Industry group SEALNG finds significant benefits to a business choosing an LNG retrofit over fuelling with VLSFO or retrofitting an HFO vessel with scrubbers, based on a 10-year payback period.
SEALNG’s analysis looks at the investment performance of three 2-stroke propulsion options. The business case compares a 300,000dwt VLCC trading from the Arabian Gulf to China. The 11,700 nautical mile round trip from Ras Tanura to Ningbo was chosen to represent the major energy trade corridor from the Middle East to China.
The relative investment performances of three 2-stroke environmentally compliant propulsion alternatives are evaluated to compare the most cost-effective options available to the shipowners:
The analysis concluded that retrofitting LNG as a marine fuel potentially delivers strong investment returns over the remaining 10-year trading life of the VLCC, with returns dependent upon the relative fuel prices of LNG, HFO, and VLSFO.
The CAPEX for a turnkey project to retrofit a 2-stroke LNG engine was calculated to be US$30.3 million. This included modifications to the 2-stroke engine for LNG fuel, necessary LNG delivery systems, and a 4,600m3 LNG tank to provide 14,000 nm range at 15% sea margin for market /laden speeds.
Adopting LNG fuel on a VLCC improves CII ratings substantially, giving and maintaining a one to two grade improvement over alternatives throughout the remaining lifetime of the vessel. The LNG vessel retains a superior B grade until mid-2027, then a passing C grade until year 2032 when it slips into D, matching the tanker historical retirement age of 20 years. The potential use of bioLNG as a drop-in blend could increase compliance further.
In contrast, with the use of VLSFO, the vessel falls from C to D in 2025 and to E in 2030. With the use of HFO and a scrubber, the vessel falls to D in 2023.
The gap in ratings between LNG and HFO scrubber or VLSFO retrofit options provides a commercial chartering financial advantage to owners who choose the LNG pathway, says SEALNG.
For owners, modernising a ship through retrofit can be carried out more quickly than building a new vessel. New vessels typically take around two years to build. Accessing and scheduling work with a retrofit yard is often easier, as they have more capacity than newbuild yards. Retrofitting can also be arranged as part of a scheduled drydock call for a VLCC, meaning out of service time is reduced across the entire project.
Adi Aggarwal, General Manager at SEALNG, said: “Retrofitting vessels provides a faster and cheaper route to the lower emission fuels that are essential to reduce shipping emissions. As alternative fuels and regulations progress, it’s important that we re-evaluate previous investments. LNG retrofits now have a strong business case.”
He says LNG is a safe, mature, commercially viable marine fuel offering superior emissions performance, significant Greenhouse Gas (GHG) reduction benefits and a pragmatic pathway to a zero-emissions shipping industry. With drop in bio-LNG or synthetic LNG, the LNG-fuelled vessels are future proofed, enabling compliance with GHG reduction targets as the shipping industry moves towards its 2050 emissions goal.
