Story by Fortune
TOTE’s container ships will be the first of a wave to run on cleaner fuel.
The North American ocean carrier TOTE is deploying the world’s first container ships fueled by liquefied natural gas (LNG). The move anticipates imminent environmental regulations that are likely to trigger large shifts in the maritime shipping industry.
TOTE is making the move to comply with the international Marpol Annex VI maritime emissions standards, first implemented in 2005. Restrictions on emissions like sulfur and nitrogen oxide will tighten in 2016 within designated emission control areas (ECAs), including the waters surrounding North America.
Sulfur and nitrogen oxides are generated in large volumes by conventional maritime ships, which have long relied on so-called heavy fuel oil—the thick, dirty, but affordable remnants of the crude oil refining process. According to the International Council on Clean Transportation, the ocean shipping industry currently accounts for 8% of global emissions of sulfur dioxide, which causes acid rain.
These emissions also have serious effects on human health. Michael Samulski, Director of the EPA’s Large Marine and Aviation Center, says that the tighter regulations will prevent between 12,000 and 31,000 U.S. deaths per year now linked to maritime pollution. Those impacts are not only in port areas or along coastlines, but reach hundreds of miles inland.
TOTE’s first LNG-fueled ship, the Isla Bella, was constructed by General Dynamics NASSCO, and completed in April. It will start working its planned route between Puerto Rico and Jacksonville, Florida, later this year. A second ship of the same model, dubbed the Marlin class, is expected to be completed in early 2016, and will work the same route. TOTE is also converting two ships in the Alaska trade to LNG.
TOTE claims that the Marlin class ships will emit 98 percent less nitrogen oxide, 97 percent less sulfur, and 72 percent less carbon dioxide than comparable conventional ships.
As shippers move to comply with the Marpol Annex VI standards, they have a handful of options. They can use higher-grade fuel, or install scrubbing technologies comparable to a car’s catalytic converter. TOTE CEO Anthony Chiarello says his company explored scrubbing technology, but concluded it’s not yet advanced enough. Higher grade diesel, on the other hand, “becomes a very expensive option.”
That left LNG, but it has its own challenges. Most importantly, ports don’t currently have much infrastructure for getting LNG fuel into ships. TOTE is partnering with Peuget Sound Energy to build LNG fueling facilities in Tacoma, where it will fuel its Alaskan ships, and AGL Resources is constructing a liquefaction plant in Jacksonville for Puerto Rico-bound ships. But those facilities won’t be completed until 2019 and late 2016, respectively. In the meantime, TOTE will rely on trucks and barges to fuel ships.
Despite these challenges, more LNG-fueled ships are in the pipeline. Crowley, one of TOTE’s competing carriers in Puerto Rico, is building LNG shipsexpected for delivery in late 2017. The United Arab Shipping Company has ordered 17 ships ready to be easily retrofitted for LNG.
“I personally believe within the next ten years, LNG will be the predominant maritime fuel,” says Chiarello. The Korean energy ministry agrees, projecting that the market for LNG ship manufacturing will grow by nearly 25 times over the next decade, and LNG fueling facilities are being built at major Korean ports to help the shipbuilding units of Samsung, Hyundai, and Daewoo capture that market.
