Fuel for thought

Julien is a frequent speaker on energy and sustainability topic, providing insights on decarbonisation in maritime operations. In this episode, we're going to look into LNG as an alternative fuel for the shipping industry, considering the impact of recent developments in rules and regulations, particularly in the context of emissions monitoring and the role of digitalisation and artificial intelligence.

So at the same time, there are IMO regulation that are location specific such as emission control area, for instance, in the North Sea, in the Met Sea that mandates certain type of low sulfur fuel. That's an example. On the other hand, EU regulation, they are so to say location specific when it comes to emission regulation, like the EU ETS or the few EU maritime. So they apply to ships that are trading in the EU region. At the same time, have some specific regulation also, I should mention that such as EU Marine Equipment Directed that apply to only EU flags.

So coming back to EU emission regulation, so EU ETS and Fuel EU, they are site specific, so to say, they are enforced since 2024 and 2025 reporting period, and they apply to greenhouse gas emission and type of fuel. So this is the aspect of IMO regulation, not geographically specific. They apply to every ship, EU regulation, they are site specific. And this is the power of the EU member state to enforce and to implement this regulation. I will just add something, the EU, the European Union, it's 27 countries.

So they have managed to find an agreement and to craft the regulation on emission reporting and monitoring and develop something because in a way there are only 27 members. On the other hand, and this is probably the topic of our discussion, the IMO, it's 176 countries. So out of which 125 are participating to MEPC that we'll discuss later. So you see, we have five times more countries, so five times more people and different agendas, which is quite difficult to more difficult, I would say to find a consensus at IMO level than it is at the EU level.

So that means ammonia now we have designed and stand out at IMO level. That mean international level to develop design that are safe to be used for a ship. Then on the other hand, LNG, there is not so much focus because at IMO level, mean at international level, there is already a code that has been developed and approved many years ago. And that means we can design and construct LNG ship without any problem from the safety perspective. But that was last year.

It cover ocean pollution, such as plastic litter. It cover underwater radiating noise, ballast water management, pollution prevention and response. So there is a wide array of environmental topics that are discussed at each of these committees. So I would say in a nutshell on each of these topics, obviously the conversation has progressed. If I take greenhouse gas production, which is the one of the main, I would say objective of this MEPC, which is to develop a global framework at international level meant to reduce greenhouse gas from shipping.

I would say at this MEPC, the membership, that means all the member states that are involved in this discussion, they agree on a certain number of things. The agreement that was not adopted last October, they have agreed to continue the discussion. So amendments will be investigated further. Adjustment also with this global framework will be investigated further and new proposal that has been submitted by other members that also will be investigated. So we said this MEPC was the opportunity for a reset and a continuation of the discussion among the member state at IMO level.

And this will continue in September this year, November this year with another 85 that will be held in November. So greenhouse gas reduction, I would say the conversation and the discussion they are continuing. The process is not stopped, which is a very good news. Then regarding the other topic that I mentioned, air quality, energy efficiency, plastic litter, I would say the work is going on and there is not much to report. I mean, there's a lot to report, but it's a continuous process.

Today, if we look at the order book, that means the new ships that are being ordered, a majority, the one that are running on alternative fuel, they pick the LNG as a fuel. So we saw LNG was the first alternative fuel to be developed some years ago. Then we saw methanol as a fuel coming in as the second I would say second choice. Methanol, green methanol. Methanol, it makes sense from, I would say, well to work or from the climate change or greenhouse gas reduction perspective, methanol makes sense if it's green.

Today, the project to produce green methanol with insufficient quantity, They are, I would say, materializing, but not that much that fast enough. Some ship owner, they consider green metal as an option, but now I think there is a switch back to LNG as a fuel. And this is what we see today in the ship order book. Coming back to the factor, the main factor is a fuel availability and it's linked to the trading profile. For instance, if we take container ships, usually they are designed to trade on specific routes.

When you take the size, so they would trade between Asia, Europe or Asia, America. So we know a container ship where she would trade. So this is where the decision to pick an alternative fuel is usually also there is at the same time the ship owner will decide and engage into discussion on the fuel provider, what type of fuel he's able to get in the location where the ship will call. And that is in a way detect in some respects the type of fuel she will choose. So container ships, some other ships, ship type like tankers or bulk carrier, basically they trade in any region.

So also the fuel availability is even more acute because they should be able to get this fuel at any location. So the criteria number one is fuel availability in which location the ship is able to get this fuel. Second, obviously for any project fuel price, today they come at a higher premium. LNG is still priced, I would say, reasonably. So I would say today, this is where we see that LNG is still the preferred option regarding this availability.

