Costs and Benefits of LNG

as Ship Fuel for Container Vessels

Content

Benefits of using LNG as ship fuel................................................................. 5

Objectives of the study.................................................................................. 6
Status of regulatory framework...................................................................... 7
Approach...................................................................................................... 7
Ship size variants and route profiles............................................................... 7
LNG technology and modelling assumptions................................................. 8
Main engine technology and modelling assumptions...................................... 8
Scrubber technology and modelling assumptions........................................ 10
Waste heat recovery technology and modelling assumptions....................... 10
Use of distillate fuels................................................................................... 10
Fuel price scenario...................................................................................... 11
Results....................................................................................................... 11
Results – payback time............................................................................... 12
The drivers – LNG tank cost and LNG price ................................................ 14
Conclusion.................................................................................................. 16
Acknowledgements..................................................................................... 17
Costs and Benefits of LNG as
Ship Fuel for Container Vessels

Benefits of using LNG as ship fuel

The use of liquefied natural gas (LNG) Emission compone nts (100% load)
g/kWh
as ship fuel has recently gained more CO2 NOx SOx
1000
attention in Europe, but also in Asia and - 23 %
the USA. There are three visible driv-
ers which, taken together, make LNG
as ship fuel one of the most promising 100
new technologies for shipping.

he use of LNG as ship fuel will reduce

10
sulphur oxide (SOx) emissions by 90-
95%. This reduction level will also be - 80 %
mandated within the so- called Emis-
sion Control Areas (ECAs) by 2015. A 1 - 92 %

similar reduction will be enforced for

worldwide shipping by 2020.

0,1
„„ A lower carbon content of LNG com-
6S70ME-C 6S70ME-GI
pared to traditional ship fuels ena- (with EGR)
bles a 20-25% reduction of carbon
dioxide (CO2) emissions. Any slip of Fig. 1: Emission components and reduction with EGR

methane during bunkering or usage

needs to be avoided to maintain this
advantage. Gas and ship fuel prices (monthly averages)
USD / mmBTU LNG Zeebrugge HFO Rotterdam MGO Rotterdam
„„ LNG is expected to be less costly 35
than marine gas oil (MGO) which will 30
be required to be used within the 25
ECAs if no other technical measures 20
are implemented to reduce the SOx
15
emissions. Current low LNG prices
10
in Europe and the USA suggest that
5
a price – based on energy content –
0
comparable to heavy fuel oil (HFO)
Ja 6

Ja 0
Ja 7

Ja 8

Ja 9

Ja 1
Ju 6

Ju 7

Ju 8

Ju 9

Ju 0

Ju 1
Ap 7

Ap 1
Ap 6

Ap 8

Ap 9

Ap 0

2
Ok 6

Ok 7

Ok 8

Ok 9

Ok 0

Ok 1
t -0

t -1
t -0

t -0

t -0

t -1
r- 0

r- 0

r- 0

r- 0

r- 1

r- 1
n- 0

n- 1
n- 0

n- 0

n- 0

n- 1

n- 1
l-0

l-0

l-0

l-0

l-1

l-1

seems possible, even when taking

Ja

into account the small scale distribu-

tion of the LNG.
Fig. 2: Gas and ship fuel prices the last 6 years

Costs and Benefits of LNG as Ship Fuel for Container Vessels 5

Objectives of the study
Shipowners interested in LNG as ship
fuel are currently facing a number of
questions regarding costs and possible
benefits of using such technology. They
want to know if exhaust gas treatment
systems could be the preferred techni-
cal solution. At the same time, increas-
ing ship efficiency with advanced waste
heat recovery systems becomes fea-
sible. This suite of technologies is the
focus of the GL and MAN joint study
on container vessel power generation
systems.

