SPECIAL REPORT: LNG shipping world changing; gas carriers expanding rapidly
The LNG shipping business is changing rapidly.
As recently as 2004, its history may be briefly described as follows: It has evolved over the past 4 or 5 decades. A few owners, mainly fully integrated operations, have been the core of LNG shipping history and developed this highly specialized business steadily in close cooperation with charterers.
LNG vessels have mainly been operated in fixed trades and enjoyed attractive long-term contracts. Development of new technical solutions has been limited.
The competence of those involved in LNG shipping has been indisputable. LNG carriers typically exhibit good technical and operational standards. Vessels’ safety records have so far been among the best in the shipping industry.
After about 43,000 commercial shipments of LNG or more than 110 million of loaded miles, no accidents with major release of cargo have ever occurred. There have been, however, enough minor incidents to suggest that statistically a major mishap could occur.
Despite the industry’s frequent references to its exceptionally good safety record, a single major accident could easily derail confidence in the business or at least damage public confidence.
This safety record has thus far prevented LNG carriers being directly subjected to the “regulation by disaster” principle, unlike the oil tanker industry that has seen new regulations after accidents involving the Amoco Cadiz (1978), Exxon Valdez (1989), Sea Empress (1996), Erika (1999), and Prestige (2002), just to mention a few.
Now, however, the LNG shipping scene is changing rapidly.
As of January 2007, 220 LNG carriers were operating and about 130 were on order, corresponding to 59 % of the existing fleet, based on number of ships.
The cargo-carrying capacity of the world’s LNG fleet will more than double within a few years. The size of the vessels has suddenly leapt to around 266,000 cu m, which are the biggest ones on order currently, from around 145,000 cu m, which used to be the standard size only a couple of years ago.
Construction of the first LNG carriers as we know them today started less than 40 years ago. And so far scrapping of LNG carriers is practically nonexistent.
Recent, current developments
New technical solutions are being applied to LNG carriers, although most of these solutions are proven technology. To the present, for example, vessels have been almost exclusively powered by steam propulsion; most carriers currently on order will employ dual fuel, diesel-electric (DFDE) propulsion.
Megacarriers (>200,000 cu m) on order will employ slow-speed diesel engines running on heavy fuel oil and feature reliquefaction plants aboard to handle cargo boil-off. Twin propeller arrangement is the preferred alternative for these megacarriers. There may be different motives for these changes, but higher thermal efficiency and insufficient availability of competent steam engineers are among them.
Gas-turbine propulsion is an interesting alternative, but to date only a single carrier 29,000 cu m has been ordered with this technology. This vessel was delivered in 1974 and was later converted to diesel-engine propulsion.
For any LNG carrier, design life expectancy of up to 40 years has become an industry standard. This has created a need for higher material-fatigue standards, increased corrosion margins, and more comprehensive corrosion protection and maintenance strategies.
New trades in less-benign waters that include cold climate and icy conditions, as in the North Atlantic, Barents Sea, and the Sakhalin area, are opening for LNG shipping.
Rougher seas and larger cargo tanks combined with membrane cargo-containment systems are increasing the focus on liquid motions and sloshing forces inside cargo tanks in order to prevent damage.
And now an LNG spot market is emerging and multiport discharge is expected to develop. Markets for ship-to-ship transfer (STS), floating storage regas units, and floating terminals are also emerging. In late 2006 in the Gulf of Mexico, Excelerate Energy demonstrated the feasibility of STS and performed the first commercial STS off Teesside, UK, while commissioning its second offshore LNG terminal.
Many new owners, ship managers, charterers, port and flag authorities, shipbuilding yards, docking-yards, terminals and operators, superintendents, officers and crew have entered the LNG shipping business in only a few years. There is now a general shortage of most categories of experienced LNG personnel. The competition is increasing for qualified crew, with significant upward pressure on cost as one result. At the same time, charter rates have been dropping during the last few years.
Competition within the mainstream of the LNG carriers is hardening as a result. Pressure on cost and lower charter rates compared to previous years will require discipline by vessel operators to maintain industry’s established safety level.
LNG shipping is different
Despite many similarities with other shipping segments, oil and LPG in particular, LNG shipping has specialties of its own. Fundamental differences exist from early specification stages of new LNG carriers through construction and operations.
