Dorian’s studies on upgrading VLGC engines to dual fuel point to high costs
But dual fuel technology continues to improve – and costs are falling
BW LPG this week launched trials of world’s first VLGC fueled by LPG
Upgrading the main engines of very large gas carriers to dual fuel technology using LPG to reduce sulfur emissions would cost more than three times that of retrofitting scrubbers, a senior Dorian LPG official said in the week to Oct. 23.
Research and preliminary engineering studies by the company to upgrade the main engines of up to 10 of its VLGCs to dual fuel technology showed “significantly higher” capital expenditure than deemed necessary to justify the investment, the company’s chief financial officer Ted Young said.
“Capital expenditure for dual fuel LPG upgrade is generally quoted at over three times that of a scrubber retrofit capex,” he said.
In response to S&P Global Platts queries, Young said the company was not currently undertaking any LPG retrofits or conversions to dual fuel technology.
“Ten of our ships are equipped with scrubbers and we have commitments for another two, which we expect to install in the coming months,” he said.
All 12 are ECO vessels, so removing those and the company’s three modern ships that are not equipped with reinforced deck tanks “leaves the possibility of LPG retrofits for up to seven vessels,” he said.
“The technology continues to improve and come down in price, and remember that the first commercially viable prototype was only made available in late 2018. We are anticipating the first upgraded LPG engine in the world to go to sea during the current Q4 and the first dual fuel LPG newbuilding vessels in 2021,” he said, referring to the LPG shipping industry in general.
Dorian LPG’s fleet of 22 vessels is comprised of nineteen 84,000 cu m ECO-VLGCs and three 82,000 cu m VLGCs. Young said US-headquartered company was in regular contact with yards and engine manufacturers to keep abreast of latest developments in the roll-out of LPG engines.
MARINE FUEL OPTIONS
The International Maritime Organization in April 2018 unveiled its strategy on greenhouse gas emissions, aiming to reduce the shipping industry’s total GHG emissions by at least half from 2008 levels by 2050, and to cut CO2 emissions per transport work by at least 40% by 2030.
“All dual fuel engine vessels could benefit from a scrubber when operating in fuel oil mode, instead of consuming VLSFO with 0.5% sulfur content,” Young said.
“Environmental emissions reductions are the most important considerations both for scrubber vessels and dual fuel LPG engines in preparing their fleet for the IMO emissions reduction trajectory. However, our fleet is currently ahead of the Poseidon Principles AER curve for VLGCs, which we believe is an important fact in looking environmental focus,” he said.
The Poseidon Principles rely on the annual efficiency ratio, or AER, as the carbon intensity metric. To assess a vessel’s climate alignment, its annual carbon intensity is compared with the decarbonization trajectory for ship type and size class.
Evaluating marine fuel options, Dorian said the readily available and lower-priced 3.5% HSFO only requires scrubbers on ships and does not need operational changes, though will incur capital expenditure for vessel modifications and is subject to new marine applications on vessels and compliance rules.
The 0.1% and 0.5% low sulfur fuel oil will require tank cleaning, which is not readily available and has no ISO standard, but is operationally compliant and does not incur capital expenditure or require vessel modifications.
Alternatives such as LNG, LPG and ethane, require newbuilding, or can be used with engine retrofitting for dual fuel. While an available, compliant and greener solution with lower greenhouse gases and nitrous oxides, they are not easy to source, have higher installation costs and face re-supply issues and storage considerations, according to Dorian.
Another shipping major, BW LPG, this week launched week-long sea and gas trials of the BW Gemini, which has been retrofitted with dual-fuel propulsion technology, making it the world’s first VLGC to be fueled by LPG.
The company, associated with shipping giant BW Group, said the retrofitting process took 60 days and was estimated to have emitted 2,060 mt of carbon dioxide, or around 97% less than ordering a newbuild with similar technology.
BW Gemini is the first of 12 VLGCs the company has committed to retrofit with LPG dual-fuel propulsion engines at China’s Yiu Lian Dockyard in Shenzhen, in a program expected to be completed by end-2021. BW Leo and BW Libra are also currently at Yiu Lian dockyard. The retrofitting cost is about $9 million per vessel, the company said.
BW LPG said it has taken a longer-term perspective to investing in R&D to advance the technology needed for LPG propulsion. It contends that while requiring significant upfront investment, the returns are positive financially and environmentally.
Compared with compliant fuel, LPG propulsion cuts fuel consumption by 10%, sulfur dioxide by 99%, particulate matter by 90%, carbon dioxide 15% and nitrogen oxide 10%, BW LPG said, adding it also saves from lower fuel consumption and bunkering logistical costs, while leveraging the expected LPG and compliant fuels price differential.
Pressurized LPG carrier owner and operator Epic Gas, in which BW Group took a majority share in 2019, uses traditional low-sulfur fuels, leading to a year-on-year reduction of 77% in sulfur oxide emissions and full IMO 2020 compliance, its CEO Charles Maltby said.
Maltby told Platts that following a review that Epic Gas found fitting scrubbers “makes limited economic sense at this point in time” as their fleet makes frequent port calls in regions with 0.1% requirements, reducing sea time and fuel consumption, as well as burning less fuel at sea.
“But… as we turn to beyond 2030 and towards 2050, that dual fuel LPG is of interest to us for the future,” he said.