Reasons & Basic Layout of an LNG Vessel New air pollution limitation requirements put forth by Annex VI of the

International Convention for the Prevention of Pollution from ships are causing companies in the marine industry to seek advanced technologies to limit their emissions. And due to MARPOLs Annex VI, stricter emission limits are going to be placed on the global shipping industry over the next decade. There is a 200-nautical-mile band around most of North America where the strictest requirements are implemented. One of the most promising alternative fuel sources is LNG. LNG stands for Liquefied Natural Gas, which is a cleaner burning fuel than diesel or gasoline. If LNG were to be used, NOx emissions will be cut by 85%; and SOx cease to exist since there is no sulfur in natural gas. This type of engine can be compliant with even the strictest emission requirements. Many of the systems, like LNG, have been proven to be effective on land and are now being transferred to the water. LNG is cheaper and more readily available than diesel and gasoline, which makes it highly competitive from an economics perspective. The Marine Industry is and will continue to pursue LNG vessels. LNG Cargo ships have used cargo boil-off to fuel their propulsion boilers for 45 years. However, LNG has only recently been used in dual-fuel ship engines. According to the United States Coast Guard (USCG), in order to build and run one of these ships, one must obtain significant expertise and experience in the design process, constructing, operating, and inspecting the vessels. Many vessel designers are looking into using LNG on passenger boats like ferries and offshore supply vessels, container roll-on roll-off ships, and towing vessels. These designs must be reviewed and deemed safe by the USCGs Marine Safety Center. As of right now, safety is determined on a case-by-case basis because the US Regulations do not address using Natural Gas as a marine fuel. However, the International Maritime Organization (IMO) is expected to develop and international code on safety for these types of boats in 2014. In 2009, IMO actually published Resolution MSC 285 (86) Interim Guidelines on Safety for Natural Gas-Fueled Engine Installations on ships, which is basically what the USCG goes off of right now to base safety on. Most major classification societies have rules and guidelines for these types of ships closely aligned with IMOs. The USCG is continually developing knowledge of LNG and is actively involved in developing IMOs guidelines. The USCG has reviewed various class society rules on gas-fueled engine installations. They have also reviewed and accepted several concept proposals for vessel designs that incorporate LNG on a case-by-case basis so that an equivalent level of safety to the current one can be established. Each design that has been accepted has been incorporated into IMOs guidelines. The USCG published Policy Letter 01-12 to provide a way to determine safety. The letter lays out one set of design criteria for equivalency. If a vessel design meets the criteria outlined, the applicant can go straight to the Marine Safety Center for review. However, if a

design doesnt meet the criteria, they may still be accepted. They are welcome to bring their proposal to headquarters for approval on a case-by-case basis. Designers generally submit their idea to the USCG. Concept Approvals include General Arrangements, a layout of the gas-filled system components, and a list of standards proposed for system design. Responses take the form of a design basis agreement that lays the framework for plan approval and vessel certification. This process, thus far, has proven successful by catching flaws in the early stages. It is extremely crucial that no work be started on the vessel until plans have been approved. During construction, marine inspectors ensure that a vessel is built according to approved plans. A member from the MSC and the Coast Guards Liquefied Gas Carrier Nation Canter of Expertise may also accompany local marine inspectors during the first inspection. Important issues for design are: Fuel system issues Gas detection Hazardous locations Fire protection

