Posted: April 29th, 2018

The Potential of Liquefied Natural Gas (LNG) as a Cleaner Fuel Source for Vessels in the Arabian Sea and Red Sea

The Potential of Liquefied Natural Gas (LNG) as a Cleaner Fuel Source for Vessels in the Arabian Sea and Red Sea
1. Introduction
Lng, or liquefied natural gas, as a cleaner fuel is currently being considered by the International Maritime Organization (IMO) to reduce sulfur and greenhouse gas emissions. The potential of LNG as an alternative cleaner fuel source, which is available at economically competitive prices, is growing. According to IMO (2005), ships cause an estimated 14 million cases of childhood asthma annually, 500,000 premature adult deaths from lung and heart disease, and 40 million cases of childhood bronchitis in industrial countries. A master plan on cleaner maritime fuels is required to decrease the above cases.
The Arabian Sea and Red Sea are known to be a potential route for ships between Europe and Asia. A previous study by Reddy and Balakrishna (2009) showed that by 2025, the total world’s crude oil, petroleum products, and natural gas exported to the US, Europe, and Asia through the Straits of Hormuz, Bab el Mandab, and Suez Canal will double up. Since ships are expected to use the same route as the cargoes, the increase of fuel consumption and air pollution in these areas is unavoidable. Therefore, guidelines to limit the potential environmental damages are necessary.
The author aims to review the potential use of LNG as a cleaner fuel for vessels in the Arabian Sea and Red Sea compared to the currently used conventional heavy marine oil. This thesis will be based on the potential for improved air quality and decreased health impacts through the use of cleaner fuels in two major shipping regions (Arabian Sea and Red Sea). Recommendations that may form the basis for future IMO policies will also be provided.
1.1 Background of LNG as a cleaner fuel
The utilization of LNG as marine fuel has been increasing over the years due to its environmentally friendly characteristics, especially in terms of air quality and greenhouse gas emissions. LNG is considered as a cleaner fuel compared to conventional marine diesel and heavy fuel oil. This is due to the chemical properties of natural gas, where combustion of natural gas will produce almost no particulate matter and less CO2 compared to the same amount of energy produced by an equivalent amount of diesel or oil. According to Dmr Sekar (2017) in his paper, he stated that the combustion of natural gas, particularly methane, released the least amount of CO2 and water when it reacts with oxygen compared to other fossil fuels. It is an undeniable fact with concrete proof that the combustion of methane will produce 1 molecule of CO2 and 2 molecules of water for every molecule of methane reacted with 2 molecules of oxygen. With the core elements of methane content in LNG, which consist of at least 80%, it can be conclusively said that the usage of LNG will produce less CO2 compared to other types of marine fuel. This potentially contributes to the reduction of CO2 emissions in the shipping industry, which will further provide significant benefits to the world community. According to Worden, H. M et al (2016) in their research, they found that global shipping is responsible for approximately 2.5% to 3% of the world’s CO2, which is equivalent to over 1000 million tons per year, and its amount is increasing yearly parallel with the increase of world seaborne trade.
1.2 Significance of using LNG in the Arabian Sea and Red Sea
Hence, considering the scenario of fuel price trends and the global economic activity, envisioning the goal achievement in utilizing LNG will be a beneficial activity in ensuring cleaner fuel maritime activity. So, with the success attained by achieving the goals of using LNG as cleaner fuel and considering the vast geographical reach of sailing, the maritime activity with cleaner fuel is sure to translate the environmental impact to all the seas adjacent to maritime countries. But since the scope of impact varies, we consider the feasibility of implementing this cleaner fuel goal in some intended sea areas of significant environmental or economical importance. One such area is the Arabian and Red Sea.
Coming to the economic activity and ship owner perspective of shipping, a significant advantage has currently been seen in the price difference between LNG and middle distillate oil and heavy fuel oil. Between 2009 and 2012, the price of LNG for a Japanese importer varied between $10 and $18 per million Btu. When we compare this to the gas oil and fuel oil prices from 2009 to 2012, the LNG price is favorable. Prices for gas oil and fuel oil over the same period averaged between $16 and $24 per million Btu and $14 and $16 per million Btu, respectively.
When we see the usage of LNG, studies have shown significant reductions in the emission rate of these air pollutants from engines using LNG compared to those using oil. Liquefied natural gas is odorless, colorless, non-toxic, and non-corrosive. When released, LNG will vaporize and dissipate rapidly, leaving no residue on water or land. So, if we consider the amount of damage to marine and estuarine life due to oil spill accidents, the usage of LNG and prevention of further damage will be a recoverable activity in the current scenario of damaged marine ecological systems.
