Maritime Register of Shipping (RS), said at the conference, RS has considerably revised the Rules for Classification and Construction of Ships Carrying Liquefied Gases in Bulk. The nearest plans of RS is to expand the range of additional class signs for gas carriers and LNG-powered ships; introduction of three-stage system for approval of membrane systems for LNG containment; further strengthening of cooperation between RS and Gaztransport & Technigaz; development of RS competence in containment and transportation of LNG.

LNG as a fuel is quite promising in international waters with 0.5-pct sulphur cap coming into force from 1 January 2020. However, each state is entitled to determine if certain types of fuel are allowed in its internal waters. As for inland water ways of Russia, the business of shipping companies operating on the rivers feature low-margin. Therefore, they are not ready for IMO requirements yet.

Meanwhile, Russian Chamber of Shipping thinks it is necessary to change Technical Regulation of the Customs Union according to which commercial distribution fuel with sulphur content of more than 0.50% will be prohibited in the Customs Union from 1 January 2020. 

“In our opinion, it is necessary to work with the Technical Regulation. I hope, it is acknowledged by the executive authorities on the federal level. At least, the recent meeting of RF Government’s Marine Board confirmed that these requirements … should undergo principle changes not to exceed MARPOL requirements”, said Aleksey Klyavin.

The ship owners’ opinion seems to have been heard. According to recent media reports, RF Energy Minister Alexander Novak said that postponement of the stricter standards for vessels operating within the country until 2024 is under consideration.

Anyway, that will happen sooner or later so it is already time to think about the construction of sea/river going ships powered by LNG. The more so as there designs of such vessels.

Gennady Yegorov, General Director of Marine Engineering Bureau, told the conference participants about designs of tankers and dry bulk cargo carriers running on LNG.

Thus, Russian shipping community is conscious of the gas fuel epoch beginning. Not to lag behind the competitors and to take Russia’s natural advantage in gas industry, it is necessary to facilitate addressing of all issues, infrastructure, shipbuilding and regulatory ones. Coordination of all stakeholders’ efforts is needed to succeed. A decision was made at the conference to establish a working group under coordination of the Russian Chamber of Shipping. The results of its activities are to be discussed at the 4th “LNG Fleet and LNG Bunkering in Russia” conference.

The “LNG Fleet and LNG Bunkering in Russia” conference was held by Russia’s leading maritime industry media group PortNews with the support of the Ministry of Industry and Trade and the Russian Chamber of Shipping with PAO Gazprom as General Partner. The conference sponsors were Gazpromneft Marine Bunker, GTT (Gaztransport & Technigaz) and Damen Shipyards Group. The conference was organized in partnership with Russian Gas Association and Refinitiv (media partner).

Vitaly Chernov