Fig. 3: 4,600 TEU type container ship

Fig. 4: GL concept, LNG-fuelled container vessel

6 Costs and Benefits of LNG as Ship Fuel for Container Vessels

Status of regulatory framework
The IMO Interim Guidelines for gas
as ship fuel (Resolution MSC.285(86))
contain the state-of-the-art on safety
concepts for using gas as ship fuel.
These are voluntary to the flag states.
GL issued its own guidelines in April
2010, adding own interpretations.
The IMO subcommittee BLG is working
on the International Gas as Fuel code
(IGF) which will supersede the interim
guidelines and is planned to enter into
force with the SOLAS 2014 edition. In
parallel, work started at ISO TC 67 on
standards for LNG bunkering.
Approach
The study assumes costs for key tech-
nologies when applied to five differently
sized container vessels, and predicts
their benefits in comparison to a refer-
ence vessel which uses fuel required by
existing and upcoming regulations de-
pending on time and location of its op-
eration. I.e., the reference vessel uses
MGO when inside an ECA by 2015
or within EU ports. Outside an ECA,
HFO is used and a low-sulphur fuel oil
(LSHO) with a 0.5% sulphur content by
2020.
Costs for implementing the technolo-
gies are compared with expected
benefits which are driven by fuel cost
differences. If a choice is possible, the
model assumes that the fuel with the
lowest cost is always used. Space re-
quired by the technologies is taken into
account by reducing the benefit.
Four technology variants were investi-
gated in the study:
„„ Scrubber
„„ Scrubber and waste heat recovery
(WHR)
„„ LNG system (bunker station, tank,
gas preparation, gas line, dual-fuel
engine)

„„ LNG system and WHR.

For each technology variant, costs and

space requirements are estimated and
specific fuel oil consumption is based
on current knowledge. Estimates were
made for each container vessel size.

The same measures to reduce NOx

emissions to Tier III levels are assumed
for the reference vessel and all variants
and, therefore, these have no effect on
the cost differences between the refer-
ence vessel and the variants.

Fig. 5: MAN B&W ME-GI concept Ship size variants and route profiles
Five representative container vessel
sizes were selected for the study. As-
Speed (knots) Main engine Round trip (nm) Default ECA share
sumed design speeds account for the
power (kW)
current trend towards lower speeds.
2,500 TEU 20 14,500 5,300 65,1%
4,600 TEU 21 25,000 13,300 11,0%
Round trips were selected for three
8,500 TEU 23 47,500 23,000 6,3%
trades: Intra-European, Europe-Latin
14,000 TEU 23 53,500 23,000 6,3%
America and Europe-Asia. The ECA
18,000 TEU 23 65,000 23,000 6,3%
exposure was used as a primary input
Table I: Container vessel sizes and route parameters parameter.

Costs and Benefits of LNG as Ship Fuel for Container Vessels 7

LNG technology and modelling as- LNG tank volume (for half round trip endurance)
sumptions 14,000
18,000 TEU, 11,500 nm
The main engine power installed is 12,000
14,000 TEU, 11,500 nm
based on specific designs with given 10,000
8,500 TEU, 11,500 nm
design speeds. Auxiliary engine power m3 8,000
is taken as a fraction of the main en- 6,000
gine power. Additional auxiliary engine 4,000 4,600 TEU, 6,650 nm
power necessary for reefer containers
2,000 2,500 TEU, 2,650 nm
is based on estimated reefer share. En-
0
gine loads are varied for port stays, ap-
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
proaches and open sea transit which,
Total installed engine power (kW)
in turn, depend on the route profile.
Fig. 6: Estimate of LNG tank volume for various ship sizes

The LNG tank volume is selected to

give the vessel a half round trip endur-
ance. This controls investment costs
USD/kW Specific additional costs for LNG installation
but increases exposure to volatile fuel
500 (half - round trip endurance with LNG)
prices. Costs for the LNG system in-
450
clude costs for tanks, bunker station, 400
gas preparation, gas line, main engine 350
and generator sets. LNG tanks are as- 300

sumed to consume TEU slots and it 250

200
results in lost earnings, assumed only
150
for every second voyage. Medium 100
sized container vessels (4,600 TEU and 50
8,500 TEU) have the largest losses with 0
2,500 TEU, 4,600 TEU, 8,500 TEU, 14,000 TEU, 18,000 TEU,
a maximum of about 3% of the total 2,650 nm 6,650 nm 11,500 nm 11,500 nm 11,500 nm
available TEU slots. Other operation
costs such as crew, spare parts and Fig. 7: Specific additional costs for LNG installation for various ship sizes

maintenance are assumed to be 10%

higher than the reference vessels.