On this pretext, when we see the shift of marine transportation towards cleaner fuels, the current scenario and the projected scenario ahead, LNG has a significant contribution to the cleaner fuel goal. Presently, high amounts of residual fuel oil and diesel oil are used in marine transportation. This results in significant amounts of air pollutants, including sulfur oxides (SOx), nitrogen oxides (NOx), and particulate matter, being emitted and discharged into the atmosphere and eventually returning to the earth.
Many times, the significance and contribution of words often turn out to be the same. However, not every alternative step taken as a contribution may be significant. Hence, the level of contribution can only be termed significant if the intended goal for which the contribution was desired is well achieved.
1.3 Objectives of the thesis
• To analyze the potential of using LNG as a marine fuel in the Arabian Sea and Red Sea, taking into account technical, economic, environmental, and safety aspects.
• To estimate the LNG demand of ships in the Arabian Sea and Red Sea up to 2030.
• To identify the potential sources of LNG supply for the ships and estimate the cost of LNG to the end users.
• To study the environmental impact of using LNG as a marine fuel in terms of emissions to air and water and its implications.
• To investigate the safety and risk issues in using and transporting LNG to the ships in the Arabian Sea and Red Sea.
• To develop a model to optimize the usage of LNG as a marine fuel for the ships in the Arabian Sea and Red Sea.
• To develop a comprehensive understanding of the development of LNG as a marine fuel in the Arabian Sea and Red Sea up to 2030.
2. Environmental Impact of Traditional Marine Fuels
Climate change implications
The emissions from shipping have effects on both local and global scales. It is estimated that international shipping now represents 3% of global carbon dioxide (CO2) emissions and 4.3% of all greenhouse gases (GHGs). This amount is rapidly increasing due to a 3% annual increase in CO2 output for several decades. The GHGs from ships are of more concern than those from other sources, as around half will be emitted into the atmosphere close to or in ports, which would affect air quality and human health, as well as magnifying the original effects of the GHGs on climate change.
Water pollution from traditional marine fuels
Arguably the most publicized source of water pollution from ships is from catastrophic events such as oil spills, in which oil is released into the marine environment and causes damage to marine life and their environments. However, a larger source of water pollution from shipping is from operational discharge and non-point sources, such as atmospheric deposition to the sea. It has been suggested that around 20% of total oil input to the marine environment is derived from ships’ operational discharges. Nutrient loading and invasive species introduction from ballast water also bring their own severe negative consequences for marine ecosystems. These sources of pollution are still ongoing, occur frequently, and cumulatively would have about the same effect on the marine environment as a catastrophic event.
Air pollution from traditional marine fuels
The quality of fuel represents a major problem for the environment. Oil-based engines release oxides of sulphur and nitrogen. Oxides of sulphur are problematic in that they can easily dissolve in water, causing water acidification and marine life damage, especially in coastal areas. Nitrogen oxides and unburned hydrocarbons are responsible for the formation of ground-level ozone, a known respiratory irritant and smog. It has been calculated that emissions from today’s international shipping may be responsible for more than 50,000 premature deaths per year. Although all are very damaging to the environment and human health, it is sulphur oxides that are of severest concern given the recent legislation of maximum sulphur content for marine fuel to be reduced to 0.1% from 2020. In addition to the aforementioned oxides, marine bunker fuel engines produce particles harmful to human health and aeroallergens, which seriously affect air quality and health in many densely populated coastal regions.
2.1 Air pollution from traditional marine fuels
From the very beginning, ship owners and operators always want to get the best out of their fuel, attempting to keep maintenance costs low and having an optimum engine performance to get the most out of their transported cargoes. But as Harrison (2005) notes, despite its fuel economy and operational cost advantages, heavy fuel oil drawbacks lay in the emissions produced from its combustion especially in comparison to other lighter distillate products. Portable combustion of residual fuel oil creates to disperse a large quantity of air pollutants into the atmosphere like sulphur oxides (SOx), nitrogen oxides (NOx), particulate matter, and unburned hydrocarbons, albeit CO2 emissions being the highest in percentage. Smith and Leigh (2002) stated that a 120,000 dwt ship used approximately 37,800 tonnes of fuel emitting 6,800 tonnes of NOx, 2,700 tonnes of SOx, and 930 tonnes of particulates, implying that there was a need for growing a solution to environmental cleaner combustion in regards to SOx matter which caused the concept of using natural gas.
