LNG demand, availability, and infrastructure are all growing rapidly. It can be bunkered at most key ports today, including major marine fuel bunkering hubs such as the Port of Singapore and Rotterdam. This is true of traditional, LNG, but we believe that it will soon apply to bioLNG as well.

BioLNG infrastructure

Carbon-neutral bioLNG can be bunkered into existing fuel tanks and blended with traditional LNG with no changes required to the vessel or any of its operating systems or procedures. This ability to drop in bioLNG, and in the longer-term renewable synthetic LNG, ensures that LNG-fueled vessels are future-proof assets. Meanwhile, the option to blend bioLNG with traditional LNG allows ship operators to incrementally introduce the lower carbon fuel in line with availability and increasingly stringent emissions requirements.

BioLNG can also be transported, stored and bunkered with no changes required to supply infrastructure. This means that it can be introduced without the major, additional supply chain investments needed for other alternative fuels. LNG’s mature infrastructure, and the marine fuel itself, have a proven safety record with well-established standards, guidelines and operating protocols. The knowledge that maritime professionals have accrued over more than 50 years on how to safely handle, transport and bunker LNG, is transferable to bioLNG too.

Engine manufacturers are already designing and building LNG dual-fuel engines that in addition to using bio and renewable synthetic LNG are, or will be, capable of using many of the future fuels being discussed. This further protects the capital investments made by vessel owners today and reduces risks. Further, engine manufacturers are focused on developing more efficient engines which address the issue of methane slip. In the latest high-pressure engines efficiency has reached a point where slip has been virtually eliminated. As availability of carbon-neutral LNG fuels increases towards 2030, technology developments will see methane emissions virtually eliminated in both high-pressure and low-pressure LNG-fueled engines.

BioLNG demand

Orders for new LNG-fueled ships reached record highs in 2021. According to data from DNV, there was a net increase of 240 ships from the previous year, more than the previous four years combined. This trend is not letting up in early 2022, with DNV reporting that another 40 ships powered by LNG were ordered in January of 2022 alone. With plenty of ship operators now able to use bioLNG, what will incentivise them to do so?

Regulations such as the International Maritime Organization’s (IMO) carbon intensity indicator (CII) are set to shake up emissions clauses in charterparty agreements in 2022 and beyond. Recent SEA-LNG analysis shows that LNG-fuelled vessels will be able to continue operating as normal under the system until after 2030, while traditional LNG blended with bioLNG, or renewable synthetic LNG will further extend compliance to 2050 and beyond.

The appetite of banks for climate-aligned investments also plays a key role. Poseidon Principles signatories are set to tighten their 2050 targets to net zero, which will drive ship operators to use increasingly lower-carbon fuels such as bioLNG. Analysis from SEA-LNG performed last year determined that for every 10% of bioLNG dropped in and blended with LNG as a marine fuel, a vessel can achieve two extra years’ compliance with the Annual Efficiency Ratio (AER) curve used to secure preferable funding under the Poseidon Principles.

BioLNG availability

While it is true that bioLNG production is in a nascent stage and requires scaling up, there are some common misconceptions that should be addressed.

The first misconception is that there is not sufficient feedstock to produce enough bioLNG for the shipping industry. This is inaccurate, as shown by the CE Delft study into the availability and costs of liquefied bio and synthetic methane. This study showed the potential for bioLNG produced from sustainable biomass resources to be orders of magnitude greater than the total bunker demand from the global shipping industry forecast for 2030 and 2050.

BioLNG is commercially available in Europe right now. Suppliers are quoting prices for delivery of bioLNG bunkers in Rotterdam, the biggest marine fuel bunkering hub in Europe, and several North Sea and Baltic Sea ports. The world’s largest LNG-fueled vessel, the CMA CGM Jacques Saade used a 13% bioLNG mix when refuelling in Rotterdam as early as 2020.

Supplies of bioLNG are also forecast to rise dramatically as businesses like Wärtsilä, Biokraft, Gasum, Titan LNG and CMA CGM step in to increase production capacity. Gasum is confident it has enough capacity to meet market demand for carbon-neutral fuels with its bioLNG production and at a lower cost than other future alternative fuels.

Meanwhile, Titan LNG recently announced a partnership with Attero and Nordsol on an EU-backed bioLNG production plant, which will produce around 2,400 ton/year of bioLNG by 2023. Titan LNG, the exclusive long-term off-taker of the project, will supply the bioLNG to the maritime industry.

This availability of bioLNG puts the LNG pathway significantly closer to delivering decarbonized shipping than alternatives, some of which, such as ammonia, are based on unproven technologies and require massive investments to build new fuel supply chains that do not exist today.

Costs of production

The second misconception is that bioLNG will be more expensive than alternative bunker fuels. The CE Delft study forecast that production costs for bioLNG would be comparable to those of other alternative marine fuels. Scaling up production of any alternative marine fuel is expensive. Any of these fuels will, at least initially, be more expensive than conventional marine fuels. However, by leveraging green financing and government funding effectively and by using existing LNG infrastructure, the total costs of producing and delivering bioLNG are lowered.

BioLNG production is a known quantity – prices are already quoted for bioLNG blends in NW Europe. For other alternative marine fuels, we still don’t have a realistic picture of the potential costs of production. Furthermore, as the production of bioLNG scales up stimulated by growing demand, facilities will benefit from economies of scale.

Net-negative emissions and the circular economy

We know that bioLNG uses existing infrastructure, there will be no shortage of demand, there is sufficient feedstock available for production and the costs are comparable to alternatives and will reduce over time. What then are the other main benefits of bioLNG?

LNG can reduce CO2 emissions by up to 23% on a Well-to-Wake (WtW) basis compared to liquid fossil fuels. Depending on the ratios, blending in bioLNG can dramatically improve this percentage. The use of certain forms of bioLNG, for example, when produced from anaerobic digestion of animal slurry can even offer negative emissions on a full lifecycle basis.

Bio-LNG is produced using waste feedstock, particularly domestic and agricultural waste. Taking waste and regenerating it into clean carbon-free energy is a classic example of an ideal circular economy. The process can capture methane that would otherwise be vented into the atmosphere, resulting in a fuel that is potentially net negative in GHG emissions. By assisting with the reprocessing of waste materials, production can also help improve waste management and begin to solve yet another major global concern.

These credentials, along with its current growing availability, are what makes bioLNG a major step on the LNG pathway to maritime decarbonization.

The pathway

The pathway to maritime decarbonization using LNG is clear. The initial steps using traditional LNG are already well-trodden, while many progressive stakeholders are already taking the second step – bioLNG. The final step is moving to renewable synthetic LNG. It is important to remember some key points when evaluating these pathways.

Firstly, you cannot look at fuels in isolation, but rather must examine the entire pathway to decarbonization that that fuel offers. Secondly, you must compare apples to apples. BioLNG should be considered a net-zero evolution of traditional LNG, while renewable synthetic LNG should be compared to other hydrogen-derived e-fuels.

Finally, shipping is likely to need a basket of alternative fuels in order to successfully decarbonize. LNG and the pathway forward will be a dominant part of that basket of future fuels. An evolution from LNG to bioLNG to renewable synthetic LNG is a safe, sustainable, and practical option that allows ship owners and operators to start reducing emissions right now, not decades in the future.

Marex Media