Australia: Woodside eyes piece of LNG bunkering pie
Woodside Energy Ltd., the largest Australian natural gas producer which operates around 6% of global liquefied natural gas (LNG) supply, on Monday (29 July) said it will be making plans to start LNG bunkering operations.
Meg O’Neill, Chief Operations Officer at Woodside, was giving a speech at AmCham, an organisation that promotes international trade and commerce and a strong relationship between America and Australia, when the noted of the development.
Her speech, which describes opportunities for the company to invest in LNG as a marine fuel and its logic in doing so, is as follows:
We know we need to be strategic and ambitious. And there is no better example of this than how we have in recent years worked to support the emergence of a market for LNG fuels.
We have not done this alone. And we have not yet reached our goal. But we are seeing some promising developments. This is a story that is much bigger than Woodside. It’s about Western Australia grasping an opportunity to take advantage of international developments to derive both economic and environmental benefits from its natural resources.
Almost three years ago, the International Maritime Organisation agreed that from January 2020 all ships would be required to use lower-sulphur fuel. That is, fuel with a maximum sulphur content of 0.5%.
The IMO’s objective was to reduce the health impacts of air pollution from shipping, which is blamed for hundreds of thousands of premature deaths each year from lung cancer and cardiovascular disease. The IMO has since indicated it will also impose future controls on greenhouse gas emissions from shipping.
The start of the lower-sulphur era in January 2020 will create upheaval for global shipping. But for Western Australia, it creates opportunity. This state has world-class LNG supplies close to the busiest bulk commodity trading route in the world, shipping iron ore exports to Asia.
Soon after the IMO’s ruling, an industry coalition was formed that would lay the vital groundwork to facilitate LNG fuelling of commodities exports from Australia by designing the vessels that could ply those routes.
The Green Corridor Joint Industry Project involved the major mining companies – BHP, Rio Tinto and Fortescue – along with Woodside and shipping industry partners. Together we developed a design of LNG-fuelled bulk carriers capable of supporting iron ore exports to Asia.
Now BHP is taking this opportunity to the next step, announcing just two weeks ago the world’s first tender for LNG-fuelled transport for up to 27 million tonnes of its iron ore.
It’s a significant move and this tender will no doubt be hotly contested. Woodside has already been working towards this for some time. We took delivery of our own LNG-fuelled marine support vessel, the Siem Thiima, in 2017 and have been preparing the infrastructure to enable LNG fuelling of bulk carriers at their home port.
These ships will deliver to many ports across north-east Asia, but they will always come home to the Pilbara, which is also home to significant LNG production. So they don’t need to waste time and fuel diverting to find LNG elsewhere in the region.
Last week, consultancy Energetics reported that “well-to-wake” lifecycle greenhouse gas emissions for iron ore carriers operating from the Pilbara would be reduced by up to a third by using LNG from Woodside, rather than heavy fuel oil.
This could yield greenhouse gas savings of up to 5.8 million tonnes of carbon dioxide equivalent per year if all iron ore exports from the Pilbara were shipped using Pluto LNG. That’s equal to taking 1.8 million cars in Australia off the road. Emissions of sulphur oxide and particulate matter would be reduced by more than 95% and nitrogen oxide by an estimated 85%.
The environmental prize is large – and so is the size of the economic prize. The potential market for LNG as a marine fuel is vast.
WA’s Minister for Regional Development Alannah MacTiernan put it well at a Marine Fuels Institute roundtable last week when she said this was an opportunity to “drive emissions down but still have a vibrant economy”.
If all shipping from the Pilbara transitioned to LNG, it would be around 4 million tonnes of LNG fueling. It’s potentially a very significant new market and would create a new industry in WA that could grow to a fleet of bunker vessels with hundreds of new high-skilled long-term jobs. This is an opportunity to demonstrate industry collaboration at its best, using Australian LNG to fuel Australian resources exports.
I’ve been asked recently if our Burrup Hub growth strategy is contingent on the market for LNG fuels taking off. It’s not. We know there will be enough global demand for LNG to soak up supply from both Scarborough and Browse.
The LNG Fuels opportunity is an adjacent opportunity. You might say it’s the cherry on top – and it’s a blindingly obvious market for WA to try to capture, with the potential for a whole new industry and the jobs and investment that brings. And now is the time to be going after that opportunity.
Related: Woodside tendering for LNG bunkering vessel for West Australia ops
Related: Gas Energy Australia highlights LNG bunkering uptake barriers
Related: Woodside: Dampier LNG bunkering a successful example for the Asia-Pacific
Related: Woodside: Focus on the ‘fundamentals’ for LNG-fuelled vessel success
Related: HHI’s LNG-fuelled VLOC receives approval in principle
Photo credit: Woodside
Published: 2 August, 2019
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