IMO guidelines provide two basic design concept for LNG vessels, inherently gas-safe and emergency shutdown. Both designs employ safety strategies to prevent the risk associated with natural gas running through a system. Under the inherently gas safe concept (IGS), machinery spaces are gas-safe under all conditions. This approach requires natural gas fuel piping within engine room boundaries to be fitted in a gas-tight enclosure, which is done using a double-walled pipe or a single-walled pipe within a gas-tight duct, where the space between the inner and outer duct must be either pressurized with inert gas or ventilated. The machinery space is considered a nonhazardous area. There are no restrictions on any electrical equipment installations. This approach is very similar to a gas-fuel distribution system on LNG carriers that use cargo boil-off as fuel. Under the emergency shutdown concept (ESD), machinery spaces are considered gassafe under normal conditions, but have the potential to become hazardous under abnormal conditions. This system allows single-walled piping inside the engine room without an external gas-tight enclosure. It uses extraction ventilation, at a rate of 30 air change per hour, to prevent accumulation of flammable vapors within the small space. If gas is detected in the space, all electrical equipment not certified for hazardous locations is automatically shut down. This system was developed before a lot of technology was available. It relies heavily on active rather than passive safety measures. Gas detectors require careful upkeep and maintenance. Automation systems that translate sensor signals into alarms and shutdowns contain multiple components that can fail, leading to disaster. So far, all systems accepted by the USCG as sage have been inherently gas safe systems. If LNG ship systems are made properly and crew members are trained adequately, then LNG-fueled ships can be operated safely. The USCG is considering a special training program

designed to make sure that all personnel aboard a LNG vessel are well-versed in safety, operation, and maintenance. There are three levels of training: a) A basic safety course for all crew members b) An advanced course specifically for deck watch officers c) An advanced course specifically for engineering officers This safety program runs on a risk-based approach, which means that those operating the fuel systems (those with the highest risk of being injured) receive more training than the remaining crew. In the past, these types of courses have been given by the engine manufacturer and crew records were help onboard the boat. The Norwegian Maritime Directorate requires that owners submit their training program plans for approval. The USCG is currently evaluating whether or not this approach will work in United States waters. USCGs Policy Letter 01-12 does not address LNG as compressed natural gas, singlewall gas piping (ESD), fuel tanks below accommodation spaces, or portable fuel tanks. Some debate exists about developing a code discussing placing tanks blow accommodation spaces, service space, and control stations, which is not prohibited, but goes against safety practices. It is best to have a clear separation between LNG storage tanks within cargo holds and non-cargo areas, such as passenger areas. Design constraints many not allow a well-designed area, so IMO guidelines provide other layers of safety to reduce risks and mitigate hazards caused by leaks or ruptures. Included in this is gas detection, ventilation, and liquid level and temperature monitoring systems.

Different spaces and areas on a gas-fueled ship are classified as zone 0, zone 1, or zone 2, depending on their safety level. To decide which levels should represent which issues, one must define gas safe and gas dangerous. This is briefly done in a USCG policy. However, currently, these requirements only apply to flammable gas cargo and are not divided into zone categories. Although, they do help to determine how the USCG should classify hazardous areas.

Certification of electrical equipment must be to either NEC or IEC standards, but not combined in a manner that would compromise safety. The electrical equipment must be certified by an independent laboratory that is approved by the USCG in order to be considered tested and approved. The tank room is considered to be a zone 1 hazardous space, which means that the installation of non-certified electrical equipment is prohibited. The walls of tank rooms must be made of cold-resistant material and be insulated from the hull walls. Different class societies have debated having additional requirements for tanks under accommodation areas on passenger vessels, including providing a protective barrier between the tank department and adjacent passenger space. Fuel tanks are also placed at a distance of B/5 from the hull, where B is the ships beam. According to US Maritime regulations, compressor rooms on chemical and gas carriers must be located above the freeboard deck. However, there is an allowance for locating them below deck, given they meet the requirements for tank rooms. LNG storage tanks must be independent and designed with the regulations in mind. CNG (Compressed Natural Gas) storage tanks are not included in the guidelines, but should still be approved by the USCG. Coast Guard requires that gas-detection systems and portable detectors also be certified by independent laboratories as their guidelines contain no requirements for these systems. A water spray system must be installed to protect the exposed outer surface of the fuel tank, if it happens to be on a weather deck. Other rooms, such as superstructures, compressor rooms, pump rooms, cargo control rooms, and any other normally occupied deckhouses that face the storage tank also must be protected with a water spray system. Bunkering stations, which take onboard fuel, must be protected by a dry-chemical-powder-fire extinguishing system, which typically is made up of a hand hose line that is listed for fire service by a recognized testing laboratory. Fire detection systems must be approved by the coast guard and be present in tank rooms, ventilation trunks for tank rooms below deck, and machinery spaces containing gasfueled engines. LNG vessels can receive fuel in a number of different ways. In Norway, this is done by a direct supply to LNG storage tanks onshore, where vessels can refuel at any time, using LNG trucks to deliver LNG similar to the way diesel is delivered, or vessel-to-vessel transfer from a barge alongside a vessel. The USCG is considering requirements specific to each type of operation. Regional and International Use of LNG Vessels Harvey Gulf International Marine has ordered boats, which will be designed by STX Marine, Inc, that use LNG as a fuel source in line with their current movement to go green. Wrtsl, a company that supplied technology in 2011 for the first ever U.S.-flagged LNGpowered Platform Support Vessels (PSVs), is the company that has received the contract for the LNG gas propulsion system to be used on offshore vessels. Chad Verret, Senior Vice President at Harvey Gulf International Marine, announced their decision with this quote: These PSVs will be the cleanest burning vessels operating in the Gulf of Mexico.

