LNG-fueled vessels in the Norwegian short-sea market : a cost-effective response to environmental regulation

Abstract

The objective of this thesis is to assess the environmental and economic advantages of using LNG as fuel for ships. Air emissions from ships are an increasing environmental concern. Since the shipping sector can expect to face more stringent environmental regulations in the future, LNG’s potential as a response to these regulations is analyzed. This study offers an overview of present environmental regulations as well as a description of the properties of LNG. The aim of the final analysis is to identify the cost position of LNG-fueled vessels within different sectors of the Norwegian short-sea shipping market. Net present value (NPV) analysis sets the technical framework for the economic evaluation. The analysis comes to the conclusion that using LNG as fuel for ships offers the potential for significant environmental improvement, regarding both air quality and climate protection, in all sectors subject to the analysis. Economically, LNG as fuel can compete with conventional marine fuel (MGO), at oil prices around approximately 60 $/bbl. Hence, the results of this study indicate that from both an environmental- and economic perspective the investment in LNG powered ships is strongly recommendable. The study also presents some potential barriers with regards to commercial viability and technological feasibility that need to be overcome before LNG becomes fully competitive with other fuels.