Most owners hold a long-term view for their LNG operations, based on charter contracts of typically 15-20 years, and operational life spans of up to 40 years for their vessels. Each LNG carrier is in most cases an essential and integrated part of a transportation chain requiring continuous flow of LNG. Should anything go wrong with the ship and cause serious delay or off-hire, it may be difficult to find and employ other ships as substitutes within a reasonable time frame, mainly due to compatibility issues and availability of ships. In the worst case, the LNG production plant or the receiving terminal and the related supply and demand chains may be affected.
This differs from oil shipping in which several vessels operate in the spot market and are normally available around the world on short notice. Interruptions of the LNG supply chain may therefore have dramatic practical and economic consequences.
For this shipping segment, where standards and expectations are high, there may be a higher and continuous need for brand management (i.e., building and protecting a reputation for success in the market) particularly among owners, not least for newcomers who have long-term ambitions and want to strengthen their market positions but also charterers that may want to protect themselves against negative publicity.
It was said, for example, that Exxon lost revenue in the range of $9 billion after the Valdez accident because consumers did not want to buy from a company that had caused such damage to the environment.
Organization, competence
Given vessel management’s responsibility to ensure efficient and safe operational practices aboard, what follows describes an increasing challenge to the continued success of LNG shipping.
Behind incidents and accidents aboard any LNG carrier frequently lies a strong human element. Eighty percent is the acknowledged figure frequently to indicate the share of maritime accidents caused by human error.
The human element aboard vessels includes:
- Competence of and decisions (including budgets) made by those who define the content of the newbuilding specification.
- Company practice (including budgets) regarding maintenance policy and spare parts.
- Management procedures, including interface between a ship and its owner’s land-based organization.
- Manning policy, including number of people aboard and competence management.
- Operational routines aboard and ashore and the interface between the two, including emergency preparedness procedures and training.
It is important to recognize that competence and training issues also apply to shore staff and that how a vessel is operated reflects to some extent the shore organization.
The International Maritime Organization’s International Safety Management (ISM) code certification will generally cover many of these subjects. It is, however, important to note that ISM is a general code, developed and implemented as a minimum standard for all applicable shipping segments.
Owners and ship managers involved in LNG shipping are strongly advised to go beyond minimum requirements and consider in detail what they need for long-term success, keeping 40 years’ vessel-life expectancy and high demand for uninterrupted service, reliability, and safety in mind.
Availability of LNG competence is now receiving increasing attention and frequently mentioned as a bottleneck for the LNG industry. The main focus is on shipboard people, even if the increasing demand is general for the whole LNG shipping industry. Given that a ship is carefully designed, built, and maintained, statistical evidence shows that the weakest link in the chain is human error by crew and pilots; this could be assumed to be equally applicable to LNG carriers.
Rapid expansion in any sector of the industry implies poor quality control, lack of supervision due to shortage of experienced teachers and trainers, shortage of qualified labor, and possible falling standards of services.
Additionally as a result of the shortage, increasing wages for experienced LNG personnel force owners to be prepared to pay more now to secure the services of competent staff.
It is claimed that even if the number of LNG carriers remained constant with no newbuilds, the industry would still have to struggle to replace seafarers retiring or leaving the sea. The International Association of Maritime Universities has estimated that almost 1,500 senior officers and nearly 750 senior engineers will be required by 2008.
The lack of qualified crew is not going to stop newbuilds from sailing. What are the consequences for the safety record of the industry? There is no quick fix here and the situation requires serious management attention and specific actions from all parties involved.
Some people seem to believe that seagoing personnel fully trained in compliance with Standards of Training Certification and Watch keeping for Seafarers (STCW95) are fully qualified for LNG ships.
It is important to remember that STCW95 sets standards for classroom cargo handling training for all gas carriers, not differentiating between LPG and LNG carriers. The basic formal training must be extended by further on-the-job aboard LNG carriers. It is up to the owner to decide its additional requirements for training beyond what is formally required for the different ranks.
Again the high demands the industry places on both availability and safety characteristic demands of LNG carriers must be kept in mind.
DNV Standard of Competence SEASKILL includes standards for LNG competence for some categories of onboard personnel and the Society of International Gas Tanker and Terminal Operators Ltd. (SIGTTO) has developed a complete set of standards for LNG operations. DNV is now as an independent third party, certifying training courses and simulators according to SIGTTO standards.
