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Bio-LNG provides ‘competitive advantage’ in shipping industry

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Bio-LNG provides a ‘competitive advantage’ in the shipping industry, according to SEA-LNG, providing ‘favourable finance’ for longer, through reduced emissions.

For every 10% of bio-LNG dropped in and blended with LNG as a marine fuel, a vessel can achieve two additional years’ compliance with the Annual Efficiency Radio (AER) curve, used to secure funding under the Poseidon Principles. This extends the average seven-year additional competitive advantage for Poseidon Principle loans achieved with LNG alone.

SEA-LNG’s new analysis compares LNG plus bio-LNG from a zero-carbon, sustainable source with conventional vessel fuels such as HFO, VLSFO, and MGO.

Bio-LNG is ‘fully compatible’ with existing LNG infrastructure and technologies and is increasingly recognised as a sustainable fuel that can be ‘dropped in’ and blended with LNG. Therefore, it represents one of the most viable pathways to decarbonisation currently available to owners, said SEA-LNG.

LNG delivers greenhouse gas (GHG) reductions of up to 21% well-to-wake and up to 28% tank-to-wake. This means that LNG vessels perform well, according to Poseidon Principles’ funding criteria, which were instigated by financial institutions to improve strategic decision-making and shape a better future for the shipping industry.

“As banks increasingly align with green finance principles, LNG offers benefits for emissions reduction and provides an ‘extended compliance runway’ for Poseidon Principle sustainability-linked loans,” said John Hatley, SEA-LNG investment committee chairman.

“An investor preserves more favourable financing terms compared to conventional marine fuels such as HSFO, VLSFO, and MGO. The use of bio-LNG as a drop-in fuel may extend this runway even further – an additional two years for every 10% dropped-in. This means lower ship emissions now and a compliance extension that yields long-term competitive advantage.”

A recent CE Delft study concluded that bio-LNG is a ‘scalable solution’ for the maritime sector. It also showed that bio-LNG will likely be commercially competitive relative to other low- and zero-carbon fuels.

CE Delft’s analysis is supported by a recent report by the International Energy Agency. The report concludes that feedstocks available for sustainable production of biogas and biomethane are huge, but only a fraction of this potential is used today.

For biomethane to realise its potential, policies should remove barriers to scaling and create a single, cross-border market for biomethane and bio-LNG.

Peter Keller, chairman of SEA-LNG, added: “As GHG emissions are cumulative, the decarbonisation challenge only gets tougher the later we take steps to address it.

“Waiting for options is not an option. The industry must act now using LNG and bio-LNG that we know provide benefits today and into the future.

“With the introduction of bio and synthetic variants, LNG not only provides a pathway to decarbonisation in its own right but also provides the physical infrastructure and asset base that can be used by other alternative fuels, when and if they become commercially viable.”