In saying this, Verret was absolutely correct. LNG also offers the best value for ship owners trying to comply with Annex VI. Wrtsl, a Norwegian company, is supplying technology for a number of LNG-powered vessels and recently announced a deal for PSVs to be used in Norway, though LNG ships in general have been authorized since 2000. The Economic Side of LNG Douglas Westwoods (DW) World LNG Market Forecast has predicted that global spending (Capex) towards LNG will total almost $228B during the next four years. This is a 181% increase from the 2008-2012 period. This is based on the spending that will be used on offshore fixed LNG liquefaction, LNG carriers and LNG regasification, via onshore and offshore fixed import terminals. Many companies have huge financial commitments to liquefaction projects and gas import facilities. It should be taken in account that this also includes spending on terminals that will not be completed until after the four-year time period. Australasia and North America will be huge frontrunners in this project and will help bring LNG into the international market. Due to the surge of Australian projects reaching total consumption, spend will peak in 2015 and then decline slightly in 2016 and 2017. This, however, could be offset by growth in other regions such as Eastern Europe, FSU, Africa, and Asia. Because of Australasias heavy construction of liquefaction terminals, Australasia is expected to have an increase of over 500% in spending when compared to the 2008-2012 period, accounting for nearly 40% of global spending, $90B. Following with an estimated 35% is Asia, which is already considered to be one of the largest LNG investment centers. This is caused by the combined spending of carrier shipbuilding and import terminal construction. The key driving factor in import spending is Asia, which represents over 80% of the import Capex. North America is expected to represent 8% of the Capex, which is a 110% step up from previous spending. The gas shale boom caused a shift in supply and demand and caused the region to act now as a net exporter rather than an importer. This region has the potential to become one of the top few exporting regions, but regulatory approvals will determine the pace of export developments. Its first export facility in Sabine Pass, after Kenai terminal (which was recently decommissioned) will be opening in 2016. Middle Eastern investment, surprisingly, will account for less than 1% of Capex. In previous years, they have accounted for more than 1/3 of the expenditure. This is caused by increasing supply constraints as a result of domestic demand rising. Middle Eastern contribution to LNG peaked in 2011 due to the completion of many LNG-related projects. Eastern Europe will also see increased investment in liquefaction because of Russia building up its export capacity. Africa will also grow as an exporting region due to developments in Mozambique and Tanzania. Though almost all segments display a notable increase in spending, the wave of new liquefaction projects under construction across Africa Australasia, Eastern Europe & FSU and North America, coupled with carrier contracts and import developments in Asia will drive Capex

