The energy industry is faced with an unprecedented scale of changes. While the industry is not new to disruptions, the current situation is unique, with a confluence of geopolitical, technological, economic, and environmental factors. In the midst of this complex landscape, this article looks at the critical relationship between efficiency, sustainability, and risk within the maritime logistics sector of the oil and gas industry. This analysis comes at a crucial time when the industry is navigating through the challenges of decarbonisation.
The pressing need to meet the emissions-reduction targets set by the Paris Agreement has catapulted the oil and gas industry into the limelight. With ambitious climate commitments made by governments and corporations alike, it is essential for every segment of the industry to step up and contribute to the transition towards a low-carbon state.
Ensuring reliable and efficient logistics remains a critical challenge for a stable and secure supply chain, now further complicated by the additional demands of addressing climate change. The maritime logistics sector, a key component in the movement of oil and gas across international borders, can play a pivotal role in reducing global emissions by improving operational efficiency and adopting smarter and cleaner energy solutions.
The case for digital adoption
Today, digitalisation is regarded as a transformative opportunity. The maritime logistics sector has seen some progress in transition towards automation and digitalisation, but compared to other industries, it still lags in ‘digital maturity’ – the degree to which businesses adapt to a digital environment. This implies that a broader and better coordinated use of advanced data and technologies could present untapped potential for further breakthroughs in efficiency and cost-effectiveness, while cutting emissions and contributing to more resilient supply chains.
A shift towards embracing technologies such as automation, advanced data, predictive analytics, artificial intelligence (AI), the Internet of Things (IoT), and smart systems, among others, can pave the way for significant improvements in operational and environmental performance.
For instance, AI-based predictive analytics emerge as a pivotal tool in offering insights that enhance route optimisation and sailing schedules, as well as in allowing for proactive management of equipment. Hyundai Samho Heavy Industries delivered the world’s first vessel equipped with an AI-based engine automation system, which is able to diagnose the condition of major equipment in the ship in real time, as well as recognize emergency situations, such as fires.
Data analytics can help gain a better understanding of fuel consumption and develop models to accurately predict consumption rates to achieve energy efficiency under different sensitivity analyses. Analytics can also contribute to reducing emissions during logistics operations by providing insights into the environmental impact of offshore projects, helping steer towards more sustainable development procedures.
Furthermore, the adoption of tracking technology introduces a new level of transparency in monitoring oil and gas movements, effectively providing insights into how emissions can be cut during logistics while maintaining security. Hapag-Lloyd, one of the world’s leading liner shipping companies, is building an intelligent container fleet after equipping its entire fleet of 1.6 million containers with real-time tracking devices.
The maritime sector seems to be taking big steps in the autonomous navigation space as well. The Nippon Foundation MEGURI2040 Fully Autonomous Ship Program is leading the world in carrying out demonstration testing of fully autonomous navigation. The programme aims to address some of the pressing issues the sector faces, including challenging working conditions and shortages of human resources, among others.
Given the sector’s complex network, which may involve several independent entities in a single port-to-port operation, the reliance on manual processes and fragmented coordination can exacerbate transit times, delays, and inflate costs. The deployment of smart technology-driven models and the establishment of a digital ecosystem can facilitate seamless data exchange among various stakeholders. This not only streamlines operations but also significantly bolsters the sector’s competitiveness and environmental stewardship.
Improving cyber resilience
This technological shift does not come without risks. The increasing use of automation and internet networks to monitor and control systems are inevitably met with cyberthreats. While cybercrimes have been fewer in the maritime logistics sector than other industries, attacks have been on the rise. And while cybersecurity has emerged as a crucial concern, the industry is still lagging in terms of cyber risk management capabilities and talent required to properly address the issue. Compared to other sectors that have cultivated a security-centric culture, the maritime sector’s slowness to adapt might make it an attractive target for cyber attackers.