From the last ten centuries, the ships are contributing to the world in burning fuel and parting out an unavoidable creation of dusky smoke. From the time when transition of using oil-fired propulsion engines in place of coal-powered steam engines, an accurate assessment on the environmental impact caused from the usage of residual fuel was made. The pollution created from this type of fuel has been given focus on air pollution, alternate type of fuel source, and health impacts (Smith et al., 2005).
2.2 Water pollution from traditional marine fuels
The problem of water pollution from marine operations is the most important environmental issue facing the shipping industry. Traditional fuels are toxic and their combustion produces waste gases, and both result in a wide range of discharges to the marine environment. Discharges can occur through routine operations, such as the release of ballast water carried to improve vessel stability, and through accidents such as collisions, grounding, and spills. Ballast water uptake and discharge is a major problem because it is a principal method by which aquatic invasive species are introduced to new environments around the world. Invasive species can cause havoc to local ecosystems, threatening native species and causing substantial economic damage. The impacts of invasions can be widespread and severe, yet in many cases effects are irreversible. The IMO Ballast Water Management Convention (BWMC) of 2004 aims to prevent the spread of harmful aquatic organisms from one region to others, and effectively eliminate the transfer of invasive species via ballast water. Japan has taken this a step further and has introduced a law which requires all vessels to switch to low-sulfur fuel when discharging ballast water in Japan as a measure to help prevent the spread of invasive species. This highlights the close connection between fuel type and water quality, and that changes to engine operation or fuel type intended to reduce air pollution can have beneficial effects on water quality. However, the BWMC has yet to enter into force due to a lack of ratification from member states; it requires 30% of world merchant shipping tonnage to ratify, and as of October 2016 only 6.3% has been reached.
2.3 Climate change implications
LNG as a fuel and its supply chain have great potential for reducing the environmental impact of shipping. Substitution of MGO/IFO fuels by LNG results in major reductions in harmful exhaust emissions, such as sulphur, particulate matter, and nitrogen oxides. Compared to heavy marine fuels, LNG has dramatically lower emissions of sulphur oxides (SOx). Emissions of particulate matter are negligible, and NOx emissions are reduced by approximately 85%. These emissions reductions are vital to the shipping industry’s efforts in reducing air pollution and acid rain. As Marpol Annex VI is phased in and new regulations are developed, tight restrictions of these pollutants and taxation or trading schemes to reduce emissions are likely to bring huge increases in the relative cost of traditional marine fuels.
Climate change is now universally accepted as a real and dangerous phenomenon. Scientifically, there is no doubt that greenhouse gas emissions are a significant contributor, and it is predicted that with current trends, global temperatures will increase between 1.4°C and 5.8°C above 1990 levels by the year 2100. Shipping is responsible for a significant proportion of global man-made CO2 emissions and a greater proportion of other gases with detrimental effects. A study for the IMO (CE Delft, 2000) estimates that international shipping was responsible for the transport of 6.86 billion tonnes of freight in 2007, a forecasted growth of between 50% and 250% by the year 2050, and has a total fuel consumption increasing from 2001’s research essay pro papers owl assignment help 225 million tonnes to 450 million tonnes in 2015. The same study realized the potential for a reduction in emissions and air pollution and stated that if trade growth is reduced, global fuel consumption could be kept to around 350 million tonnes in 2050.
3. Advantages of Liquefied Natural Gas (LNG) as a Marine Fuel
3.2 Reduced greenhouse gas emissions
One of the most beneficial attributes of LNG relative to other fossil fuels is its lower CO2 emission. LNG produces around 25% less CO2 than conventional marine engine fuels. When taking into account the lifecycle of the fuel, from extraction to combustion, this figure can be as high as 30% (Lloyds Register, 2012). LNG is still a hydrocarbon fuel, but it is the cleanest burning fossil fuel. The use of LNG therefore paves the way to meet the International Maritime Organization (IMO) strategy to reduce greenhouse gas emissions from shipping by at least 50% by 2050. This should allow for a longer-term use of LNG in comparison to other conventional fossil fuels.
3.1 Lower emissions of air pollutants
Compared with heavy marine fuel oils, LNG when used as a main engine fuel, has favorable air quality. The emissions of SOx and particulate matter are negligible, and the combustion process for natural gas within an Otto cycle engine produces lower NOx emissions. This can contribute to cleaner air and meeting increasingly stringent air quality regulations (Sakaris, 2007). This can also save operators money, as expensive exhaust gas cleaning systems will not be necessary to comply with regulations inside Emission Control Areas and on the high seas.