Main engine technology and model- kg/kWh Specific fuel oil consumption
ling assumptions (typical for 52 MW engine)
0.20
The MAN B&W ME-GI engine series,
in terms of engine performance (out- 0.15
put, speed, thermal efficiency, etc.), is HFO
identical with the well-established ME 0.10 MGO
engine series. This means that the ap-
LNG
plication potential for the ME-GI system 0.05
Pilot fuel
applies to the entire ME engine range.
0.00
Specific fuel oil consumption is speci- 30% 50% 70% 90% Engine load
fied for different engine sizes, fuels and
engine loads. Fig. 8: Specific fuel oil consumption

8 Costs and Benefits of LNG as Ship Fuel for Container Vessels

The control concept of the ME-GI en-
gines comprises three different fuel
modes:

„„ The fuel-oil-only mode is well-known

from the ME engine and, in this
mode, the engine operates on fuel oil
only, and the engine is considered to
be “gas safe”

„„ The minimum fuel mode has been

developed for gas operation. In
this mode, the system controls the
amount of gas fuel, combined with
the use of a minimum preset amount
of fuel oil (pilot oil) which is set at 5% Fig. 9: Scrubber installation on Ficaria Seaways

approximately. Both heavy fuel oil

and marine diesel oil can be used as
pilot oil. The minimum pilot oil per-
centage is determined from 100%
engine load. When the engine pass-
es the lower load limit, the engine re-
turns to fuel-oil-only mode. If a failure
occurs in the gas system, this will
result in a gas shutdown and a return
to the fuel-oil only mode

„„ Specific fuel mode, where any mix of

gas and fuel oil is possible.

Fig. 10: MAN WHR system (MARC-HRS-STPT)

Costs and Benefits of LNG as Ship Fuel for Container Vessels 9

Scrubber technology and modelling
assumptions
This study assumes usage of wet
scrubbers to reduce SOx emissions by
scrubbing the exhaust gas from the
engines with sea water. The exhaust is
led from the turbocharger into a large
scrubber placed in the funnel of the
ship, downstream the exhaust gas boil-
er. The exhaust is led through an array
of seawater droplets which will wash
the sulphur out of the exhaust gas. The
cleaning water will fall to the bottom of
the scrubber and is discharged into the
sea. The exhaust will travel up into the
funnel passing through a reheater to
prevent steam from being visible in the
exhaust. If the ship is sailing in an area
where it is not allowed to discharge the
used water into the sea, it is possible
to use a closed loop system with fresh
water. If the closed loop is engaged, the
water will be recirculated and a water
cleaning system will be engaged. The
Scrubber operating costs
2.50
inside ECA by 2015
2.00
m USD per year
1.50
1.00
0.50
0.00
2,500 TEU 4,600 TEU
Fig. 11: Scrubber operating costs
10 Costs and Benefits of LNG as Ship Fuel for Container Vessels
cleaning system contains a centrifuge
for particle removal, and NaOH is add-
ed to the circulated water, for neutral-
ising the sulphuric acid, which will de-
velop when washing the sulphur out of
the exhaust gas with fresh water.
Scrubbers are assumed to be used
only when needed to meet required
emission limits, i.e. inside ECAs, in EU-
ports and globally by 2020. Their oper-
ating costs depend on operation time
and engine loads. An average cost for
open and closed loop scrubbers of 5
USD/MWh was used. Lost TEU slots
depend on the space required for the
scrubber installation. Up to 0.3% of the
total available TEU slots are assumed
to be lost. This is assumed to apply
only every second voyage. Other op-
eration costs such as crew, spare parts
and maintenance are assumed to be
20% higher than the reference vessels.
globally by 2020
8,500 TEU 14,000 TEU 14,000 TEU
Waste heat recovery technology and
modelling assumptions
The waste heat recovery (WHR) sys-
tem consists of an exhaust gas heated
boiler supplying steam to a steam tur-
bine. To boost the electrical output, the
system can be extended with a gas tur-
bine utilising the energy in the exhaust
gas not used by the turbocharger. To
obtain the highest electrical production,
the optimal solution is to use a dual
steam pressure system or even a triple
steam pressure system if the engine is
equipped with a system for exhaust gas
recirculation. Waste heat recovery sys-
tems are modelled to reduce specific
fuel consumption. Savings depend on
engine load and ship size. A maximum
benefit of 13% was assumed for the
largest vessels at 75% MCR.
Lost TEU slots depend on the space re-
quired for the WHR installation. For the
smaller vessels (2,500 TEU and 4,600
TEU), up to 0.4% of the total available
TEU slots are assumed to be lost. This
is assumed to apply only every second
voyage. Other operation costs such as
crew, spare parts and maintenance are
assumed to be 15% higher than the ref-
erence vessels.
Use of distillate fuels
Running on distillate fuels for a long
period of time is the straight forward
solution to comply with the forthcom-
ing emission regulations on sulphur.
The fuel system needs to be fitted
with a cooler or a chiller configuration
to meet the viscosity limits for the en-
gine. A suitable cylinder oil will also be
required. For running in non-ECAs, the
fuel system must also be able to cope
with the new fuel (LSHO with 0.5% sul-
phur) that might be introduced.
Fuel price scenario Fuel price scenario
USD/mmBTU
The basic assumption for the fuel price 40
HFO 2.7% S
scenario is a continuous price increase MGO 0.1% S
due to expected increase in oil and gas 30 LSHF 0.5% S
LNG
production costs. MGO and LSHO are
expected to increase faster than HFO 20
and LNG with stronger increase in de-
mand. The starting year for the fuel
10
price scenario is 2010 and 650 USD/t
(=15.3 USD/mmBTU) for HFO and 900
0
USD/t (=21.2 USD/mmBTU) for MGO 2010 2015 2020 2025 2030
are set. LNG is set at 13 USD/mmBTU
which includes small scale distribution Fig. 12: Expected fuel prices

