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Is Australia Missing Out From Its Lack Of SSLNG Infrastructure?

It’s no secret that BE&R are proponents of the important role that Small Scale LNG (SSLNG) has to play as transition fuel while the world moves towards a low-emissions future.

That’s why we were thrilled to be mentioned in parliament recently by Ian Goodenough MP, Federal Member for Moore, in a speech he made about the need for Australia to invest in LNG marine bunkering and SSLNG infrastructure at key ports around the country.

Here’s a small excerpt from his speech:

“My grievance relates to the lack of investment in marine bunkering infrastructure for liquefied natural gas at key ports around Australia for the supply of fuel for use by ships. The barriers preventing the transition of the maritime shipping industry from heavy fuel oil to LNG include a lack of appropriate infrastructure, such as bunkering facilities, and a lack of an appropriate policy framework.

Based on projections by Perth based consulting firm BE&R Consulting, which specialises in small-scale LNG and LNG bunkering projects, this potentially equates to a lost opportunity to create a new industry capable of generating revenue of $500 million to $1 billion per annum for the Australian economy.”

BE&R is grateful for Mr Goodenough’s assistance in raising this important issue. We thought we’d take this opportunity to delve further into the subject and explain why a lack of action now has the potential to cost the nation billions of dollars in lost revenue.

The Role of Shipping in World Economic Growth and Prosperity

With international shipping responsible for the carriage of around 90% of world trade, it’s fair to say that it’s the lifeblood of the world economy.[1] This is a situation that is not likely to change in the foreseeable future. Sea trade is growing at a rate of 3.2% per year and is predicted that 3.2 million tonnes of cargo will be shipped annually by 2050.[2]

Shipping continues to play an important role in lifting millions of people out of poverty by improving access to basic materials, goods and products. Maritime transport is fundamental to sustaining global economic growth and spreading prosperity, thus it fulfils a critical social as well as economic function.[3]

Being an island nation, Australia’s economy is heavily dependent on ports and shipping for our ongoing prosperity. As such, the role that shipping plays in contributing to climate change and other ecological damage is particularly relevant.

Shipping: A Clean Energy Opportunity

At present there are over 50,000 merchant ships trading internationally. It is estimated that the shipping may be responsible for up to 17% of the world’s CO2 emissions.[4] In addition, shipping is a major source of black carbon, microscopic black particles produced by the combustion of marine fuel, especially ships burning heavy fuel oil. 

Black Carbon contributes to heart and lung disease and is also a danger to the environment as it accounts for 21% of CO2-equivalent emissions from ships. [5] It is estimated that shipping could represent up to 10% of global greenhouse gas emissions by 2050.[6]

It’s also not only greenhouse gas emissions that are the issue with conventional shipping. The diesel and heavy fuel oil used by ships causes air pollution in the form of nitrogen oxides, sulphur oxides and particulate matter – all of which have detrimental health and environmental impacts.

IMO 2050 Strategy

Given the critical role that shipping plays in global economics, it’s vital that the negative environmental and health consequences are reduced as a matter of urgency. This is why the International Maritime Organisation (IMO) 2050 strategy has identified the need for the sector to reduce total annual GHG emissions by at least 50% by 2050 compared to 2008, while simultaneously pursuing efforts to phase them out entirely. [7] 

The strategy also includes a specific reference to “a pathway of CO2 emissions reduction consistent with the Paris Agreement temperature goals.” This represents a significant challenge for an industry as dispersed and unevenly regulated as international shipping.

As part of its overall strategy, the IMO has ruled that from 1 January 2020, marine sector emissions in international waters are to be slashed. The target is for the marine sector to reduce sulphur emissions by over 80% by switching to lower sulphur fuels. 

The previous maximum fuel oil sulphur limit of 3.5 weight percent (wt%) has been reduced to 0.5 wt%. The IMO 2020 regulations will see the largest reduction in the sulphur content of a transportation fuel undertaken at one time. [8]

The Role of LNG as a Transition Fuel

While the future of shipping is undoubtedly fossil-fuel-free, LNG has an important role to play in keeping up with global demand while significantly reducing the health and environmental damage caused by the industry.

By replacing higher-emissions fuels, LNG has the potential to reduce greenhouse gas emissions by up to 30% on a life cycle basis while also virtually eliminating emissions of sulphur dioxide and fine particulate matter. It also dramatically reduces the emission of nitrous oxide.[9]

There are no waste disposal or discharge issues associated with the use of LNG in contrast to exhaust gas treatment systems (also known as scrubbers) used by shipping companies which continue to burn high sulphur heavy fuel oil.  LNG also poses no pollution risk to ocean environments through fuel spills, in contrast to traditional marine fuels. [10]

The Case for LNG Bunkering in Australia

As Mr Goodenough pointed out in his speech to the Federal Parliament, the global LNG bunkering market is expected to grow from one million tonnes per annum in 2020 to 15 million tonnes per annum by 2030. There is the potential for Australia’s LNG bunkering market to grow from zero to greater than two million tonnes per annum over the next 10 to 15 years.

The irony of the situation is that while we have access to abundant reserves of natural gas, the Australian economy is currently more than 80% reliant on imported transport fuel oils.

Mr Goodenough made the argument that this reliance on imported fuels is a “concerning and unsustainable model that undermines Australia’s energy security. By adopting LNG as a marine fuel, Australia will provide the maritime industry with an alternative, sustainable and cost-effective fuel source. The use of LNG as a marine fuel provides a step towards Australia achieving energy independence.”

Can We Afford Not to Act?

BE&R agrees with Mr Goodenough’s opinion that reducing Australia’s reliance on imported fuels is of great strategic benefit, and that LNG offers an economically viable solution to power the shipping industry as it moves towards a carbon-free future.

However, the right policy framework and a significant level of investment in the necessary facilities and infrastructure is required to build our ability to change with the shifting patterns of global energy consumption.

Failure to act has the potential to cost the nation billions of dollars, both in unnecessary transport fuel imports and lost LNG bunkering revenue from the shipping industry.

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