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UMAS blasts LNG project spending as 'high-level failure in EU planning'

Says $500m spent on LNG projects in the EU 'will have no significant climate benefits at best, and could potentially increase GHG emissions'.



Image credit: Pixabay CC0


Updated on 26 Jun 2018 12:56 GMT

University Maritime Advisory Services (UMAS) claims that $500 million spent on LNG projects in the marine sector using 50 percent partnership funding from the EU "will have no significant climate benefits at best, and could potentially increase greenhouse gas emissions from shipping".

The UK-based advisory service on Friday released a report entitled 'LNG as a marine fuel in the EU', commissioned by Transport & Environment, which assesses the public and private financial investments by EU member states into LNG port/bunkering infrastructure and looks at the cost/benefit of investing in LNG bunkering infrastructure from a greenhouse gas (GHG) abatement perspective.

In a summary of its findings, UMAS observes that the EU's investment in LNG projects makes LNG incapable of achieving the reductions required under the recently adopted International Maritime Organisation (IMO) strategy on reducing GHG emissions from ships.

UMAS suggests that there has been "a high-level failure in EU planning, in which short-term improvements to air pollution via replacing heavy fuel oil consumption [with LNG] come at the expense of locking in fossil fuel infrastructure for decades to come".

UMAS also notes that even if public funding on LNG infrastructure ceased by 2025 or 2030, total public expenditures over this period would still amount to US$0.95-1.5 billion - which is at least a fivefold increase from what has already been spent on LNG bunkering infrastructure to date, under the EU's CEF (Connecting Europe Facility) and TEN-T (Trans-European Transport Network) projects.

The researchers also observe that a reduction in shipping emissions in line with the initial IMO strategy objective of at least 50 percent GHG reduction by 2050 on 2008 levels - and the Paris Agreement temperature goals - is only possible with a switch to increased use of non-fossil fuel sources (hydrogen, ammonia, battery electrification) from 2030 at the latest and with rapid growth thereafter.

If sustainable biofuels can be sourced, they could be introduced - as part of blends - before 2030 to help increase the timescale for the introduction of synthetic fuels (e.g. hydrogen and ammonia), UMAS says.

'High gas' scenario

According to UMAS, in the 'high gas' scenario where the growth of LNG as a marine fuel continues, then reducing total annual emissions from shipping in line with the initial IMO strategy objective of at least 50 percent GHG reduction by 2050 (on 2008 levels) could only be possible through GHG reductions being made out-of-sector. This, UMAS suggests, would be problematic, not least because it would leave funds flowing out of the shipping sector that could have been spent to create real GHG reductions in-sector.

Transitional fuel

On the argument that LNG is a transitional fuel and a natural precursor to biogas (biomethane), UMAS notes that "deep questions remain over the availability of such bioenergy to meet all of shipping's needs, and uncertainties that this bioenergy will be cheaply available as a gas and not as a liquid".

"The 'LNG as a transition fuel' argument seriously risks future pathways to decarbonization, creating a single path dependency and technology lock-in," UMAS adds.

Domagoj Baresic, Consultant, UMAS and PhD researcher, UCL Energy Institute, remarks: "There is an uncertain future demand for LNG as a marine fuel over the next 10 years. On the one hand, it is an option for complying with the 2020 sulphur cap, but as it cannot enable the GHG reductions that have been committed to in the IMO's initial strategy for GHG reduction, and the Paris temperature goals more generally, it is clear its role in shipping's transition to a low carbon future can only be transient."

'Limited gas' scenario

UMAS also warns of the potential risk of investing heavily in LNG bunkering infrastructure if LNG is subsequently not taken up as a marine fuel by the maritime industry.

The cash flow for the 'limited gas' scenario - where LNG demand and investment flow in quickly initially, but with the development of zero emissions fuels, the demand for LNG soon peaks and declines - is said to be strongly negative with a net present value (NPV) of -$211 million (-$100 million if only CAPEX is considered).

In this scenario, as a result of a higher take up of biofuels and hydrogen (both of which also fall under Directive 2014/94/EU), and a strong push to get closer to the EU 2050 shipping 40 percent emission abatement target and IMO 2050 targets, LNG never becomes heavily diffused into the shipping industry.

The latest study follows two others carried out by UMAS in conjunction with Lloyd's Register - one published in May and another last December - which concluded that biofuel is currently the most affordable zero-emission option for shipping.

To view and download the latest UMAS report, please click here.






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