Working papers in Transport Economics,
CTS - Centre for Transport Studies Stockholm (KTH and VTI)

Abstract: This study compares the effectiveness of potential future shipping fuels in terms of cost and climate change impact and in particular the pros and cons of LNG compared to liquefied fuels. Today there are only a small number of LNG-fuelled ships and none that use FTdiesel, methanol or DME. This makes the comparison complicated. However, both LNG and methanol are traded in large quantities. In his choice of fuel the owner has to consider the individual vessels energy intensity and remaining years of operation as well as the space available for installing complementary equipment and the extent to which the ship is expected to move in seas with special sulphur and NOX restrictions. Currently HFO in combination with scrubbers, LNG and methanol all appear to be competitive to MGO provided that any investment can be written off over at least five years and that the ship operates mainly in SECAs. However, all fuels based on natural gas are extremely sensitive to the price difference between gas and HFO. The incremental investment is higher for LNG than for methanol, which might make the latter a better choice for a ship with few remaining years. In new ships, LNG has the advantage of being allowed a longer depreciation period, and a rising price of natural gas is less of a threat to LNG than to methanol and DME. The long-term choice of fuel may also be influenced by future regulations on CO2, methane, soot and other particles as well as by safety requirements. LNG is more sensitive to stringent requirements concerning methane and safety than the competing fuels.

Keywords: Maritime shipping; Marine fuels; LNG; Methanol; DME

JEL-codes: Q42

20 pages, November 29, 2012

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CTS-2012-28.pdf  

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