One good opportunity for training and competence building which should not be underestimated is the newbuild process, all the way from owners’ approval of plans and specifications, throughout the construction period, and final testing and commissioning in connection with delivery. Active participation here is a practical hands-on approach that represents a lost opportunity if subcontracted to others.
It should also be emphasized that the need for LNG competence and updating of such shore-based personnel as superintendents and other technical staff is also very important. Owners should not underestimate this and allocate funds accordingly for necessary training of this category of personnel as well.
Alternative propulsion
Almost all LNG carriers delivered until recently have been powered by steam-turbine propulsion. They use boil-off from the liquid cargo as fuel in combination with bunker oil.
Very high reliability and low vibration levels together with a convenient way of handling boil-off gas are the main reasons for the widespread use of this arrangement.
At present, however, most LNG carriers are on order with diesel electric propulsion, while the megacarriers on order all have slow-speed diesel engines based on heavy fuel oil as the only fuel. This arrangement is supplemented by onboard reliquefaction plants to take care of cargo boil-off.
Reasons behind this development include the following:
- The efficiency of a traditional steam propulsion is the lowest (~30%) among the alternatives.
- A service speed of 19-20 knots for LNG carriers with more than 200,000 cu m cargo capacity will require more power than is available from single steam turbine installations (>61,000 kw).
- The supply of experienced steam engineers is insufficient.
Economics, which includes thermal efficiency (Fig. 1), is decisive for what is the preferred alternative. For LNG carriers, more than for other vessels, it is important to have a long-term view.
With increasing focus on the environment and emissions, the shipping industry in general will also be subject to closer scrutiny. It is increasingly going to be considered a target for legislators looking for ways to cut pollution levels. European governments will most likely implement legislation for a sustainable shipping policy in the years to come, reflecting a new proposed integrated maritime EU policy. In this connection CO2, NOx, and SOx emission levels will be targeted.
LNG carriers ordered today may be technically able to trade until 2040 and beyond. But will they be accepted to remain in business for the next 3 decades as local and international environmental legislation develops at an accelerated pace? If or when carbon trading is implemented, associated costs in addition to increasing fuel bill may also become important input of the overall economical equation and probably influence the choice of propulsion alternative.
Shipowners ordering LNG carriers today should study likely scenarios as a basis for their choice of propulsion and other relevant particulars. Future considerations may be different from those today, particularly if emissions are included more specifically.
As Table 1 shows, the steam-turbine alternative, when operating in dual-fuel mode (LNG + heavy fuel oil) is clearly the least favorable from the sulfides and CO2 emissions point of view. If propulsion depends more or less exclusively on LNG, emissions are reduced.
LNG carriers, even the big ones, are all designed with a loaded draft of about 12 m. One consequence is that they are growing wider as the cargo carrying capacity increases, i.e. beams of ~43.5 m, 50 m, 55 m for 140,000 cu m, 210,000 cu m, and 260,000 cu m cargo capacities, respectively.
A widening of the aft body hull form and a wish to maintain the full cargo tank width of the aft cargo tank have meant that certain hydrodynamic issues have to be considered, particularly the effect of water flow round the aft body to the propeller shaft.
Influenced by increased environmental awareness, small-scale LNG distribution is emerging. Small LNG carriers are being developed to distribute LNG locally, as fuel to other types of ships, for example, such as offshore supply vessels and coastal passenger ferries on the west coast of Norway (Fig. 2).
One example is the LNG-fueled ferry Glutra (96 cars), the first LNG-fueled ferry in the world, which has been in service since January 2001 (Fig. 3). NOx emissions have been reduced by 90% and CO2 by about 20% compared to fuel oil. The operational experience is very good, and five more LNG-fueled passenger-car ferries are now being delivered.
Also, two more LNG-fueled offshore supply vessels have been operating successfully in the North Sea during the last 3-4 years, and two more have been ordered.
More such LNG-fueled vessels are likely to be ordered in time. Local infrastructure for supply of LNG is a prerequisite for such vessels.
Small-scale LNG will likely be developed further, and LNG fuel for different ship types may become a more common alternative, for different types of ships, as availability of LNG is developed and emissions are included in the basis for decision.
