The Business Case for LNG Bunkers

Ed de Jong, Business Development, G.C.M. Deen Shipping.

As part of the run up to LNG Bunkering Summit 2014, Tim Haidar of Ship & Bunker's event partner Oil & Gas IQ recently spoke with Ed de Jong, Business Development, G.C.M. Deen Shipping.

They talked about the business case for Liquified Natural Gas (LNG) bunkers, the challenges involved with converting your fleet to LNG, and their pioneering LNG bunker barge, the Argonon.

Oil & Gas IQ: My first question is going to be what is the business case for shipping companies switching to LNG because a lot of people are still to be convinced?

Ed de Jong: Yes that's certainly in regard to the lack of knowledge about LNG. It's a new fuel and everybody has the wrong mindset from my opinion, because everybody thinks it's very dangerous and scary when it is absolutely not the case. LNG is a very safe fuel. And besides that LNG is safe it's also the cleanest fossil fuel in the world and therefore you have lower emissions when you burn it in engines.

At the other end, LNG is also much cheaper than marine gas oil and therefore there is a very interesting business case for inland barges and certainly also for seagoing vessels that will enter into the SECA area from 1 January 2015. Because LNG is less expensive than marine gas oil and therefore you have an interesting business case in regard to the investments you have to make. To give you an example, the Argonon is an LNG propelled barge that runs on dual fuel, 81% of natural gas and 90% of marine gas oil. And in that case we have a lower fuel cost from an average of 30% in the last two years. So therefore it is a very interesting business case, certainly for inland vessels and also for seagoing vessels that will run on marine gas oil.

Oil & Gas IQ: Talk to us a little bit more about the Argonon and the drive behind the commissioning of it because there will be people who aren't familiar about what this project is.

Ed de Jong: The Argonon is the first inland barge that will run on natural gas as a fuel and because it was the first we had to change the regulations. Because before the Argonon was not allowed to run on another fuel than marine gas oil because in the regulations you can't use another fuel that has a lower flaming point than 55 degrees Celsius; so the only fuel that was applicable according to the regulations was marine gas oil. So we had to change the regulations and the regulations are changed for the whole of Europe and the inland waters and therefore also colleagues of ours can use LNG as a fuel.

But it was an easy road; it was a bumpy road. Three steps forward two steps back, sometimes four steps back, that's the outcome of being the first; being the first you have to solve all the problems for everybody but, at the end of the day, we managed to cope with the problem and we got the Argonon applied for that. The Argonon is an inland barge that will bring heavy fuels to seagoing vessels, this is a little bit of a contradiction; it transports 6,000 tons of heavy fuels and it's fully dual fuel propelled. We also have a special feature onboard that's a mini turbine that will generate electricity for our barge and this is propelled on 100% of natural gas.

Oil & Gas IQ: Now, you said it yourself, if you are the first people to embark on such a project you're going to be the first person to come across the problems and then solve them. What were the challenges that you saw converting to LNG?

Ed de Jong: The biggest challenge for us was changing the mindset of people; that was the biggest challenge because when you are talking about gas everybody thinks about explosions and that's not the case with LNG. It's a closed system. It's stored very safe in a cryogenic tank onboard. So it's a closed system no gas is out of that system. So the biggest challenge we had was changing the mindsets of people who had to apply our barge into the regulations.

But that isn't a big challenge for the ship owners that will go after us because we coped with the problem. The challenge we have is infrastructure because in this moment you can't bunker LNG at a bunkering station or via an LNG bunker barge. So that is holding up the transition to LNG. 

And there are some other things, the financial situation in the world, in America and SECA it's not a good time financial-wise because banks withdraw loans for ship owners so it's not an ideal situation. And this is also the reason that we try to find a solution for all those problems. We started a new company called the LNG Group, a joint venture with one of the famous Dutch shipbuilders, Veka the third shipbuilder of the Netherlands with a lot of experience in regard to cryogenic techniques because they were the first one that build a seagoing LNG transport vessel, The Pioneer Knutsen. And therefore we found a shipyard that has the knowledge in regard to cryogenic techniques.

And within the LNG Group we also try to solve the other problems. First of all, bunkering LNG via a bunkering station, that's very important for inland barging, of course, and therefore we're going to build the first bunkering station in the Rotterdam Port area and that will be finished by the end of 2014. And the third problem is a bunker barge for seagoing vessels. We cope also with that problem and therefore we ordered two inland bunker barges that can transport LNG over the inland waters and can also bunker seagoing vessels that have a request for LNG.

Oil & Gas IQ: So basically one group of companies is trying to solve the problem of actually bunkering these vessels by itself.

Ed de Jong: Yes.

Oil & Gas IQ: That's a hell of a challenge by itself.

Ed de Jong: It is certainly.

Oil & Gas IQ: With respect to that, let's talk about something which surely must be on your mind, where is the help from the European Commission, the IMO; are these guys going to step in and help you down the road or is this just something that the business sector is going to have to go alone?

Ed de Jong: I think business has to go alone but also the IMO has to help us, of course, because when the IMO applied the regulations for LNG propelled vessels, on a way that is easy to invest in, then it's only good for the ship owners. But at the end of the day we have to do it, therefore we also applied for a subsidy in the European Union and we have received subsidy of the European Union as a TEN-T programme and with it we could build the first barge and we already started building the barge. We are now in detailed designing. We ordered some of the equipment already so our barge will be finished mid 2015.

Oil & Gas IQ: Let's talk about that then, just how important is subsidisation from the European Authorities in making LNG bunkering a viable story for marine and domestic travel?

Ed de Jong: It's very important, certainly for the early movers because there is a lot of risk involved as you can imagine. Because when you are the frontrunner you have to design a ship, then, second, you have to find out every regulation and you have to find out what is useful and what is not. So subsidy is very important. But at the end of the day you must have the business case that can run on its own. That's our opinion; you have to have a business case that could run on its own later on, but needs a push to design it and to develop it. Because we now have to develop an infrastructure, we now have to build bunker barges to arrange LNG for all seagoing vessels that want to propel on LNG.

Oil & Gas IQ: Is there such a thing as green shipping or a green fuel industry for marine or otherwise?

Ed de Jong: I think at this moment there isn't such a thing but I think with LNG as a fuel then you have green shipping; it is the greenest fossil fuel there is. So at the end of the day you have the cleanest fleet if they are propelled on LNG.

LNG Bunkering Summit 2014 is being held from 27-29 January, 2014 in Amsterdam.