Addressing these vulnerabilities is imperative, not only for safeguarding critical infrastructure, but also maintaining operational integrity. The sector can enhance its defences by investing in robust cybersecurity measures, as well as by adopting cutting-edge security technologies. Collaboration with cybersecurity experts and government agencies would also be crucial to stay ahead of evolving threats and ensure a secure logistics network.
Charting a sustainable course
Currently, maritime transport is responsible for around 3% of global greenhouse gas (GHG) emissions as more than 95% of ships operate on internal combustion engines using a range of petroleum products. According to a UNCTAD report, emissions increased by 20% over the last decade, and they could reach 130% of their 2008 levels by 2050 without any sustained actions.
Global CO2 Emissions by Sector
Increasing regulatory and investor requirements have been encouraging one of the hardest-to-abate sectors to search for ways to decarbonise and achieve carbon neutrality by 2050. Both Amazon and IKEA have pledged to use only maritime operators powered by zero-carbon fuels by 2040. Several decarbonisation options are currently being explored, including methanol, ammonia, and hydrogen. While they seem to be promising sources of zero-carbon fuel, their adoption remains in the early stages as they come with significant investment requirements and challenges. They also involve long lead times in scaling up production, building the required bunkering infrastructure, and introducing the necessary safety and regulatory standards.
To address these issues, multi-faceted, phased solutions are important, and LNG serves as a solution. Initially confined to LNG carriers utilising boil-off gas from their cargo, LNG is now increasingly used across various vessels.
In 2022, a diverse portfolio of LNG-fuelled ships was delivered, including LNG-powered crude oil tankers, car and passenger ferries, chemical tankers, and containerships. As orders for LNG-fuelled ships have hit record highs in recent years, this upsurge is poised to boost the global growth of infrastructure dedicated to LNG refuelling, or bunkering.
LNG could also provide advantages by improving the environmental footprint of the sector and meeting current regulatory requirements. It is considered the cleanest fossil fuel that is readily available to be used at scale today, reducing GHG emissions (carbon dioxide and methane) by up to 23% compared with traditional marine fuels, when estimated on a full lifecycle (well-to-wake) basis (Sphera’s 2nd Life Cycle GHG Emissions Study). LNG also enables vessels over the medium term to be compliant with the GHG intensity targets introduced by the European Commission’s FuelEU maritime proposal in 2021.
Over the longer term, the use of increasing proportions of bio-LNG and renewable synthetic LNG (e-LNG) could extend compliance beyond 2040. Alternatively, as the maritime sector continues to move towards low and zero-carbon fuels to reach net-zero targets by 2050, LNG (in its non-liquefied form) could be used as a feedstock to produce low-carbon bunker fuels when used in conjunction with carbon capture and storage technology.
Navigating the future of maritime logistics
Confronted with the critical challenges of climate change, rapid digital transformation, and persistent cyber threats, the maritime logistics industry must re-evaluate and innovate its approach to operations. Embracing digital transformation and cybersecurity, while accelerating the adoption of cleaner energy solutions like LNG is a strategic imperative.
The sector’s ability to adapt and innovate will determine its role in a sustainable energy future and its contribution to achieving global climate goals. This journey of digital transformation is not merely a response to external pressures; it can represent a significant opportunity for further growth and development.
The incorporation of cutting-edge technology, especially in digital and cybersecurity realms, is more than an operational necessity – it is the cornerstone of the energy industry’s future resilience and sustainability. Innovations such as AI and advanced data analytics can redefine how logistics operate, delivering efficiency and environmental performance while empowering the human factor and ensuring resilient supply chains.
The transition away from traditional fuel sources highlights another commitment which extends beyond mere compliance with environmental regulations. It reflects a deeper understanding of the industry’s role in shaping a sustainable energy future by embracing cleaner energy solutions and improving operational efficiency.
Looking ahead, there are a multitude of ways where efficiency, innovation, and sustainability will help shape and transform the sector. The strategies and synergies developed between regulatory bodies and corporations will dictate how successfully the sector navigates these transformative times and meets IMO’s net-zero target by 2050.
The article was published by the LNG Industry.
Picture Credit: pixabay, Peter Lindenau