* EU wants all ports to have LNG fuel stations by 2020
* Shale gas, LNG could push gas ahead of oil as top fuel
By Henning Gloystein and Jonathan Saul
LONDON, March 5 (Reuters) - North European ports are leadinga switch to natural gas as a cleaner way to power ships thanburning oil-based bunker fuel, while regulation and costbenefits are likely to convince other sectors to follow incoming years.
Gas has been used so far mostly for power generation andheating, while oil products have dominated the transport sector.
The outlook for cheaper gas in the wake of the shale gasboom in North America as well as toughening environmentalregulation in Europe have driven up investment in gas as atransport fuel.
Ports in northern Europe, pushed by regulation to clean up amajor source of pollution, are now at the forefront with theplanned installation of liquefied natural gas (LNG) fuelstations for ships, known as bunkering, before the end of thedecade.
"At present there are around 20 vessels in operation usingLNG as a marine fuel; almost all are in Scandinavia. Many moreare on order, and even more will be likely to be ordered," saidAndrew Clifton, general manager of the Society of InternationalGas Tanker and Terminal Operators.
The shift in ship engines will follow.
"It will be at least two years before major deep-seashipping companies order LNG-powered engines once financingbecomes more available," said Arthur Barret, director of LNGbunkering at French group Gaztransport & Technigaz.
"By then, hopefully, there will also be more infrastructureto load LNG as a ship fuel," he added.
An European Union draft law has set a goal to cut greenhousegas emissions from the shipping sector by at least 40 percent by2050 from 2005 levels. The European Commission is pushing forregulation that will oblige all major ports in the EU to provideLNG refuelling facilities by 2020.
"There seems to be a very strong economic argument in favourof supporting LNG in shipping," a European Commission workingdocument published in January said.
Swedish infrastructure company Swedegas and Dutch oil andgas storage company Vopak are jointly investing around1 billion Swedish crowns ($155.3 million) in an LNG terminal atthe port of Gothenburg, Sweden's biggest. Swedegas said it wasalso looking to fit other Swedish ports with LNG stations.
"We can start bunkering in Gothenburg in 2015, and activitywill be expanded by 2017," a spokeswoman for Swedegas said.
The Belgian port of Antwerp, one of Europe's biggest, ischairing an international working group with other leadingports, including Amsterdam, Bremerhaven, Brunsbuttel,Gothenburg, Hamburg, Le Havre, Los Angeles, Long Beach,Rotterdam, Stockholm and Zeebrugge, to develop guidelines onsafe procedures for LNG bunkering operations.
Rotterdam and Singapore, both major transport hubs, havealready announced plans to invest in facilities that would allowships to take LNG as a marine fuel, and Norway has alreadydeveloped a state-driven national LNG marine transport fuelstorage network.
BIG CHANGE AHEAD
Ports in North America, also affected by new industrystandards to reduce pollution from ships within so-calledEmission Control Areas, are beginning to follow suit.
Anglo-Dutch energy major Royal Dutch Shell said onTuesday it would build two small-scale gas liquefaction units inLouisiana and Ontario, with plans to become operational by 2016,in order to unlock value in the use of LNG as a transport fuel.
"Populated coastal areas have emissions standards thatprohibit the use of heavy fuel oil, so 'cleaner' options shouldbecome increasingly popular in coming years," Urs Dur, managingdirector of Clarksons Capital Markets, said in a report.
Even so, the shift will take time and start in bigcommercial markets because of the need for massive investment inglobal infrastructure to transport and distribute gas, startingwith LNG import and export terminals at ports.
Shell has said gas will ultimately overtake oil as theworld's most used energy source, driven largely by growth in thetransport sector.
"In the 2030s, natural gas becomes the largest globalprimary energy source, ending a 70-year reign for oil," thecompany said in a report published in February.
Shell did not see an end to the primacy of oil in the roadtransport market before 2040, however. In the auto market,gas-powered vehicles also will face stiff competition fromelectric cars, it added.
China and the United States are both making attempts toreplace more oil-powered vehicles with cleaner gas.
"The high energy density of the fuel increases the drivingrange; this makes LNG an interesting option for the heavy-goodstransport sector," said Rolande LNG, a Dutch road gastransportation company, adding that it was already relativelywell developed for use in trucks in the United States.
In China, the government has targeted the country's vasttransport sector as a preferred user of natural gas.
