Lng bunkering china status report January 2016

Editor's Notes

1. 7 of the top ten trafficked container ports is in china, and china handles 30% of the worlds containers every year. Recently focus on air emissions from ships have become much more clear. As SOx NOx and particulates from ships at port and river transport contribute a lot to air pollution due to lower requirements. New SOx ECAs in the most trafficked shipping ports will gradually come into effect towards 2020. Yangtze river is the river in the world that transports the most cargo and has more than 100,000 vessels. Totally, China’s inland waterways has around 240,000 vessels LNG is a future oriented solution to meet air emissions requirements New bunker stations needs building, along rivers and bunker supply for ports is needed. Regularions for LNG needs clarification and standardized solutions needed Government is supporting the transition and development of LNG infrastructure to avoid a chicken and egg situation.
2. These goals concerns retrofit and were very ambitious and show commitment. However, the goal of 2000 converted LNG vessels by end of 2015 was not met. Time was needed for new ship designs and the lowered fuel oil cost in 2014 and 2015 also made the incentives to switch to LNG fuel less in the short term. The development in the cheap oil price continues to threaten LNG solutions and MDO with sulphur content < 0.5% will be the easiest measure to stay within the current SOx requirements for now
3. Sulphur emissions and comes from the Sulphur found in the fuel. LNG has no sulfur in it because it must be removed from the natural gas before it is liquefied to LNG. HFO and oil based fuels contains black incombustible particles that may escape the exhaust as particulate matter. LNG turns into clean gas and adds no PM from combustion. Nox emissions come from high peak temperatures during combustion. A more uniform combustion with good mixture of air and fuel helps to reduce the peak temperatures. LNG has a higher “Heating Value” than fuel oils and refined oils. This is due to more C-H connections per C atom. As the energy comes from breaking those bonds and making H2O and CO2.
4. It should also be stated that methane, the largest component of natural gas, is itself a potent greenhouse gas, and procedures to reduce methane slip to the atmosphere should also be done. Methane emissions from LNG ships may come from unburnt fuel in exhaust or vented trace amounts purged to the atmosphere during refuelling. Boil of gas (BOG) from LNG carriers or land stations are re-liquefied or used for propulsion in today’s best practices.
5. Nanjing is the divide on Yangtze between River and Coast. Giving the port strategic importance. The content of Sulphur is less than 350 ppm or 0.0350 % which is 100 times stricter than current, ocean going vessel requirement of 3.5% Sulphur. These requirements are planned to be made gradually stricter. From 01.07.2017 it is planned maximum 50 ppm sulphur fuel cap and less than 10 ppm sulphur from 01.01.2018. Larger river vessels such as coasters and channel ships are allowed different requirement of less than 1000 ppm sulphur content (0.1% sulphur similar to European ECA). In addition marine residual fuel is forbidden, HFO etc. This prohibition can be circumvented if one uses exhaust gas cleaning technology such as Scrubbers, and the SOx removal efficiency is equal to reduction from fuel requirement. Of course LNG will also be a possible solution to eliminate PM and SOx emission from the fuel, as no SOx is present in LNG.
6. Stage 1 emission requirements will take effect from January 1st 2017. This are the same rules which were already put in effect in the EU zone in the 2000’nds and corresponds to the stage 2 (Tier 2) of the US-EPA Final Rule for inland marine vessels. HC and NOx are grouped together because the emissions of these two pollutants are oppositely related. At higher combustion temperatures there is more NOX and less HC and vice versa.
7. The challenge for using LNG propulsion is the higher investment costs. A return on investment depends on ships size, fuel consumption, maintenance cost and relative bunker price of LNG to Refined oil. If the ship is affected by emission control requirements and often sails in ECAs, LNG may be a key solution. So far the switch to LNG is reliant on government support to be economically viable in China.
8. 28 % more energy per ton with LNG compared to MDO However, the density of LNG is just half of that of MDO The result of this is more storage space required for storing the same amount of Energy if you switch to LNG And also that for every ton of LNG bought you can theoretically travel 28% longer.
