Container ShipThere are over 90,000 cargo ships powered by oil-based fuels that, according to one study, account for 3-4% of worldwide emissions (including SOx, NOx, PM and CO2). In 2012, the International Maritime Organization sparked a series of regulations aimed at reducing sulfur emissions and in January, 2015, a new U.S. rule went into effect that requires ships operating in coastal waters to make further reductions. With an abundance of U.S. natural gas, one potentially cost-effective compliance option is to transition and build new LNG-fueled ships; however, challenges remain.

Supporters of LNG as a fuel source say it will reduce air pollutants beyond the levels required by current regulations and it allows for long-term cost savings. A single giant container ship running on conventional fuels emits many chemicals and LNG could reduce the emissions of NOx by 60% and SOx by 90-100%. While the upfront costs of an LNG propelled ship are 10-15% greater than conventional ships, in the long-term, supporters believe LNG would save money because of the abundance of natural gas and because existing ships would not have to undergo ongoing, expensive technological retrofitting to meet regulations.

There are numerous challenges, however, with LNG as a cargo-ship fuel. Ship owners traditionally purchase fuel on the spot market at any location but, there are a limited number of LNG fueling stations, and natural gas providers primarily work with long-term take or pay contracts. In addition, retrofitting and building LNG ships is expensive, and since LNG is less energy-dense than traditional fuels, onboard tanks require more space, reducing the available room for cargo. Finally, LNG requires extremely low temperatures and has a high-energy content, so it is difficult to contain and can be hazardous.