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Argus Media Q&A: Aviation may pull feeds away from marine, says BV

Biofuel feedstocks could be routed away from marine fuels to meet demand from the aviation sector if the latter is willing to pay higher prices associated with sustainable aviation fuel, says Bureau Veritas.

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Biofuel feedstocks could be routed away from marine fuels to meet demand from the aviation sector if the latter is willing to pay higher prices associated with sustainable aviation fuel (SAF), Bureau Veritas (BV) Marine & Offshore's global market leader for sustainable shipping Julien Boulland told Argus. Edited highlights follow:

19 July 2024

Marine biodiesel has been the largest alternative fuel uptake, with over 1mn t sold in Rotterdam and Singapore last year. But with Argus assessments showing premiums above $225/t to VLSFO dob ARA, how do you see marine biodiesel demand in the medium- to long-term?

Shipowners and ship operators have to run an individual cost-analysis on whether the premiums could be offset by potential savings under EU emissions trading system (ETS) and FuelEU Maritime regulations, as well as any future regulations such as the International Maritime Organisation (IMO) economic pricing mechanism.

In terms of emissions, biofuels still emit CO2 on a tank-to-wake basis, but less on a well-to-wake basis compared to their fossil equivalents. This will also vary depending on the feedstock for the biofuel as well as the production process.

Under the current IMO regulations for energy efficiency, including the Ship Energy Management Plan (SEEMP) and its requirements for fuel reporting (DCS), there might be some indirect commercial benefits for owners, too. For example, a better CII (Carbon Intensity Indicator) score may make a vessel more appealing to charterers and help its owner secure more favourable rates.

There are also other factors to consider, such as Scope 3 emissions rights, which can influence demand, as we currently see from voluntary demand from cargo owners seeking those documents.

But this will also have a geographic impact on demand, as larger container liner companies usually utilise the east-west route and they might prefer to opt for bunkering the marine biodiesel blend in Singapore due to lower prices.

What are the risks associated with bunkering marine biodiesel in relation to conventional ship engines? How significant is the recent FOBAS report that implied a correlation between the use of "unidentified" biofuels and engine pump injector damage?

We have supported our shipowner clients in numerous pilots to trial biofuels such as fatty acid methyl ester (Fame) and hydrotreated vegetable oil (HVO) in variable blends.

Overall, these trials have gone smoothly, but we have learned a few things along the way.

Firstly, engines do not need to be modified, but since biofuels have slightly different physical properties, it is necessary to find the right engine adjustments. A very good knowledge of the fuel properties is key in determining the right adjustments, and the new revision of ISO 8217 on marine fuel specifications is crucial in supporting this process. Another key finding is the importance of receiving full information on fuel characteristics from the supplier. Finally, BV plays a key role in ensuring full fuel certification on several aspects, including sustainability and physical properties.

Used cooking oil (UCO) can also feed into SAF and with potentially greater refining margins. Do you think some feedstocks will be pulled away from marine?

When it comes to methanol, we believed marine would take up more of the feedstock compared with the chemicals industry due to greater willingness to pay larger premiums.

But with biofuels, it seems to be the other way around where aviation could end up pulling biofuel feedstocks away from maritime. In terms of fuel consumption, the marine and aviation industries are comparable but if aviation are willing to pay more, then it will likely get more of the feedstocks required to produce SAF.

What are the implications of the new ISO specifications, what are the key takeaways for marine biodiesel uptake?

More has to be done, but now we have parameters for assessing biofuel blend specifications.

It was very well accepted by the industry, and now operators and shipowners have a standard to rely on. 

But it doesn't resolve the question around feedstock cross-industry competition. However, it does also open the door for off-spec Fame residue blends to become ISO-certified — depending on further testing.

With IMO aiming for "global regulations for a global market", how do you see conflicts between different regulations affecting the market?

We are closely following the IMO development process for a global economic pricing mechanism.

IMO has assigned a working group of technical experts to look at this mechanism from an apolitical perspective.

In terms of potential regulatory conflicts, we have the example of the Netherlands, where the Dutch emission authority requires the delivery of Proof of Sustainability (PoS) certificates for applying to the scheme of Dutch renewable tickets (HBE-G) which can be traded, but this PoS cannot be used for other purposes, such as the EU ETS. To circumvent this hiccup, we may see the development of new digital certificates, such as an accompanying ISCC-certified Proof of Compliance (PoC).

By Hussein Al-Khalisy

Related: FOBAS announces publication of ISO 8217:2024 marine fuel specifications and FAQs

 

Photo credit and source: Argus Media
Published: 23 July, 2024

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Alternative Fuels

DNV: Use of ammonia as a bunker fuel among highlights in IMO MSC 109

Amendments to the IGC Code to enable the use of ammonia cargo as fuel were adopted and interim guidelines for the general use of ammonia as fuel were approved during session.

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Classification society DNV on Saturday (7 December) shared a statutory news article that provides a summary of the 109th session of the International Maritime Organization’s (IMO) Maritime Safety Committee (MSC 109) including adopted amendments to the IGC Code to enable the use of ammonia cargo as fuel and approved draft interim guidelines for ammonia as a marine fuel.

