LNG: A Game Changer for the Shipping Industry?

Our oceans have always been our lifeline. More than enormous bodies of water, they are superhighways, connecting different regions and countries with each other across the world. Today, 90% of all world trade is transported by sea. The Port of Singapore is the busiest in the world by shipping tonnage and the second busiest container port in the world after Shanghai, handling a total of 37.2 million TEUs of container throughput in 2019. Singapore is also ranked among the busiest ports in the world by cargo tonnage with more than 600 million tonnes of cargo handled annually. On average, a cargo ship arrives at or leaves every couple of minutes.

At the same time, the shipping industry is known for being quite the polluter. In a 2018 report commissioned by the United Nations (UN) shipping agency, the International Maritime Organisation (IMO), 2.89% of the total global carbon emissions are caused by the industry, more than some nations such as Germany and South Korea. If left unchecked, this is predicted to grow to 17% by 2050. CO₂ emissions reached a staggering 1056 million tonnes as well, versus 962 million tonnes in 2012^[2].

In an attempt to make shipping greener, the industry is undergoing major shifts. One of them is to move away from traditional bunker fuels and adopt liquified natural gas (LNG) to power cargo ships. LNG is a clear, colourless, and non-toxic gas that has been cooled down to liquid form. It is composed of 95% methane and its combustion primarily emits water vapour, making it the cleanest fossil fuel. But is it as good as the industry claims? 

To learn more, we asked our in-house port and maritime expert Dr. Yap Wei Yim, Head, International Trade Management Minor at the School of Business, SUSS, to share deeper insights into the benefits and downsides of LNG.

In your opinion, is LNG a game-changer for the shipping industry?

Yap: This has to be seen in the context of the International Maritime Organisation’s (IMO) 2050 strategy, which aims to reduce total greenhouse gas (GHG) emissions from international shipping by at least 50% by the year 2050, compared to the emission level of 2008^[3]. The move by the IMO is also consistent with efforts to support the UN’s Sustainable Development Goal 13 as well as the Paris Agreement which aims to fight climate change. The concern lies with shipping being seen as a significant contributor to GHG emission. Hence, we are witnessing R&D efforts devoted to various approaches to reduce GHG emissions and using LNG fuel in shipping is one such alternative.

What makes LNG a cleaner fuel?

Yap: The advantages of LNG compared to conventional marine fuel is its attraction in being almost sulphur free as well as having lower emissions of CO₂, PM and NOx.

What are some downsides to LNG?

Yap: As with all inventions and innovations, a key challenge relates to the commercialisation process. Specifically, how can we make the fuel become available on a commercial basis? A related question is that can we make LNG become a cost-competitive choice compared to conventional marine fuels? At the moment, industry concerns primarily revolve around the capital and operating costs aspects associated with usage of LNG fuel. On the shipping side, there are significant costs associated with conversion of existing ships as well as newbuildings fitted to run on LNG fuel. On the port side, supporting infrastructure is required for LNG bunkering to become available.

What are some alternatives to LNG, now or in the near future, for the shipping industry to become more environmentally friendly?

The industry is actively seeking alternatives to LNG. This includes exploring ways to reduce GHG from conventional marine fuel as well as using hydrogen and biofuels, and even electricity and wind power. As a whole, there are many sustainability initiatives by the port and shipping community. These include encouraging the use of equipment and processes that are less pollutive. Other initiatives include:

• The adoption of alternative maritime power (AMP) such as cold-ironing
• Reduction of idling time
• Application of green building standards as well as environmentally friendly construction methods to lower pollution brought about by new port development
• Placement of monitoring systems to track GHG emissions as well as quality of water and air
• Promoting the use of renewable energy in ports and intensifying efforts towards recycling, reusing and reducing energy and water consumption

As one of the world’s busiest ports, what is Singapore doing to help the environment?

Yap: Singapore is well known as the world's busiest container transshipment port as well as a major port in terms of cargo tonnage and vessel arrivals. In addition to Singapore's role as a major hub port, a significant proportion of port calls made at Singapore involves bunkering operations. In fact, more than 70% of vessel arrivals measured by tonnage involved taking bunker in Singapore. Furthermore, there are multiplier effects brought about by the bunkering sector that contributes to other activities in the maritime cluster as well as the wider Singapore economy. It is thus important to remain relevant and responsive to the needs of shipping lines and making LNG fuel available in the world's busiest port-of-call by vessel arrivals becomes crucial.

Costs and regulatory compliance are often the main drivers of environmental strategies. Green measures ultimately require the port and shipping community’s commitment to accomplish the desired goals and there will be costs involved regarding the implementation. In any case, the community recognises sustainability concerns as the “new normal” in the business. From Singapore’s perspective, pursuing green objectives will contribute to strengthen Singapore’s competitiveness as a port and maritime hub.

In recognition of the importance of lowering the environmental impact of the port, the Maritime and Port Authority of Singapore (MPA) launched the Maritime Singapore Green Initiative in 2011, which aims to incentivise efforts by the industry to adopt green practices that go beyond the minimum requirements of IMO conventions^[4]. The initiative is a multi-prong approach aimed not only at the shipping and port sectors, but also at the important aspects of green energy, green technology and green awareness. Incentives include annual tonnage tax rebates, reductions in port dues, reduced initial registration fees and grants to co-fund development and adoption of green technology solutions.

The most reliable option

While there surely are other alternatives that will be studied and developed in the coming decades, liquefied natural gas looks to be the most attractive option today, from both an environmental and cost standpoint.

If Singapore, the world’s top bunkering port, is taking steps to develop into a leading LNG bunkering and gas trading hub, there must be something worth exploring. Singapore has seen a rise of more than 50 companies with an LNG trading or business development presence in the nation, according to Trade and Industry Minister Chan Chun Sing^[5], and recently licensed two LNG bunker suppliers with more expected to come.

[1] Maritime and Port Authority of Singapore Singapore’s 2019 Maritime Performance

[2] Reuters (AUG 2020) Shipping's share of global carbon emissions increases

[3] International Maritime Organisation Reducing greenhouse gas emissions from ships