Structural fatigue
Why is fatigue an increasingly important issue for LNG carriers?
Generally, the result of fatigue is cracking. Cracks may or may not be serious to the extent that they require immediate attention. Some elements of current development of LNG shipping emphasize the importance of a high fatigue standard:
- Longevity. The design life expectancy of LNG carriers now generally seems to be 40 years for worldwide trade, while previous practice was 25 years. Forty years appear to be closer to current realistic expectations.
- Rough weather trades. Existing LNG routes have been pretty much limited to relatively benign waters. Now North Atlantic trades are increasing, where fatigue life generally is about half, compared with worldwide trade.
- Increasing ship size. As ships grow in size, use of high tensile steel (HTS) tends to increase. As the stress levels increase, there may be an increasing risk of fatigue, as fatigue resistance does not increase for HTS.
The following points may be useful when considering fatigue life:
- Fatigue life for vessels operating in North Atlantic trade is about half that of those employed in a worldwide trade.
- Fatigue life of steel structures in corrosive environments (exposed to seawater, for example) can be roughly reduced to half when compared to steel that is protected. This is one reason that coating standards and coating maintenance in ballast tanks are such important issues.
- The quality of workmanship during construction is essential for vessel fatigue life. A good design and long calculated fatigue life may be severely undermined by poor workmanship. It is essential that class and owner representatives pay proper attention to workmanship throughout construction.
Liquid motion in tanks
In LNG carriers, and particularly membrane carriers, not only the response of the hull structure but also that of the cargo containment system must be taken in to account. DNV uses a comparative approach in which the highest pressure obtained from the model tests within filling levels comparable to those from successful sailing experience, becomes a reference for the maximum allowable pressure.
For membrane-containment systems, the complete insulation system is then modeled and results obtained from the model tests used as input for the loading of the membrane system. The capacity of the membrane systems to sustain the maximum expected loads can then be confirmed.
There are currently a number of uncertainties in the analysis when set against the reality of liquid motions in LNG prismatic cargo tanks. These uncertainties include the compressibility of the entrapped gas, the actual loading on the containment system (whether point or distributed load), and the extent to which actual impacts with the tank surfaces are cushioned.
DNV has investigated the use of different liquid-motion (computational fluid dynamics) analysis software, both 2D and 3D, to gain a more accurate picture of what is actually occurring. In order for DNV to have full confidence in such software, it is first subjected to qualification testing. It has become clear that the reliability of the results from both 2D and particularly 3D software is limited.
Another major uncertainty relates to the scaling laws that are applied to the model test results to develop equivalent full-size loads. For direct assessment of impacts, DNV conservatively uses Froude Scaling in absence of better knowledge regarding the scaling laws that apply to the different phenomena that occur during liquid motion and sloshing impacts of LNG.
DNV has initiated further research into the scaling problem in order to understand this important but difficult issue.
DNV has conducted in-house sloshing tests with a small (model scale 1:70) and large tank (1:20). Identical motion tests were done with both tanks with variations of ullage pressure and ullage gas density. The study indicated that Froude Scaling is currently the most appropriate scaling law and does not in fact provide large over-predictions, as had been suggested previously.
In order to understand applicable scaling laws, DNV and industry partners have prepared the necessary technology and are now in the process of instrumenting an LNG carrier under construction and obtaining full-scale measurements of pressures exerted by LNG motion in prismatic cargo tanks. This will provide scaling factors in measured external conditions that can then be simulated at model scale to obtain scaling factors at the filling levels measured.
Although the exact contributors to the measured loads at full scale will be difficult to differentiate at certain filling levels and in certain conditions, it will nonetheless provide scaling factors that incorporate these elements and remove much of the current uncertainty.
The authors
Jan Koren ([email protected]) is business director-tankers for DNV Maritime. He has been with DNV for 32 years in various positions, including ship surveyor and spent more than 10 years in Japan and Singapore in different management positions. He holds a masters in marine engineering from the Technical University of Norway.
Per Wiggo Richardsen ([email protected]) is media relations manager and press spokesman for DNV Maritime. He joined DNV in 1999 and has held several positions at DNV headquarters and DNV Houston. Before that he held different positions within Norsk Hydro’s communications department. He holds a masters in computer science from the University of Tromsoe, Norway.
