Momentum is building for liquefied natural gas to be used to power bulk carriers and other large export ships operating between China and Australia, with a cadre of global businesses joining an initiative to not only reduce emissions but also to boost Australia’s energy security.
The initiative, known as the Green Corridor, is being advocated by the LNG Marine Fuel Institute, a Perth-based not-for-profit organisation established to promote the use of LNG as a marine fuel.
LNG MFI is led by a high-powered board of directors, including Jackson McDonald chairman of partners Richard Sandover, Woodside Energy chief operating officer Mike Utsler, Baker Hughes a GE Company Australia chief executive Mary Hackett, former foreign minister Stephen Smith, Mitsubishi Australia deputy managing director Hero Gohda and Altegra Property Group chief executive Tony Brooks.
Participants in the Green Corridor include some of the world’s biggest exporters and shipbuilders, including iron ore miners Fortescue Metals Group, BHP and Rio Tinto, major ship owners MOL and U-Ming, gas exporter Woodside Energy, shipbuilders Mitsui O.S.K Lines and DNV, as well as the Shanghai Merchant Ship Design and Research Institute.
The project is focused on developing LNG-fuelling infrastructure across the iron ore and coal trade route between northern Australia and ports in China.
A design for an LNG-powered 210,000-tonne Newcastlemax bulk carrier was unveiled in June, providing a new fuel option for one of the most widely used vessels worldwide.
Design work for another ship to be powered by LNG, known as a Very Large Ore Carrier, is continuing and expected to be completed by around March next year.
Following completion of that design, the partners will work together to determine how to commercialise the technology, with the Industrial and Commercial Bank of China and China Merchant Bank invited to participate in the process.
The program is designed to leverage a pollution-reducing revolution occurring in the international shipping industry, with all ships globally required to comply with a 0.5 per cent limit on the sulphur content of fuel, down from current regulations, which allow 3.5 per cent.
Each year, global shipping operations emit more than 1 billion tonnes of carbon dioxide into the atmosphere, equating to 2.2 per cent of emissions.
LNG MFI chief executive Walter Purio said those emissions, made up of sulphur oxides, nitrogen oxides, carbon dioxide and particulates, were causing significant environmental and health issues around the world.
“A recent Chinese study found that at least 24,000 premature deaths per year in East Asia were related to air pollution from ships,” Captain Purio told Australia China Business Review.
“These deaths were mostly caused by cancers, heart and lung diseases.
“These diseases not only impact on health and social welfare, but also limit resources in an already strained public health system.”
At the current sulphur content regulations of 3.5 per cent, Captain Purio said just one large container ship operating at full speed burning heavy fuel oil emits more sulphur in a 24-hour period than 58 million cars do in a year.
As well as new ship designs, the Green Corridor also advocates the construction of LNG bunkering facilities across the trade routes, effectively establishing a virtual LNG pipeline.
Captain Purio, who has spent more than 40 years working in the global shipping industry, said a virtual pipeline in Australia would help address the country’s energy security issues, which have come to the fore in recent months with supply shortfalls forecast across much of the eastern seaboard.
"We are constrained by our security of oil supply, we import over 90 per cent of our transport fuels," Captain Purio said.
“Our reserve over inventory of oil is woeful – the Organisation for Economic Co-Operation and Development recommends 90 days’ supply – we have less than 10.
“We’re in bad shape as Australia in that regard.
“If there is a geopolitical issue that stops supply, that is a problem for us, if there is an environmental event, that would also affect us.”
Captain Purio said the push for lower emissions in global shipping had significant precedent, with emission control areas already in place in north and south America, northern Europe, the Baltics and the Caribbean.
In those regions, ships are required to burn fuels of less than 0.1 per cent sulphur, meaning vessels need to be powered by dual-fuel engines or by LNG.
"As a ships guy, the problem with dual fuel is you have different operating temperatures, you've got different operating pressures, different lube oils, more stress on the engine, there's more things that can go wrong because you're changing fuels," Captain Purio said.
“You’re changing the complexion of the fuel that you’re burning to get the power that you need.”
Studies in the United States show the cost of implementing the emissions control areas on the country’s east coast were around $US3.2 billion ($4.2 billion) per year, however, the savings on treating heart and respiratory ailments in US hospitals were $US111 billion $(145.9 billion) annually.
Captain Purio urged Chinese authorities to adopt similar measures, a move which he said would create a catalytic effect.
"If they did that, the rest of the world would fall in line and it would drive LNG as a clean fuel," he said.
“We all want to move into renewables, but for the shipping world, we’re probably talking 40 to 50 years before that actually happens.
“But right now, one of the best things we can do as our fleet refreshes is to go to gas.
“That would make a big difference for China, it would make a big difference for Asia, and it would make a big difference all over the world.”