costs of 4 USD/mmBTU. It is assumed

that distribution costs do not increase
over time.
mUSD Annual cost advantage for 2,500 TEU container vessels
10 (compared to a standard vessel using standard fuels)
Results
8
Annual cost advantages, compared to
the reference vessel using the required 6
fuels depending on time and location, 4
can be computed using the assump- 2
tions described above for each tech- Invest
0
nology and vessel size. Cost advan- 2015 2016 2017 2018 2019 2020
-2
tages are the sum of fuel cost savings,
additional operating costs and lost -4
Scrubber LNG
(negative) earnings. For a 2,500 TEU -6 LNG + WHR
Scrubber + WHR
regional vessel operating 65% inside -8
European ECAs, significant cost ad- -10
vantages are predicted using LNG or
scrubber by 2015 when strict fuel qual-
ity requirements enter into force. The Fig. 13: Annual cost advantage for 2,500 TEU container vessels

payback time is shorter for solutions

without WHR due to its relatively high
investment costs.

Costs and Benefits of LNG as Ship Fuel for Container Vessels 11

Results – payback time
Payback time for LNG system (start in 2015)
Benefits of technologies such as LNG
2,500 TEU 4,600 TEU 8,500 TEU 14,000 TEU 18,000 TEU
or scrubber depend strongly on their 72
usage. The higher the ECA exposure,
60
the shorter the payback time for all vari- Payback time (months)
ants, with operation start in 2015. The 48
larger ECA shares unlikely f or larger vessels
payback time is shorter for smaller con-
36
tainer vessels (2,500 TEU and 4,600
TEU). This is caused by the relatively 24
smaller investment for the LNG sys-
12
tem compared to large vessels. With a
65% ECA exposure, the LNG system 0
payback time below 2 years can be 0% 10% 20% 30% 40% 50% 60% 70%

achieved for smaller vessels. Share of operation inside ECA

A comparsion of the different technolo- Fig. 14: Payback time for LNG system

gies shows that the LNG system offers

a shorter payback time than a scrub-
ber for the 2,500 TEU vessel (using
Payback time for 2,500 TEU vessels (start in 2015)
the standard fuel price scenario). The
Scrubber Scrubber and WHR LNG-fuelled LNG and WHR
payback time is longer for variants with
84
WHR due to higher investment costs.
72
Payback time (months)

At ECA operation shares lower than 60

20%, the scrubber system payback
48
time is longer than 60 months which
36
indicates that payback is achieved only
after the introduction of the LSHO qual- 24

ity standard in 2020. 12

0
0% 10% 20% 30% 40% 50% 60% 70%
Share of operation inside ECA

Fig. 15: Payback time for 2,500 TEU vessels

12 Costs and Benefits of LNG as Ship Fuel for Container Vessels

 4,600 TEU vessels, operating 11% in-
Payback time for 4,600 TEU vessels (start in 2015)
side of an ECA, also offer a shorter pay-
Scrubber Scrubber and WHR LNG- fuelled LNG and WHR back time for LNG systems compared
72 to the scrubber installation. Similar to
2,500 TEU vessels, a WHR system
60
Payback time (months)

does not shorten the payback time.

