Why the World's Most Massive Ships Are Switching to Natural Gas

Due to environmental regulations, natural gas is now the cheaper option.

Apr 20 2015, 10:24pm

​Over the weekend the Isla Bella rolled out of a San Diego shipyard, to cheers, fireworks and streamers. The Isla Bella is the first container ship powered by liquid natural gas—as opposed to low grade fuel oil—and it will run between Puerto Rico and the US mainland.

Why the break with precedent? In short: the fuel is cheap, and it clears environmental regulations.

If you can ignore concerns about fracking and the fact that "an aver​age tonne of LNG produced will lead to total emissions of 3.81 tonnes CO2, including emissions from production and end use combustion," LNG-powered ships have the look of a more environmentally friendly option: using LNG cuts carbon emissions by about 25 percent, sulfur oxide emissions by nearly 100 percent and nitrogen oxides by 85 percent. It's been catching on as a fuel for smaller ships, mostly in Northern Europe, for the last half decade, but this is the first time a container ship that drinks the stuff has been delivered.

Container ships are the red blood cells of the globalized world economy; according to The Internati​onal Business Times, 80 percent of global trade is carried by ship, making the maritime industry one of largest consumers of fuel in the US. The US Energy Information Administration calc​ulates that domestic and international shipping within US waters "consumes about 1 quadrillion Btu of fuel oil per year." Or, in more recognizable terms, the Wall Street Journal reported that "sales of diesel fuel for marine vessels reached 2.1 billion gallons in 2011," and "an additional 4.5 billion gallons of marine oil was sold in 2011."

The bunker fuel used by ships has historically been higher in both sulfur and nitrogen oxide emissions than diesel used on land, but that's changing. Stricter emission regulations for ships now require the reduction of sulfur and nitrogen oxides to 0.1 percent in "E​mission Control Areas" within 200 miles of the US coast this year, and 0.5 percent globally by 2020.

Ships can be retrofitted with scrubbers to reduce their sulfur emissions, which is what Carnival Cr​uise Lines is spending $180 million on to bring 32 ships into compliance, and there's also an option of a low-sulfur marine fuel. On the other hand, liquid natural gas is very cheap!

An American Clean Skies Foundation report on LNG as a marine​ fuel stated that "based on the current forecasts, natural gas delivered for production of LNG is now at least 70 percent less expensive on an energy equivalent basis than marine residual fuel and 85 percent less expensive than marine distillate fuel," and "that this relative price advantage will continue, and even increase, through 2035."

There's some debate about whether the EIA has been accurately estimating how much gas America can actually frack. If the US doesn't have as much gas as the EIA has projected, LNG prices could rise to the point that it isn't the most practical fuel option. 

But if shipping companies are taking their cues from EIA reports, it looks like the Isla Bella is the start of a trend. According to the market analyst firm MEC Intelligence, nearly 10,000 vessels could adopt LNG propulsion by 2020. It's an environmental step up from the 2​0 million tons of sulphur oxides that ships emit annually, even if that still represents a whole lot of carbon.