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The chief executive officer of Canada's BC Ferries, David Hahn, has said the conversion of vessels from diesel fuel to liquefied natural gas (LNG) could save the business at least US$25 million per year.

"I don't think it's a question of if you'll see it, it's a question of when," Hahn was quoted as saying on Tuesday.

Hahn said that the province of British Columbia has a "tremendous abundance" of natural gas, which combined with the distribution facilities already available in the region makes LNG "a product that we could easily transition to".

Vessel retrofits

On the issue of retrofitting existing vessels, Hahn said: "[BC] Ferries needs to seriously look at the fuel source during retrofits and rebuilds in future years. It makes a hell of a lot of sense."

It is understood that BC Ferries plans refits for seven to 10 small and medium-sized vessels over the next few years, and another five C-class vessels over the next 15 to 20 years.

Commenting on the scenarios currently under evaluation, Hahn said: "We're either going to refit, repair, do a major overhaul or build new. We'll probably look heavily at doing liquefied natural gas as a fuel source. There's big savings there.

"Replacing an engine is expensive, but on a Spiritclass vessel, you could probably save $6 million a year in fuel on each one. Because of the cost, it makes sense to convert only vessels with at least 10 to 12 years left in them," he said.

Bunker costs, purchasing and B5 fuel

BC Ferries anticipates that the total annual bunker costs for the light diesel mix used for its 35-vessel fleet will reach $115 million in 2011-2012.

Annual fuel costs rose from $45.9 million in 2003 to $86.8 million in 2008. Bunker costs for the 2008-09 period were calculated to be approximately $120 million.

Commenting on its bunker purchasing strategy, Hahn said: "We buy through a big contract that we price out every couple of years, and we do hedging when it makes sense. But you are pretty much subject to the whims of the market."

BC Ferries uses a B5 fuel blend in all service areas where the product is available. The B5 fuel blend is a mix of 5 percent canola-based biodiesel with 95 percent low sulphur petroleum diesel. Biodiesel burns cleaner with significantly less unburned hydrocarbons, carbon monoxide and particulate matter in emissions.

BC Ferries worked with its fuel supplier, Chevron, for over a year before implementing the new product in order to ensure that the safety and reliability of the vessels would not be compromised.

New LNG engine technology

BC Ferries has been dealing mainly with leading engine manufacturers such as Rolls Royce and Wärtsilä, but is yet to decide on a preferred LNG-powered engine.

"This technology has been changing rapidly over the last four to five years. We've been waiting for others to test it out so we are not first in line," Hahn said.

"Changing to liquefied natural gas would result in a huge decrease in emissions," Hahn noted.

Hahn Retirement

Last month BC Ferries announced the retirement of Hahn as President and CEO, effective December 31st 2011.

“The Board has a succession plan in place and we expect to make an announcement on a successor sometime after our Board meeting in November, 2011,” Hahn was quoted as saying in September.