48 WHR systems offer larger benefits for
36 large vessels with high installed engine
power and associated savings. There-
24
fore, the payback time for the LNG
12 system or scrubber when applied to
a 14,000 TEU vessel is shorter with a
0
0% 10% 20% 30% 40% 50% 60% 70% WHR system implemented.
Share of operation inside ECA
The LNG system offers a shorter pay-
Fig. 16: Payback time for 4,600 TEU vessels back time than the scrubber system for
large vessels (using the standard fuel
price scenario). Only at higher ECA op-
eration shares (which are unlikely), the
Payback time for 14,000 TEU vessels (start in 2015)
scrubber solution has a shorter pay-
Scrubber Scrubber and WHR LNG-fuelled LNG and WHR back time than the LNG system.
72 ECA shares larger than 20% unlikely to be encountered

60
This documents that, when standard
Payback time (months)

assumptions are used, LNG systems

48
offer shorter payback times than scrub-
36 ber systems.

24

12

0
0% 10% 20% 30% 40% 50% 60% 70%
Share of operation inside ECA

Fig. 17: Payback time for 14,000 TEU vessels

Costs and Benefits of LNG as Ship Fuel for Container Vessels 13

The drivers – LNG tank cost and LNG Payback time for LNG system (start in 2015)
price
2,500 TEU 4,600 TEU 8,500 TEU 14,000 TEU 18,000 TEU
The largest share of the additional in- 84
vestment is related to the LNG tank. In 72
this study, a type C tank is assumed to Payback time (months)
60
be fitted for the 2,500 TEU vessel and
48
type B prismatic tanks are considered
for the larger vessels. Smaller type C 36

tanks are expected to have higher spe- 24

cific costs than larger type B tanks.The 12
payback time for larger vessels shows ECA operation share varies f or ship size
0
a stronger dependency on the specific 1,000 USD/m³ 2,000 USD/m³ 3,000 USD/m³ 4,000 USD/m³ 5,000 USD/m³
LNG tank costs than for smaller ves- Specific cost for LNG tank system

sels.
Fig. 18: Payback time for LNG system

A comparsion of the LNG and scrubber

systems’ payback time for 2,500 TEU
vessels shows that even at high LNG
Payback time for 2,500 TEU vessels (start in 2015)
tank costs the payback time is shorter
Scrubber LNG-fuelled LNG and WHR
for the LNG system (when the standard
48
fuel price scenario is used).
Payback time (months)

36
For larger vessels, specific tank costs
above 3,000 USD/m3 result in unfa-
24
vourably payback times compared to
the scrubber system. 12

Considering the still not widely availa- 65% ECA operation share
0
ble LNG supply infrastructure for ships, 1,000 USD/m³ 2,000 USD/m³ 3,000 USD/m³ 4,000 USD/m³ 5,000 USD/m³
Specific cost for LNG tank system
changes in LNG distribution costs
are considered to affect the payback
time for LNG systems. In general, the Fig. 19: Payback time for 2,500 TEU vessels

14 Costs and Benefits of LNG as Ship Fuel for Container Vessels

 payback time for larger vessels with
Payback time for LNG system (start in 2015)
relatively larger LNG system costs de-
2,500 TEU 4,600 TEU 8,500 TEU 14,000 TEU 18,000 TEU
144 pends strongly on the LNG price (deliv-
132 ered to the ship). At price parity of HFO
120
and LNG, based on the energy content,
Payback time (months)

