Royal Dutch Shell PLC hopes to pump natural gas into Great Lakes freighters, as it seeks new ways to lift demand for a struggling commodity.
Shell on Monday unveiled plans to build a small liquefied natural gas plant in Sarnia, Ont., to provide fuel to marine traffic, as well as trucks and trains. Another new plant is planned for Geismar, La., which will serve ships sailing the Gulf of Mexico and the Intracoastal Waterway, along the Gulf and Atlantic coasts of the United States.
The new plants are part of a growing energy industry push to make natural gas into a transportation fuel. Construction is already under way at a similar small Shell liquefaction plant west of Calgary, while a Flying J truck stop in the city opened for LNG refuelling on Friday. The Alberta LNG plant will be complete early next year; the two marine-focused facilities will take three years.
"You really need to start building infrastructure so people have confidence and make that switch," said James Burns, general manager of LNG in Shell's Transport Americas group.
What Shell and others are proposing is, Mr. Burns said, a "game-changing event" for a transportation industry that has spent decades deeply dependent on diesel.
The three plants each have a planned capacity of 250,000 tonnes per year. They are far smaller than the 12-million tonne LNG export plant that Shell and several partners have proposed for the Canadian West Coast. But they will produce 1.5 million litres of LNG per day, enough to fuel 5,000 trucks or a good percentage of the Great Lakes fleet where, depending on size, ships consume between 7,500 and 38,000 litres daily.
Sarnia is an important refuelling hub on the Great Lakes, where some 65 U.S.-flagged and 80 Canadian-flagged ships regularly do business. Most of the U.S. vessels are too big to move through the St. Lawrence Seaway, meaning they are essentially a captive fleet on the lakes – an ideal place for Shell to offer a new type of fuel.
Shell said it expects Ohio-based Interlake Steamship Co., which runs 10 vessels, to be its first marine customer. Interlake executives were not available for comment Monday. But Brigitte Hébert, a spokeswoman with Montreal-based CSL Group Inc., said: "CSL is investigating all forms of clean, efficient marine propulsion, including natural gas powered ships. An LNG fuelling facility on the Great Lakes is seen by CSL as a positive step."
The Great Lakes shipping industry that has struggled in tough economic times. The last new U.S. Great Lakes vessel was built in 1981; the oldest still in service has sailed for more than a century: It was built in 1906.
With no new ships coming, Great Lakes carriers must convert existing vessels, at a cost of $15-million to $25-million, said Glen Nekvasil, vice-president of the Ohio-based Lake Carriers' Association.
Shell said that a litre of diesel will cost roughly 30 per cent less than diesel, and noted that new rules will force upgrades to marine emissions systems in coming years.
But ship owners must decide whether they believe natural gas will stay inexpensive. "It's a decision that is not made lightly," Mr. Nekvasil said.
There are other obstacles, too, including rules and regulations about LNG refuelling. Authorities "have to really make fit-for-purpose permits and standards," said Shell's Mr. Burns.
The St. Lawrence Seaway has never seen an LNG-fuelled ship. But seaway management said there is no reason it can't happen.
"LNG as a fuel is no more of a risk than any of the conventional fuels," said spokesman Andrew Bogora. "LNG is certainly becoming a more important fuel source, and the economic argument for LNG is certainly one that shippers are taking note of."