The following is an excerpt from the news update relating to bunker fuels:

The 109th session of the IMO’s Maritime Safety Committee (MSC 109) was held from 2 to 6 December 2024. Amendments to the IGC Code to enable the use of ammonia cargo as fuel were adopted, and interim guidelines for the general use of ammonia as fuel were approved. The IGF Code was amended to improve the safety of ships using natural gas as fuel. MSC 109 further approved draft SOLAS amendments to enhance the safety of pilot transfer arrangements and progress was made on the new safety code for Maritime Autonomous Surface Ships.

Meeting highlights

  • Adopted amendments to the IGC Code to enable the use of ammonia cargo as fuel
  • Adopted amendments to the IGF Code for ships using natural gas as fuel
  • Approved draft interim guidelines for ammonia as fuel
  • Approved draft amendments to SOLAS Regulation V/23 and the related performance standards to improve the safety of pilot transfer arrangements
  • Advanced the non-mandatory Code on Maritime Autono- mous Surface Ships (MASS)

Amendments to mandatory instruments 

Ammonia cargo as fuel (IGC Code) MSC 109 adopted amendments to Paragraph 16.9.2 of the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (IGC Code) to enable the use of ammonia as fuel on ammonia carriers.

An MSC circular to encourage the voluntary early implementation of the amendments to Chapter 16 was approved. 

The amendments will enter into force on 1 July 2026.

Safety of ships using natural gas as fuel (IGF Code)

MSC 109 adopted amendments to the International Code of Safety for Ships Using Gases or Other Low-flashpoint Fuels (IGF Code), based on experience with the code since its entry into force in 2017.

The amendments include:

  • Clarified application provisions
  • Alignment with the IGC Code on suction wells for fuel tanks extending below the lowermost boundary of the tank
  • Alignment with the IGC Code on discharge from pressure relief valves to discharge to tanks under certain conditions
  • Clarified requirements to fire insulation for deck structures in relation to fuel tanks on open deck
  • Clarified requirements for hazardous ducts through non-hazardous spaces and vice versa
  • Updated requirements for the hazardous zone radius for fuel tank vent mast outlets, increasing to 6 metres for zone 1 and 4 metres for zone 2

The amendments will enter into force on 1 January 2028.

Goal-based new ship construction standards

Goal-based standards (GBS) for the new construction of bulk carriers and oil tankers are, conceptually, the IMO’s rules for class rules. Under the GBS, IMO auditors use guidelines to verify the construction rules for bulk carriers and oil tankers of class societies acting as Recognized Organizations (Resolution MSC.454(100)).

Initial GBS verification of Biro Klasifikasi Indonesia (BKI) BKI has requested GBS verification of their ship construction rules for bulk carries and oil tankers. MSC 109 agreed that the BKI rules comply with the GBS, provided non-conformities and observations are rectified and verified in a new audit.

North Atlantic wave data (IACS Recommendation No. 34, Revision 2) MSC 109 noted that IACS is currently undertaking a review of its Common Structural Rules (CSR) for bulk carriers and oil

tankers to reflect advances in data, materials, technologies and calculation methodologies. The CSR are implemented in the individual class rules of the IACS members, which are subject to compliance with the GBS.

MSC 109 further noted that IACS has now issued a revision of the North Atlantic wave data to ensure more scientific data as a basis for the rule formulas in the CSR. The new scatter diagram in Revision 2 of IACS Recommendation No. 34 shows the probability of occurrence of different sea states and is based on wave data from advanced hindcast wave models combined with ships’ AIS data for all SOLAS vessels in the period from 2013 to 2020.

MSC 109 agreed that an observation from the initial CSR audit in 2015, that the scatter diagram in Revision 1 of IACS Recommendation No. 34 was based on past statistics, was now considered addressed.

MSC 109 further invited IACS to provide more information about the assumptions, modelling and technical background for Revision 2 of IACS Recommendation No. 34, and agreed that the GBS audit of the revision to follow should be carried out in conjunction with the consequential rule changes in the CSR.

New technologies and alternative fuels 

Identification of gaps in current IMO instruments MSC 109 continued its consideration of potential alternative fuels and new technologies to support the reduction of GHG emissions from ships from a safety perspective. The intention is to identify safety obstacles, barriers and gaps in the current IMO instruments that may impede the use of the various alter- native fuels and new technologies.

MSC 109 agreed to add “swappable traction lithium-ion battery containers” to the list of alternative fuels and new technologies. The list already includes fuels and technologies such as ammonia, hydrogen, fuel cell power installations, nuclear power, solar power, wind power, lithium-ion batteries and supercapacitor energy storage technology.

Recommendations to address each of the identified barriers and gaps in the IMO regulatory framework will be considered in a Correspondence Group until MSC 110 (June 2025). Application of the IGF Code

MSC 109 agreed on draft amendments to SOLAS to clarify that the IGF Code applies to ships using gaseous fuels, whether they are low-flashpoint or not. The term “gaseous fuels” was added to the definitions in SOLAS Regulation II-1/2 and to the application provisions of SOLAS Regulations II-1/56 and 57.