9. The challenge for using LNG propulsion is the higher investment costs. A return on investment depends on ships size, fuel consumption, maintenance cost and relative bunker price of LNG to Refined oil. If the ship is affected by emission control requirements and often sails in ECAs, LNG may be a key solution. So far the switch to LNG is reliant on government support to be economically viable in China. Chinese government have supported new construction of ships with LNG propulsion with around 800 RMB in 2015. Engine and fuel system for LNG propulsion can be 10-20% of total vessel cost. In the current tight economic environment for the maritime industry and unfavourable prices of LNG compared to oil it will be less likely to see a spike in implementation and conversion in the short term in China.
10. For a detailed cost benefit analysis and considerations of LNG for ship fuel for larger container vessels see Germanischer Lloyd report “Cost and Benefits of LNG as Ship Fuel for Container Vessels” from 2011
11. As of the beginning of 2015, LNG enters the Country through 12 major terminals and a small peaking facility, with 8 under construction and several other facilities in various stages of planning CNOOC is the pioneer Chinese NOC to run LNG import and regasification terminals in China and is currently involved or owner of 7 operational LNG receiving and regasification terminals. Chinas first floating storage and regasification unit (FSRU) was put in operation in Tianjin at the end of 2013. Their newest 4 mtpa receiving terminal in Shenzhen-Diefu was scheduled to be completed during 2015, construction was slowed due to lowered profitability and competition with inland sources. New terminals under construction in Yuedong/Jieyang and Fujian with scheduled online dates in 2017 and 2016 respectively. CNPC is the second largest national player in LNG receiving terminals. They have 3 operational terminals with planned expansion of capacity, and one newbuild under construction. Sinopec entered China’s LNG market by starting up their LNG import in Qingdao in 2014 and is also represented in Guangxi province, and has a planned terminal in Tianjin.
12. The cost of the LNG fuel will be higher than LNG import price due to need of building new infrastructure for bunkering or truck loading and handling of smaller volumes. Truck to ship option has been used extensively in china already, Port to ship is also available, but usually needs a long processing time for verification. And few vessels are in need of the sort of high volume transfer, so most are small scale tanks. Then the recent step has been to develop the bunkering barge concept. A pilot project has been finished and regulations made. Thus more bunkering barges and pontoons of similar structure can rapidly be built.  
13. Bunkering of Imported LNG   -Bunkering close to import site from land station, pipes (PTS). -Trucks or barges bunkering from import site (TTS). -FSRU or land based terminals are available sources. -Imported LNG could be filled into smaller river LNG carriers that may be used for bunkering other vessels (STS). Bunkering of Domestic LNG Source   -From existing satellite LNG liquefaction site from pipe feed gas (PTS). -Distributed with trucks to remote bunkering facility (TTS). -From central LNG liquefaction plant and transported with trucks directly to ship or local station (TTS).
14. Initial plans presented by CNPC, most of construction and plans now put on hold, Loosing money on investment after construction as the prices have fallen steeply on LNG and ships continue to use Oil based fuels. Few of the planned bunker stations (yellow flag) have been built.
15. The government is encouraging LNG investments by private companies and providing subsidies to NOC investment. Currently private Chinese energy companies such as ENN energy holdings limited, ChangBai Group and GuangHui Energy are investing in LNG infrastructure. ENN is building natural gas supply chains in China and bunkering stations for LNG. ENN was the first Chinese private company to operate an LNG terminal. Close to Ningbo, on Zhoushan Island ENN is currently building a land based LNG import terminal with bunkering facilities planned to import 3 mtpa in by 2018. Changbai is planning to construct a LNG facility west of Shanghai in Jiangyin. Guanghui plans to invest 2 billion yuan in a LNG distribution station in Nantong Port, upriver from the Yangtze delta [14]. Due to lack of regulation and complexity of approval of land based bunker stations for LGN, the floating LNG pontoon solution has become popular. The tanks of LNG are in most cases less than 300 m3 in volume due to special requirements for larger tanks. Larger tanks will need special safety studies and will thus become a more expensive and complicated project. Wuhan is seen as a potential future hub for LNG distribution as Wuhan port is in the middle of China and on the Yangtze River.