TOTE and LNG: Meeting the Challenge of Change
The IMO's Marpol Annex VI deadlines are rapidly approaching for ships operating in Emission Control Areas. The deadlines address the next phases of mandated drastic reductions in nitrogen and sulfur oxides, and shipowners are faced with three basic choices to bring their vessels into compliance.
The two most expedient and economical methods available are either switching to the use of low sulfur fuel or installing scrubbers and continuing to use current fuel. Those options appear attractive at first glance, but each has its drawbacks.
Compliant fuel costs 40 percent more than current fuel, and will probably be more in 2015.
Installing exhaust gas scrubbers uses current fuel with added costs, plus there are significant maintenance concerns as well as the problem of how to dispose the contaminated seawater generated by the process.
The third option is to switch to the use of liquefied natural gas – LNG – with its potentially lower fuel costs, and the fact that it meets current and future emissions requirements. The drawbacks are cost and lack of infrastructure at this time.
As far as one major US container and ro/ro ship owner and operator is concerned, the age of LNG has begun – and the shipping industry's shift from bunker fuel and diesel to liquefied natural gas is "as major as the shift from wind to steam," said Anthony Chiarello, the president and CEO of TOTE, Inc.
TOTE is a trailblazer in the leap to LNG – the company is the first US ship owner to convert its fleet to LNG. TOTE is building the world's first LNG-powered container ships for the company's Florida to Puerto Rico liner service, as well as performing diesel-to-LNG dual-fuel engine transplants on subsidiary Totem Ocean's two Orca class ro/ro trailerships that make weekly runs between Tacoma and Anchorage.
The significance of TOTE's making the leap to LNG – which provides a needed jump-start to widespread adoption of the gas as marine fuel – was recognized by the White House in May when Anthony Chiarello was named one of 2014's eleven "Transportation Ladders of Opportunity Champions of Change".
TOTE's decision to switch its fleet to LNG was not made overnight.
"We started having discussions in 2010 about how to fulfill the ECA requirements for the reduction of sulfur and nitrogen oxides," said Chiarello. "Our Totem Ocean ships never leave the ECA zone, they are never more than 200 miles from the west coast.
"We put together a team from Totem Ocean that spent more than two years traveling the globe to investigate our options. Our Orca class ships were built in 2003, they were less than ten years old at the time, and powered by MAN diesel-electrics. MAN told us they did not make a conversion kit for LNG for those engines.
"We look at our ships as 40 year investments," he said. "We decided to install new engines in the Orcas instead of converting. We requested bids for new LNG dual-fuel engines from different manufacturers, including MAN. Wartsila was the winner."
TOTE's decision to convert the Orcas also paved the way for its decision to use LNG on the two new containerships the company was planning to build for its Florida to Puerto Rico weekly liner service. The fact that at least 40 percent of the Puerto Rico route passes through the North American Caribbean ECA underlined LNG's environmental benefits.
"Our ships in the Puerto Rico trade were of an age that we had to do something, they were 35 to 40 years old," said Chiarello. "What is interesting is that MAN won the contract to supply those two new vessels."
The commitment to use LNG as a vessel's primary fuel has been perceived to increase supply and safety risks.
"We are always looking to minimize risk as much as possible," said Chiarello. "The replacement of the Orca class vessels' engines will have less risk than conversion.
"The use of LNG as a marine fuel is not new. There are LNG fueled ferries in Scandinavia, and LNG carriers that have been using dual-fuel engines with the ability to burn off gas from their cargo have been around for quite some time. What we are doing is taking a known and tested technology from one platform and transferring it to another."
TOTE's decision to go with LNG powered new builds and the expensive change to LNG dual-fuel on the Orcas has triggered a chain reaction of interest and commitment from other critical potential players in the LNG revolution.
"Change is often fueled by challenge," said Chiarello. "The challenges posed to our company by the North American Emissions Control Area quickly became an opportunity to lead the industry to cleaner fuels beyond diesel. We've been bullish in our statements that we believe all new ships built for the US domestic trades will burn LNG as fuel.
"The response from other maritime companies has been nothing short of a tidal shift. Orders for LNG ship construction accelerated after we announced plans to convert our ships that serve Alaska and build new ships, the first container ships in the world to be powered by LNG, for Puerto Rico."
The fact that TOTE's ships are engaged in regular liner service between US ports plays an important part in reducing the risk of fuel availability.
"Our biggest area of uncertainty was the LNG supply side," said Chiarello. "As a Jones Act domestic carrier, we're uniquely positioned to create real change in the supply conundrum – availability of fuel is a big hurdle for most transportation sectors to change over to clean burning natural gas."
The regular service routes of TOTE and Totem Ocean create enough of a steady demand to entice fuel partners to build liquefaction plants in their ports of call – thus making LNG supply available to others in those markets. Supply in Jacksonville, Florida, and Tacoma, Washington, will serve the Southeast and Pacific Northwest with natural gas that can be used for ships, trucks, and rail.
"As more maritime and transportation companies move to natural gas, the benefits will grow exponentially," said Chiarello. "The impetus was improving air quality, but we also know that moving to a domestically sourced fuel will increase reliability for our critical supply chain and the environmental and operational safety record of LNG is unmatched."
This is not the first time that TOTE has decided to invest more than the minimum required and for the long term. Totem Ocean's two 839-foot Orca class ships, the M/V Midnight Sun and North Star, were specifically built as trailerships to service the Alaska trade. The ships were designed and built to withstand the rough winter seas of the passage as well as designed to optimize the loading and unloading of the 600 tractor-pulled trailers to meet eight-hour port turnaround times on each end.
TOTE's two LNG containerships are currently under construction in General Dynamics NASSCO's San Diego Shipyard and will be ready in early 2016. The engine transplants on the two Orca class ships will take place in the successive winters of 2015 and 2016 to minimize any disruption of service – the Shipyard has not yet been announced.
"Change of this magnitude requires strong support from partners and regulatory agencies," said Chiarello. "The EPA, helping to facilitate engine conversions; the US Coast Guard, working to create new regulations; Wärtsilä, designing new LNG engines for our ships; General Dynamics NASSCO, building a ship that's never been built before; partners creating fuel infrastructure; and our parent company Saltchuk, which is both able and willing to invest to 'do the right thing'."