Innovating with LNG

LNG is a hot topic and is seen by many as the fuel of the future. Dutch Deen Shipping and Veka Group are two of them and therefore they joined forces to set up a collaboration in the field of LNG, which was officially signed on 29 May 2013 during the Construction & Shipping Industry trade fair in Gorinchem, the Netherlands. The first product of their cooperation is a ship design for the first inland LNG carrier, 90 metres long and with a capacity to transport 2,250 cubic metres of LNG.

Ed de Jong, responsible for business development at Deen Shipping, explains how the cooperation started: ”The owners of Deen Shipping and Veka Group, Gerard Deen and Peter Versluis, have a lot in common: both own a family company, both feel the urge to innovate and to be a frontrunner, both say what they do and do what they say and both are experienced regarding LNG as a fuel. Deen has developed and operates the world’s first LNG propelled inland tanker, the Argonon, and Veka was the first Dutch shipyard to deliver a seagoing LNG carrier with LNG propulsion, the Pioneer Knutsen. They decided to develop the missing link regarding the bunkering of LNG for seagoing vessels together. By bundling both companies’ knowledge about and experience with LNG we want to be ready to be able to meet the future demands.”

Fuel of the future

De Jong alludes to the lack of possibilities for vessels to bunker LNG in Europe. Currently, bunkering is possible, by truck, LNG delivered out of Zeebrugge Belguim. Gate terminal in Rotterdam has the same plans. Zeebrugge is currently working on small scale jetties to offer small LNG vessels the possibility to load and also Gate is developing this. ”Once the LNG arrives at a seaport, LNG carriers can distribute the LNG further via inland waters. In Rotterdam, we have the advantage of excellent connections with the hinterland. Our new inland LNG carriers are designed to be able to sail all inland waters, delivering LNG to bunker stations, but also to provide other vessels with LNG in the seaports. In Northern Europe, LNG is already widely used and it will soon make its way to the rest of Europe.

We are convinced that LNG is the transport fuel of the future, as it is cleaner and cheaper than marine gas oil. Moreover, when the gas is liquefied, it also is 600 times smaller and therefore easy to transport. The Argonon has a loading capacity of 6,060 tons and uses about 15 tons LNG per month. In the future, however, not only inland barges, but also seagoing vessels will sail on LNG and they use a lot more LNG than the Argonon. We expect that the price of marine gas oil, MGO, will rise as the demand will also rise due to the SECA (Sulphur Emission Control Area, ed.) zones where vessels are required to sail with low sulphur fuel oil.

We believe in LNG

Vessels propelled with heavy fuel oil will not be allowed to enter the SECAs after the new regulations will have come into force and therefore they have to switch to MGO or the use of scrubbers. However, we think this is not the solution, but LNG is.”

“We pioneer as a collaboration together, we believe in LNG. In bad times you need to accomplish things to be able to stand out in good times”, De Jong continues. “Veka built many sorts of vessels and we look at a concept now that can be built in series with an LNG installation. We want to do this as smart as possible to keep the costs as low as possible. We want to use cryogenic techniques, which means the installations and the pipes can handle cold fluids, -162 degrees Celsius is the temperature when LNG becomes fluid. These techniques are not often applied yet and it therefore is a niche market and as a result expensive, but we strive to make this the standard.”

Viable business case

The new LNG carriers will be exploited in joint cooperation. According to De Jong, there is a lot of interest already to charter the LNG carriers: ”Therefore we are convinced that more LNG carriers will be built, two carriers for sure as one carrier is no carrier. Besides, just look into the future, currently 1.2 million cubic metres MGO are being bunkered in the Netherlands and Germany. We expect 10% to 20% of this volume to be replaced by LNG, as this is a viable business case, especially for large-scale consumers. In the port of Rotterdam, eleven million ton fuel oil is available for the shipping industry per year. If you take the developments of refits and newbuildings powered by LNG into consideration, we think that in 2016, 100,000 tons of LNG will be demanded in the port of Rotterdam and we expect an explosive growth towards 2020, up to 600,000 tons per year. To meet these demands, one bunker carrier is not enough. Therefore we expect that at least ten vessels will be needed and also an increase in scale of the vessels.”

Veka CEO Arnold den Boon adds: ”According to our planning, the first two vessels should be operational during the second half of 2015. We will probably need six months from now for the development and engineering, the building of the hull will take about six months and afterwards we need some time for the final outfitting. We will use the most modern techniques and newly developed tanks. There are still some bumps in the road, especially regarding regulations, but as everyone is pioneering right now, we will be fine as long as everyone in the market helps each other. The tanks will determine the exact run time of the vessels, as building the tanks will take longer than building the vessel itself. By now, we know the biggest suppliers of tanks, but we would like to build a tank jointly at our location, but with the knowledge of the current tank builders.”

Therefore, they want to start an LNG knowledge centre with partnerships to make sure to create something for the long run. With his knowledge and experience regarding rules and regulations in the field of LNG as a fuel Deen Shipping’s director Gerard Deen is currently working on getting new rules and regulations in place and the new vessels approved, and this process makes good progress. The systems are thought out by Deen, and Veka is responsible for the carriers’ design and the LNG installation.

One stop shop

Next to developing and building the first LNG inland carrier that is able to provide other vessels with LNG, Veka and Deen also analyse all sorts of vessels that do not carry LNG and their propulsion systems to find out how to incorporate an efficient LNG installation. De Jong: ”We will not stop at the development and the build of the LNG carrier. We plan to help colleagues to refit existing vessels and to build new vessels. We see ourselves as early adopters; some types of vessels with a certain fuel consumption might benefit from LNG already because of the high MGO prices. For vessels with a lower fuel consumption, LNG might not be as relevant today, which is mainly due to the limited LNG bunker possibilities. However, LNG will become a viable business model in the future because of the SECAs and the related rising of MGO demands and prices.” By building the new LNG inland carriers, Deen and Veka want to create a one stop shop for the delivery of LNG. Clients can turn to the

Dare to invest now

consortium for the build of their vessels, but also for the delivery of LNG.

”We have to go back to the basis: what is the vessel being used for and which amount of power is needed”, says Den Boon. ”This all has to be seen in the light of sustainability and the costs. We have to think ahead, make big investments, which can be earned back relatively fast and after that you start saving costs. Therefore it is important to dare to invest now. We expect that the gap between gas and MGO will only rise and MGO will be replaced by another fuel, which is mainly prompted by the government due to rules and regulations.” De Jong agrees: ”If you build a vessel now, you have to look at the process with 2016 and the new regulatory requirements in mind. Also you have to take the whole lifecycle of a vessel, about 30 to 35 years, into consideration instead of only thinking about the first five years. The cleanest shipping company will win in the future, not the cheapest.”

Gail van den Hanenberg