Japan: An LNG Bunkering Hub?

Maritime Activity Reports, Inc.

April 26, 2018

(Photo courtesy Intrernational Transport Forum)

(Photo courtesy Intrernational Transport Forum)

New study examines Japanese government strategy for creating infrastructure for environmentally-friendly ship fuel.

A new report by the Intrernational Transport Forum at the OECD assesses Japan’s ambition to become an international bunkering hub for liquefied natural gas (LNG).

The Japanese government is working to position the nation as a LNG bunkering hub as it expects the fuel's significance in shipping to grow.

Japan is already the world’s largest importer of LNG by a large margin. Alongside the fuel’s main use in electricity production, the country has developed marine bunkering facilities to provide LNG to ships. Japan is also a major trading nation, and the volume of its maritime trade provides the basis for its LNG bunkering hub strategy.

According to the new report backed by a voluntary contribution from the Government of Japan, the success of this strategy will depend on four conditions.

1 - Uptake of LNG as ship fuel
There are currently 118 LNG-fueled vessels in the world, a marginal share of the world fleet. However, the number is growing and will almost double by 2020, based on ship order data.

2 - Availability of LNG bunkering facilities worldwide
Operators will need a network of ports where they can take on board LNG. These facilities are becoming increasingly available in Europe, and to a lesser extent in North America and Asia.

3 - Recent and future emissions regulations
Regulations to reduce SOx and NOx emissions from ships have increased demand for alternative fuels including LNG. Emission Control Areas (ECA) have boosted LNG-fueled coastal shipping in Northern Europe and North America. The global sulfur cap from 2020 will likely drive the use of LNG-fueled ships in other parts of the world.

4 - Strategic location close to trade routes
The Port of Keihin (Yokohama, Tokyo and Kawasaki) is located at one end of the North Pacific trade route as a first port for loading and unloading. This gives it a locational advantage to become a major LNG bunkering hub, and Keihin already has existing LNG bunkering infrastructure.

The report concludes that Japan has the potential to become a major LNG bunkering hub. At the same time, some uncertainties exist. Emissions regulations will soon target maritime CO2 and no longer mostly NOx and SOx. LNG can cut CO2 by around 20 percent but is not the ideal solution to reduce greenhouse gas from ships. For instance, it releases methane from unburnt gas in engine exhaust (methane slip), and handling LNG at each stage of the supply chain leads to fugitive emissions.

The report recommends to involve stakeholders in the development of LNG bunkering policies including LNG importers, global and coastal shipping companies, as well as firms with a high degree of expertise in storage and handling of LNG.

The report also recommends planning LNG infrastructure in a flexible manner that can be scaled up if and when demand grows. New storage facilities and gas infrastructure should be able to accommodate a range of gases, such as bio-methane.

International cooperation in LNG bunkering services was also recommended. Increasing the number of LNG-propelled vessels significantly requires a worldwide network of LNG bunkering facilities. Japan has been active in international coordination efforts, for instance via a Japan-Singapore Summit Meeting in 2016 and a Japan-Singapore Joint Study on LNG Bunkering in 2017.

Additionally, the report suggests mitigating negative environmental side-effects of LNG-fueled shipping. LNG could increase its contribution to more sustainable maritime transport if operators of LNG supply facilities build on their experience to further minimize the remaining negative impacts.

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