Smoke on the Water - As IMO Targets Additional Emissions Reductions, LNG Carriers Play a Role

Just a few years ago, the possibility of overseas ethane exports was almost incomprehensible. Lack of infrastructure, high handling costs, no suitable ships and minimal market demand made ethane exports seem extremely unlikely.  But then the shale gas boom transformed the ethane market.  Now U.S. ethane production greatly exceeds demand and each day hundreds of thousands of barrels of ethane are being rejected into the natural gas stream.  Consequently a few pioneers are hammering through the challenges associated with overseas ethane exports, including the construction of specialized tankage, loading facilities, ships and unloading facilities.  And international chemical companies are spending hundreds of millions of dollars to modify olefin crackers to use the cheap feedstock.  Now the first of those pioneers has made it to the new ethane frontier. In today's blog we examine the impact of imminent ethane exports from the Energy Transfer/Sunoco Terminal at Marcus Hook, PA.

Leading international shipping associations and many of the large shipowners they represent are pressing the International Maritime Organization (IMO) to take a much more aggressive approach to decarbonizing their industry, and calling for a $100/metric ton fee on carbon dioxide emissions from ships to spur investment in no-carbon propulsion systems. In effect, shipowners—themselves under pressure from their large, ESG-minded customers, are telling the IMO that its goals of reducing global shipping’s carbon intensity by 40% by 2030 and total greenhouse gas emissions by 50% by 2050 are far too timid. They are insisting that the IMO set the industry on a course to quickly ramp down its carbon dioxide emissions in the 2020s and achieve net-zero CO2 emissions by mid-century. If the shipowners prevail, it could result in the phase-out of hydrocarbon-based bunker fuel in favor of low-carbon alternatives like ammonia, hydrogen, and electric batteries. In today’s RBN blog, we begin a review of the big changes ahead for global bunker fuel and what they mean for oil and gas producers and refiners.

Back in January, when the International Maritime Organization implemented more stringent limits on sulfur emissions for large, ocean-going vessels, the vast majority of shipowners and charterers complied with the new rule — commonly referred to as IMO 2020 — by switching to very low sulfur fuel oil or gasoil. A few others stuck with old, higher-sulfur bunker but installed scrubbers to remove sulfur from the engine exhaust. A third option — fueling ships with LNG — is now gaining traction, in part because it could help shipping companies deal with future IMO mandates on reducing greenhouse gas emissions. Orders for new-build LNG-powered vessels and LNG bunker ships are rolling in, and plans for port infrastructure to support LNG bunkering are being implemented. Today, we begin a series on the growing use of LNG in global shipping.