The impact of LNG on maritime China

China is steadily increasing its focus on reducing pollution in general, particularly in ports and coastal regions. The goal is a cleaner, greener fleet, and LNG is seen as an important part of the solution.

As the world works to clean up it skies and oceans, use of LNG in land-based and marine applications is on the rise. LNG, though not carbon neutral, is a cleaner alternative to other carbon energy sources such as coal or diesel.

  • Eason Xiong, Antti Ruohonen, Keyi Hu
  • Jun Chen, Keyi Hu, Rong Huang

Increased use of LNG is having a significant effect on the global maritime industry, with the number of ships supplying LNG to land-based consumers rising, and more vessels burning LNG as fuel to accommodate ever-stricter marine emissions requirements. And though China has only a limited stake in LNG shipbuilding at present, the industry is busy plotting a course for increased participation in the growing segment – which has been central to the discussions at the Generations roundtable discussion in Shanghai.

Moderator Wenhua Xing, Chairman of the Shanghai Society of Naval Architects & Ocean Engineers (SSNAME), started the discussion by highlighting the tightening environmental regulations on shipping in China: “Pollution caused by maritime traffic is getting a lot of attention from the government now, under the Blue Sky Protection Campaign, and the industry is beginning to respond. Last year, China State Shipbuilding Corporation (CSSC) signed a contract with Gasfin for a dual fuel container ship. Also, clean fuel is now required for ships trafficking the Yangtze and Pearl rivers.”

Xing noted that electric power solutions for marine use, while on the rise, are not yet viable on a large enough scale to meet these new environmental restrictions in China: “LNG can provide the alternative solution, but China does not have broad experience in LNG yet.” As an example, he observed that Hudong Zhonghua is the only shipbuilder with LNG experience.

Accommodating LNG

Jun Chen, General Manager at Hudong Zhonghua Shipbuilding (Group) Co. Ltd, elaborated: “Environmental protection policies get wide public support in China. We are gaining experience with LNG on land too, where demand is increasing. Power plants and households are increasingly using natural gas. In fact, China is the largest consumer of LNG in Asia.” This development has emerged over recent years, he said, but the trend is clear. “LNG produces less pollution than coal, and demand was greater than supply last winter for the first time. Emission restrictions will dictate increased use, and demand will grow.”

Only a small amount of LNG is transported in pipelines in China, he noted, with the bulk of transport being handled by sea. “With growing demand, the vessel infrastructure needs to be expanded to allow for large-scale usage. Present rules and regulations restrict marine LNG transport, especially on inland waterways and rivers. But demand will continue to grow for the next 10-15 years, so regulations need to be adjusted to accommodate this.”

Stepping up to meet new needs

Chen confirmed moderator Xing’s observation that construction of LNG vessels is limited in China. “We are the only yard, and that is not enough to meet demand the way it is increasing now.” He observed that there are only two LNG shipowners in China as well, China LNG and Shanghai LNG.

“China does not have enough trained crew to meet growing demand. Right now, we are dependent on hiring foreign tonnage, and foreign crew,” said Chen.

Addressing the issue of how Chinese yards can compete with other builders with more experience, Chen said: “I believe we need to look at the whole picture, to consider vessel types, contracts, and operations. Higher investments are required for LNG vessels than for standard vessel types. This has an impact on decisions to build and operate. With LNG, quality is the most important for operations, not price. With an operating cycle of up to 35 or even 40 years, standards are higher than for bulk ships. There are important quality issues related to maintenance and operation.”

This would mean raising standards in China, he maintained, though he believes the quality of construction is already good and will get better. “This is recognized in U.S. and Japan. In fact, quality in China is in many areas already higher than in Korea. We have equipment and ships at the highest international level, using international equipment suppliers, including ABB. But we rely on other suppliers for raw materials such as insulation. These must be imported from Europe or Korea, and this can cause delays. Delivery time is critical, and we need domestic feeder markets for materials to keep to schedules. This may actually end up being more important than equipment supply.”

Finding a cleaner way together

From the Jiangnan Shipbuilding Co., Ltd, Chief Engineer Keyi Hu remarked that the expanding geographical market for LNG in China will increase demand for small LNG feeders trafficking inland waterways. “LNG is primarily used to fire power plants and for local domestic purposes today, but it is increasingly attractive as marine fuel due to environmental requirements.”

He noted that there is already considerable transport of LNG by river in China, but that there is room for improvement. “The infrastructure is not perfect, but the basic regulations for smaller ships are in place. Trucks provide strong competition, though. We are investigating containerized tanks for flexible transportation, but we need to extend the infrastructure inland, beyond the coastal areas, both for transport and use of LNG as fuel.”

Accommodating these needs and reaching a higher level of quality will require joint efforts across the industry, Hu admonished, citing his own company’s commitment to expanded cooperation: “Jiangnan will cooperate with Hudong to build nine containerships with dual fuel. China also needs its own design for large LNG carriers. It is too expensive to obtain patent rights from Korea, and the verification process involves some risk for the shipyard.” To achieve this, he concluded, the classification societies and the shipowners will need to work together to overcome technical barriers. “We all need to work together to reduce risk, improve the building process and lower costs.”

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