at an overall CAGR of 7%. Over 60% of the total Capex, $140B, will go towards total liquefaction. At 8%, import expenditure is expected to represent the second-largest amount. LNG carrier spending is expected to increase to almost $35B. Carrier builders had experienced a quieter period during 2009-2012 due to the recession, but due to the increased in liquefaction projects, this is expected to increase. From 2008-2012, 90mmtpa of liquefaction capacity was used. Over 100mmtpa is expected to arise from 2013-2017. This is due to 14 new developments and nine expansion projects. The construction of these terminals will equal over $140B. However, DW does expect some differences between these predictions and what will be realized due to the fact that many proposed terminals are still in the planning stages and have not been approved nor found construction sites. All ship-building is expected to take place in Asia because all of the major yards are located there. From 2008-2012, 121 vessels (mostly Q-max and Q-flex sized) were delivered. However, the effect of the recession dealt a hard blow to the ship-building industry. A large surge is expected to occur during and beyond the forecast period. Increased technology and confidence in the ship-building business will also contribute and give an additional boost. South Korean shipyards will be used for the majority of construction on new boats, but Chinese group Hudong-Zhonghua will also increase its market share. However, yard capacity may be an issue in the coming years due to the high demand for these types of vessels. Western European shipbuilders may take advantage of the high demand. Considering import terminals, nearly 250mmtpa was brought onstream during 20082012, with associated capex totaling $32B. This number is expected to rise to $50B. The last five years saw significant import investments in North America, Western Europe, and Asia, but in 2011 and 2012, North America experienced a drastic reduction. North America has since been moving toward import independence. Developing economies in Asia are and will continue to be the dominant importing region, accounting for 80% of import facility spending. As domestic demand dictates a reverse in trade, Japan, South Korea, Malaysia, and Indonesia will drive further LNG imports. Vietnam, the Philippines, and Singapore are expected to increase their investments in import infrastructure. Latin Americas Capex, due to projects in Brazil, Chile, Cuba, the Dominican Republic, and Mexico, will rise gradually throughout the four years. Westen Europe will experience a $.4B drop. In the long term, however, this number will rise again. Strong growth in LNG demand as a fuel and increasingly as a substitute for oil and gasoline will drive increased spending on facilities worldwide. However, the distances account for major price differences. For example, the US charges around $3 for gas, while Europe charges $9 and Japan charges over $16. LNG would help to lower these numbers. Many places are seeing growing gas demand and see LNG as a solution. The UK is seeing a severe fall in gas production and is increasing importation of LNG. Growing environmental awareness is also a factor, since LNG is one of the cleanest burning fuels. The

EUs emission act in 2015 is going to incentivize ship-owners to use LNG as an alternative fuel. LNG is also being adopted by many countries for use in cars or buses. Gas reserves such as shale gas and coal will be both a driving force and a competitor for LNG. Successful production could help the USA become a net exporter during the forecast period. However, approvals are hard to obtain. US natural gas prices will increase as the full cycle gas production are at least $7-8/mmbtu. Around the world, prices are expected to be higher than in the US. In most places, LNG is cheaper than oil and gas. In the meantime, the Middle East remains one of the top exporters, but this will change with the forecast. Reducing the costs of LNG production remains a major challenge. However, beyond 2017, significant potential for major growth in LNG capital expenditure can be seen, due to the large discoveries in East Africa and Eastern Mediterranean, together with increased focus on exports of US shale gas. Furthermore, the considerable prospective reserves of the arctic offer a longer-term potential. Works Cited Gomez, Michelle. "LNG Capital Expenditure." Maritime Reporter And Engineering News Sept. 2013: 34+. Web. 01 Oct. 2013. "LNG PSV to Be Cleanest Burning Vessel in the Gulf of Mexico." Ship & Bunker. Ship & Bunker, 10 Dec. 2012. Web. 01 Oct. 2013. <http://shipandbunker.com/news/am/678782lng-psv-to-be-cleanest-burning-vessel-in-the-gulf-of-mexico>. Meyers, Timothy E., and Lt. Nicholas A. Woessner. "June 2013 Exclusive Story: Policies Taking Shape For Natural Gas-Fueled Ships." American Oil and Gas Reporter. National Publisher's Group Inc., June 2013. Web. 30 Sept. 2013. <http://www.aogr.com/index.php/web-features/exclusive-story/policies-taking-shape-fornatural-gas-fueled-ships>.