This section explores the advantages of utilizing LNG as a marine fuel. Compared to conventional diesel oil marine engines, the use of LNG as marine fuel can lead to a reduction in air pollutants and greenhouse gas emissions. This affords lower levels of environmental impact, which is an increasingly important issue in this day and age. Furthermore, the use of LNG can provide a safer working environment for the crew and the engine room (Sega, 2004). The advantages mentioned are likely to accelerate the global shift towards cleaner energy resources and greener marine transportation.
3.1 Lower emissions of air pollutants
The high combustion temperature of natural gas compared to marine gas oil results in the produced nitrogen oxides and carbon dioxide, however the combustion process in LNG engines and the control technologies in place provide a very promising future in reducing the emissions of nitrogen oxides, with the potential for up to an 80% decrease in the next generation of lean pre-mixed engines. This is a significant improvement on the diesel engine method with pressure injection, where the changes made to combustion chamber design, changes to injection nozzles and ultimately complete development of a new engine all produce mere incremental reductions in nitrogen oxides emissions. A like for like cost comparison and assessment of potential additional costs would fund extensive research in development of a LNG engine, which can best be achieved through cooperation with powerful development facilities globally. Such activities to meet tight emission requirements will provide a valuable and lasting approach to reduce nitrogen oxides emissions for the using LNG engines.
Reduction of nitrogen oxides
Using LNG to fuel the global marine transportation industry would result in a significant decrease in the emission of sulfur oxides. Sulfur oxides are a harmful air pollutant that is produced when burning sulfur, associated with serious health effects including respiratory symptoms and lung disease. By changing to LNG, vessel operators would be meeting the stringent requirements to restrict the sulfur content of fuel in emission control areas “ECA” to 0.1% S. This spark in demand for LNG holds significant value, as there is currently a very high and increasing level of marine gas oil consumption in ECA zones. By making the transition from marine gas oil to LNG using dual fuel engines, operators can expect to reduce their sulfur oxides emissions by 100%, and compliance with the current and future regulations being made to limit air pollutants. This impact on ECA zones is becoming a more and more prevalent issue for vessel operators to address, and although it is feasible with provision of marine gas oil with a higher sulfur content, it has come under heavy scrutiny by concerned bodies including the International Maritime Organisation due to the negative environmental and health impact.
The emission of sulfur oxides
3.2 Reduced greenhouse gas emissions
The energy content of LNG is 70% that of diesel. Therefore, in the event of an oil spill, LNG evaporates and disperses rapidly, leaving no residue. This can be considered both an environmental benefit and an oil spill clean-up benefit, as the task of removing oil from the sea and cleaning affected shorelines can be impossible and sometimes more damaging to the environment than the actual oil.
Oil is also a fossil fuel, and oil spills pose a great threat to marine life. The most disastrous oil spill in terms of damage to marine life occurred in the Arabian Gulf when approximately 8 million barrels of oil were released. This has caused the region to impose a ban on single-hulled tankers. In 25 years time, these tankers are to be phased out completely and replaced by double-hulled tankers, although countries with no oil resources may still import oil using single-hulled tankers. This may result in oil being transported by older single-hulled tankers, thus increasing the risk of oil spills.
Carbon dioxide is released into the atmosphere by the burning of fossil fuels (oil, natural gas, and coal), solid waste, trees, and wood products. Methane is emitted during the production and transport of coal, oil, and natural gas. Natural gas systems and the fermentation of organic matter in livestock are also sources of methane emissions. Scientists believe that methane has 21 times the warming potential of carbon dioxide per molecule.
The greenhouse effect is the rise in temperature on Earth as certain gases in the atmosphere trap energy. These gases are known as greenhouse gases. The primary greenhouse gases in the Earth’s atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone. Greenhouse gases are responsible for maintaining a hospitable temperature on Earth. Without them, the average surface temperature would be -18°C, in contrast to the current 15°C. Human activities, primarily the burning of fossil fuels and clearing of forests, have intensified the natural greenhouse effect, causing global warming.