LNG is available in many locations. I would say the bunkering or the supply is quite global. Globally, the price is reasonable. That's why LNG has a few today the preferred option when it comes to alternative fuel. The third one I did not mention, sorry, is biofuel.

Biofuel is also a way to reduce greenhouse gas provided the biofuel comes from a fulfilled sustainability criteria. And that's another topic, but biofuel is also considered as a way as an alternative fuel to reduce greenhouse gas reduction. And again, biofuel is available in not all the bunker places in the world, but biofuel is another topic because it can be used in conventional engine without much modification.

And they haven't adapted the directive the same way. So if you take like different countries, Netherlands, France, Spain, Italy, they did not translate the requirement for biofuel the same way. So it's not, and some decided to do this biofuel to be used predominantly by road transport and less by shipping and some other members, member country, they say, okay, let's use it equally between road transport and shipping. So that's just an example of regional regulation. So the red directive, which is a EU directive that is applied differently.

And that links to, let's say, uneven availability of this biofuel across the EU. So for a ship owner or a ship operator, we get this fuel. This, I would say, level of regulatory complexity at another layer, I would say, in terms of fuel availability.

So it's good also from that perspective of air quality. In terms of NOx also, there is a reduction, so nitrous oxide. So initially LNG and still the case was developed for air quality, so local air quality matter. It turns out also in terms of greenhouse gas, there is less CO2 that is produced on the usage basis. Then when we look at the production, we have also to mitigate the gas release.

But LNG, that's the reason why LNG was developed, let's say a decade ago. And then we saw this molecule, this product was not available anywhere. And we saw some bunkering hub like Singapore, one of the largest, the Ara region, Rotterdam, Amsterdam, and that region also. So we had these two hubs that develop LNG infrastructure. So the fuel was available in those regions.

Then we saw Fujairah in The Middle East, we saw Marseille in France, we saw other places that China that developed in America. So I would say it's a continuous development of this LNG infrastructure that is driven on one hand by the fuel supplier and also by the client. So I would say it's a chicken and egg, but in a positive manner. So I would say recently there is no further development, but we see in the news and a part of this LNG bunkering infrastructure is the LNG bunkering ship. That means the LNG is transferred first to a small bunkering ship that in turns can supply this to a larger ship.

And we see more and more of this LNG bunkering ship being ordered and built. So that participates with the development of the LNG bunkering infrastructure.

This is something, yeah, again, this I can't comment on that because honestly I have detailed ID, but I would say each and every company is looking at the potential for AI. That's the question on AI. Connectivity is something else is how in terms, if we look at shipping as a system, as a big system, as a supply chain, definitely there is more connectivity or we can call it also a digitalization. That means like ship, they are more and more connected. Ships is a big system in itself, each and every ship.

So they also generate a lot of data at high frequency. And this is the data that is more and more monitored by the company, by the shipping company to making sure that the ship will operate as per supposed to be in terms of, let's say fuel emission, fuel consumption and things like that. So it's linked to So it's a big question in itself is how do we, let's say acquire the data that are linked to a ship? How do we analyze them? How do we clean them up?

How do we transfer or transfer to onshore? That's a big question. And now ship, they are more and more connected and ship, they operate more and more like a dashboard. They can see, and now we see something we see. The ship, we have also what we call a digital twin, a model where we see how much a ship is supposed to, let's say, consume.

In the company, they will see that maybe the ship is consuming less or more than it's supposed to be. So they may ask a question to the shipboard and say, okay, what are your challenges or how can you improve that? And so that's linked to data. So I would say data is a big topic. Everyone is positively impacted by that.

And that helps to in a way the decarbonization in a way that, again, I come back to the initial statement shipping as a supply chain, a big system, the more we are able to, let's say, have the right speed for any ship, the less energy and less fuel we will consume. So this is the same concept. If a ship is supposed to sail from A to B, the idea is to sail at the right speed and not to sail fast and wait in port. So it's also linked to connectivity.

And again, any companies impacted by this type of threat. So we have developed at Bureau Veritas, what we call class notation on cybersecurity to making sure a ship is secure from cyber threats. So this is something we propose to our clients. It's also something that has become in a way mandatory, a ship to be cyber secured. Data sharing is another element.

It links to anonymity, to commercial distortion. And this is to come back to our initial conversation about IMO. At less than EPC two weeks ago, NEPC eighty four, there was a segment conversation on data sharing. Some members state they were of the opinion that too much data sharing was not what they would like for a reason linked to distortion of competition, which we hear and understand. That's the other side of the story, cybersecurity, data sharing, anonymity, interoperability.