108
96
the payback time for larger vessels is
84
72 longer than 60 months (indicating a
60
48
breakeven is possible only when the
36 2020 fuel standard is in force.)
24
12 ECA operation share varies f or ship size
0 For the 2,500 TEU vessel, a compari-
-6.3 -4.3 -2.3 -0.3 1.7 3.7 5.7
Fuel price differential (LNG-HFO)
son of payback times for the scrubber
USD/mmBTU and for the LNG system, and varying
LNG prices, shows that the LNG sys-
Fig. 20: Payback time for LNG system tem is attractive as long as LNG (de-
livered to the ship) is as expensive as
or cheaper than HFO, when the fuels
Payback time for 2,500 TEU vessels (start in 2015) are compared on their energy contents.
Scrubber Scrubber and WHR LNG-fuelled LNG and WHR
(In January 2012, the LNG wholesale
144 price in Zeebrugge was at 10.6 USD/
132 mmBTU and HFO in Rotterdam was at
120
15.7 USD/mmBTU, indicating that LNG
Payback time (months)

108
96 as ship fuel appears commercially at-
84
72 tractive vs. HFO in Europe.)
60
48
36
24
12 65% ECA operation share
0
-6.3 -4.3 -2.3 -0.3 1.7 3.7 5.7
Fuel price differential (LNG-HFO)
USD/mmBTU

Fig. 21: Payback time for 2,500 TEU vessels

Costs and Benefits of LNG as Ship Fuel for Container Vessels 15

Fig. 22: DSME LNG-fuelled container ship
Conclusion
The use of LNG as ship fuel promises
a lower emission level and, given the
right circumstances, lower fuel costs.
The attractiveness of LNG as ship fuel
compared to scrubber systems is dom-
inated by three parameters:
„„ Investment costs for LNG tank sys-
tem
„„ Price difference between LNG and
HFO
„„ Share of operation inside ECA.
With a 65% ECA exposure, the LNG
system payback time below 2 years is
predicted for the smaller vessel sizes
(using the standard fuel price scenario).
For the 2,500 TEU vessel, a compari-
son of payback times for the scrubber
and for the LNG system, and varying
LNG prices, shows that the LNG sys-
tem is attractive as long as LNG (deliv-
16 Costs and Benefits of LNG as Ship Fuel for Container Vessels
ered to the ship) is as expensive as or
cheaper than HFO, when the fuels are
compared on their energy content.
For larger vessels typically operating at
smaller ECA shares, e.g. a 14,000 TEU
vessel, the LNG system has the short-
est payback time (when the standard
fuel price scenario is used), and the use
of a WHR system further reduces the
payback time.
The price of LNG delivered to the ship
is difficult to predict. Base LNG prices
vary from the USA to Japan by a factor
of four. European base LNG prices ap-
pear attractive at around 10 USD/mmBTU
even with small-scale distribution costs
added. An LNG price of up to 15 USD/
mmBTU could give LNG systems a
competitive advantage against scrub-
bers in terms of payback for the smaller
vessels considered in this study.
Small-scale LNG distribution is just
starting to become available in Europe
(outside Norway) and it remains to be
seen which LNG fuel price levels will be
established.
The model to predict costs and benefits
for LNG systems, scrubbers and WHR
systems on board container vessels
offers extensive possibilities to study
additional variants. Options include dif-
ferent vessel sizes, route profiles, incl.
ECA operation shares and other LNG
tank configurations.
LNG as ship fuel has become a real-
ity in international shipping. The prod-
uct carrier Bit Viking started operation
using LNG in October 2011. She is
classed by GL.
Fig. 23: 8,500 TEU type container ship

Acknowledgements
This study was jointly performed
by GL and MAN Diesel & Turbo in 2011.
The work was performed by Dr. Pierre C.
Sames (GL), Mr. Niels B. Clausen (MDT)
and Mr. Mads Lyder Andersen (MDT).

Costs and Benefits of LNG as Ship Fuel for Container Vessels 17

All data provided in this document is non-binding. This data serves informational
purposes only and is especially not guaranteed in any way. Depending on the
subsequent specific individual projects, the relevant data may be subject to
changes and will be assessed and determined individually for each project. This
will depend on the particular characteristics of each individual project, especially
specific site and operational conditions. Copyright © MAN Diesel & Turbo.
5510-0122-02ppr Aug 2012 Printed in Denmark

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