3.3 Enhanced safety aspects of LNG
Liquefied natural gas (LNG) has very specific properties that set it apart from other traditional fuel options such as heavy fuel oil or marine diesel oil. One of the main reasons for LNG being chosen as a fuel for vessels will be enhanced safety over other fuel options. LNG when fueled in ships or stored in bunkers are in double-walled, self-supporting storage tanks. These tanks are specifically designed for the low temperature (-162°C) of LNG. The LNG tank and its insulation are located within the ship’s double hull space and the hold space is normally ventilated with inert gas. All these features and the properties of LNG being a non-toxic and non-renewable source make it ideal for enhanced safety over other fuel options.
The construction of LNG-fueled ships follows the same basic principle as conventional diesel fuel ships. Other than the specifically designed storage tanks, the fuel systems and engine are similar in design. There have been new projects to develop combined diesel engine and gas turbine (COGAS) vessels that will have the gas turbine function as the main propulsion and the diesel engine as an alternative with the use of a common fuel source. Simulation of gas turbine LNG carrier was created to study the temperature and pressure changes in the LNG fuel supply system and to confirm the safety of the fuel. A primary concern for LNG safety of engine builders and ship owners will be to maintain the same LNG fuel system safety level established for land-based systems.
4. Challenges and Opportunities in Implementing LNG as a Marine Fuel
Although the utilization of LNG as a marine fuel has many advantages, there are several challenges which must be overcome prior to the adoption of LNG as a marine fuel. A primary challenge, especially in the Middle East, is the establishment of a suitable infrastructure to facilitate LNG bunkering. For refueling operations, it is common practice for ships to berth alongside in port or at anchor, and use a bunker barge to transfer fuel from the terminal to the ship. Bunker barges come in various sizes and are designed to deliver a variety of fuel types, with special adaptations for residual fuels that require heating or insulation. However, LNG is a cryogenic liquid and as such, it must be stored and transferred at very low temperatures (approximately -160 to -20°C). This requires vessels and terminal facilities that are equipped with specialized cryogenic storage and transfer systems, and in the case of double-walled vacuum insulated storage tanks, there are currently no existing designs that are approved for marine application. Furthermore, the high cost of cryogenic materials, stainless steels and nickel alloys required for LNG service, means that a new build LNG bunkering infrastructure will be a significant investment and in the near term, it may be unlikely to achieve an economic return. Until there is a sufficient level of LNG bunkering facilities at major ports and LNG bunker barges that are capable of meeting the fuel delivery needs of a variety of ships, the attainability of LNG as a marine fuel will be limited.
4.1 Infrastructure requirements for LNG bunkering
As the storage and subsequent bunkering of LNG is different from that of traditional liquid or gaseous marine fuels, comprehensive risk assessment studies need to be conducted before any design phase begins. The requirements and guidelines for safe LNG bunkering operations are currently being developed by the Society for Gas as a Marine Fuel (SGMF) and the International Organisation for Standardisation (ISO). Vessels are the primary focus in the development of these guidelines given that they have to access any LNG fuel supply. The forthcoming ISO 20519 standard will address specific vessel designs for natural gas as a fuel. This will be supplemented by risk assessment studies on key safety aspects, leading to a prescriptive methodology for the safe design and operation of LNG fuel installations on ships. The application of these guidelines will ensure that the safety aspects of LNG fuel use and bunkering are properly addressed. This approach will mitigate potential hazards to a level that is as low as reasonably practicable (ALARP). An LNG QRA study. The bar chart displays the risk in terms of individual risk and societal risk and demonstrates that by including specific risk control measures, it is possible to achieve ALARP levels of risk. An example of a risk control measure could be the reduction of consequences via the selection of an alternative design or equipment. This could potentially raise the societal or individual risk but further measures would be taken to reduce it to an ALARP level. An iterative approach between the risk assessment team and the relevant decision makers is required to implement cost effective risk control measures and apply them to the design process.
4.2 Economic considerations and cost-effectiveness
To establish the economic viability of utilizing LNG as a marine fuel, the concept of pricing differentials between HFO, ULSFO, MDO, and MGO becomes an important factor. One of the main reasons why many ship owners are looking towards adopting LNG is that in terms of cost, it will become more competitive than any other fuel in the future. This is because the global abundance of natural gas and the implementation of new techniques for extracting it mean that LNG prices will remain stable or even decrease with time. According to a report by SEALNG, the relative price between LNG and marine distillates is expected to be maintained at 40-50% of marine gas oil’s price due to continued low gas prices, increased gas supplies, and the expected high availability of LNG. They also project that the cost of new supply infrastructure and supply chain is likely to be absorbed easily by sweet study bay economies of scale and LNG supply chain improvements which will take place in the future. This is a key point as some shipping companies may not be willing to switch to LNG if it involves high capital cost to install bunkering equipment or if they are unsure of the long-term cost of LNG.
In comparison to this, the price of HFO, ULSFO, and contaminated MDO/MGO varies significantly, and although it is difficult to predict future oil prices, it is expected that these variations will remain and may increase. This unpredictability and potential price volatility of oil is a major concern for ship owners, and since in the long term it is expected that LNG will become cheaper and less risky than all other marine fuels, there is likely a long-term switch to LNG from ship owners who will prefer acceptability. During the period of 2009-2012, average prices for MGO were around 151% higher than US natural gas prices in terms of energy content. This resulted in the increased interest in LNG as a marine fuel during that period and led to the establishment of many LNG fuel trail and development projects. An example of this is the Viking Grace project in Finland, in which Viking Line converted the huge MGO-consuming auxiliary power and thruster system of their existing ship for dual fuel operation with LNG. This was primarily due to the fact that the rise in energy price and the stricter marine fuel sulfur regulations set forth by the EU during that period were expected to add significantly to MGO/MDO costs.
4.3 Regulatory frameworks and international standards
A global outlook on the use of LNG as a marine fuel reveals a complex picture. Although it has been established that there are significant environmental advantages in using LNG as a fuel, some barriers still exist which may prevent its adoption. When considering a global or regional industry strategy for the use of LNG as marine fuel, stakeholders must recognize the complex nature and interaction of barriers. In social science terminology, the LNG supply chain could be seen as a complex system. This means that its constituent elements are both complex and interdependent. Elements of the LNG supply chain are not only technical in nature, but also social, involving various forms of human organization and cultural influence. This complexity suggests that there are no easy predictable relationships between a given action and its outcome. In other words, for stakeholders to consider implementing change in using LNG as a shipping fuel, they must recognize that there are a number of different ways to achieve a goal, and the potential for unintended consequences. This process may involve trial and error, and a long time frame to make the changes. Influencing the system will require considerable resources and political capital.
4.4 Future prospects and potential growth of LNG in the region
Since the global financial recession in 2009, growth of the world economy has been slower. The energy sector has also been sluggish in terms of demand growth. Natural gas demand has risen by less than 2% a year during this period. The power generation and industry sectors have been the main sources of demand growth. The current excess of LNG supply globally has been due to the development of new production capacity sanctioned when expectations of demand growth were higher. This has led to an influx of new LNG to be transported to European and Asian gas markets, when they already have a significant oversupply. This coupled with the slower demand growth has created intense competition between suppliers seeking to place their LNG in limited growth markets, resulting in downward pressure on prices and margin compression for all components of the value chain. This environment has made sanctioning of new LNG projects and development of new LNG supply regions very difficult. Development of a regional LNG market in the Arabian Sea and Red Sea would likely be faced with similar challenges, and would only be feasible if competitive supply sources are available to meet growing demand, or if there are sufficient price incentives to displace other fuels. This paper aims to discuss the potential for LNG to become a significant marine fuel in the Arabian Sea and Red Sea, the chances of success, and the associated implications. Globalization spurs on increasing demand from international shipping in the Arabian Sea and Red Sea, with vessel and tanker traffic to and from Suez Canal and SUMED pipeline points, and oil/gas export and import representing the mainstay of economic activity. These transportation sectors are facing tightening regulations concerning air emissions and pollution control from vessels as outlined by the MARPOL Protocol, and increasingly stringent local environmental regulations imposed by the littoral states of both the Arabian Sea and Red Sea. The shipping industry is predominantly using heavy fuel oil (HFO) as a marine fuel. HFO is the bottom-of-the-barrel residue from crude oil refining, and regular HFO is high in sulphur content presenting a pollution issue. The MARPOL Protocol which came into effect in 2005 set a global cap on sulphur content in marine fuel; the current limit in designated Emission Control Areas is 1.0%, and will further decrease to 0.1% in 2016. This presents a dilemma for the shipping industry in that it must either invest in costly retrofits and operational changes to vessels, or procure more expensive higher quality marine fuels such as diesel, or marine gas oil. These fuels are significantly more expensive than HFO, and stricter regulations on pollution emission will likely increase their relative cost. This represents an opportunity for clean burning LNG which could be a cost competitive alternative. High prices and price incentives for cleaner fuels also allow a price umbrella for LNG to enter the market.

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