The draft amendments are expected to enter into force on 1 January 2027, subject to adoption by MSC 110 (June 2025).

Carriage of cargoes and containers

Ammonia as fuel

MSC 109 approved draft interim guidelines for the safety of ships using ammonia as fuel.

Ships carrying liquefied gases in bulk (IGC Code)

MSC approved draft amendments to the IGC Code to incorporate the large number of Unified Interpretations developed since the latest major review of the code, which entered into force in 2016. The primary objective of the draft amendments is to remove ambiguity and promote the consistent implementation of the IGC Code requirements.

 

Photo credit: CHUTTERSNAP on Unsplash
Published: 9 December, 2024

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Methanol

Methanol Institute welcomes HIF Global as its newest member

HIF Global will collaborate with industry leaders, policymakers, and stakeholders to promote the adoption of methanol-based solutions and e-Fuels in the transition to a low-carbon future.

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HIF Global joins Methanol Institute as its newest member

The Methanol Institute (MI) on Thursday (5 December) welcomed HIF Global as its newest member. 

HIF Global is an innovator in the production of e-Fuels, offering sustainable alternatives to fossil fuels that are compatible with today’s transportation and industrial infrastructure.

As part of MI’s membership, HIF Global will collaborate with other industry leaders, policymakers, and stakeholders to promote the adoption of methanol-based solutions and e-Fuels in the transition to a low-carbon future.

MI said HIF Global’s pioneering approach combines renewable energy with technology to produce green hydrogen through electrolysis and capture CO₂ from atmospheric, biogenic, and industrial sources. 

These components are then synthesised to create e-Fuels, including e-Methanol for ships, e-SAF for planes, and e-Gasoline for cars, which are crucial to decarbonizing global transportation and reducing greenhouse gas emissions.

At the heart of HIF Global’s operations is HIF Haru Oni in Magallanes, Chile, the world’s first operating e-Fuels facility, which was inaugurated in December 2022. The company is scaling its production globally, with projects underway in the United States, Chile, Australia, Uruguay and Brazil. Its most advanced commercial-scale project, the HIF Matagorda e-Fuels Facility in Texas, is designed to produce 1.4 million metric tons (466 million gallons/1.76 billing liters) of e-Methanol annually once fully operational.

“We are thrilled to welcome HIF Global to the Methanol Institute,” said CEO of MI Greg Dolan. 

“HIF Global’s work in e-Fuels, particularly e-Methanol, is a crucial contribution to the energy transition. Their innovative approach underscores methanol’s potential as a key solution for decarbonizing transportation and industry, and we look forward to collaborating to accelerate this transformation.”

Cesar Norton, President and CEO of HIF Global, said: “e-Fuels are essential to achieving a sustainable future. We applaud the Methanol Institute for their leadership in methanol markets and join them to drive forward the vision to expand e-Methanol based e-Fuels that support our global circular economy.”

“Together we will advance the energy transition by pioneering e-Methanol solutions that utilize existing infrastructure to inspire innovation and reduce costs.”

 

Photo credit: Methanol Institute
Published: 9 December, 2024

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Biofuel

ENGINE: The Week in Alt Fuels: Golden B100 window

In the past week, ENGINE has seen delivered 100% used cooking oil methyl ester biofuel (UCOME B100) indicated way above its estimated UCOME cargo price in Singapore.

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Bunker tanker “MT MAPLE” owned Global Energy Group

Sometimes first-movers can gain an advantage by offering products that others can’t with handsome margins to show for.

That is what’s happened in certain biofuel bunker markets. Bunker suppliers with chemical bunker tankers seem to be reaping the rewards of their investments with sizeable bunker delivery price premiums.

In the past week we have seen delivered 100% used cooking oil methyl ester biofuel (UCOME B100) indicated way above our estimated UCOME cargo price in Singapore. If bunker suppliers fix stems at these price levels, it could help their payback times on chemical tanker investments.

To break down our estimate, PRIMA Markets has assessed UCOME FOB China – a major producer - at $1,000-1,015/mt in the past week. The freight rate for a 40,000 mt medium-range tanker sailing from China to Singapore has been $15/mt. Delivered B100, meanwhile, has been indicated at $1,290-1,300/mt, which leaves $260-285/mt to cover logistics costs like storage, handling and delivery to a receiving ship with a chemical bunker tanker.

That looks like a chunky bunker margin compared to estimates from the ARA, where we have recently seen delivered UCOME B100 fixed at both $5/mt premium and $5/mt discount to Argus UCOME barges, a key benchmark for UCOME pricing in the region. B100 bunker prices are sharper in the ARA not just because of a more established pricing index, but because a greater number of suppliers can offer B100. They are not bound by the same biofuel delivery vessel restrictions as in other bunker locations.

So-called IMO Type II chemical tankers - which can also typically supply methanol - are required to be allowed to supply bio-bunker blends above 25% in ports outside of the ARA, where stems are delivered by river barges exempt from the IMO rules. A growing number of bunker suppliers have invested in them, but only a few of these vessels have entered into operation yet.

Vitol Bunkers, Global Energy, Fratelli Cosulich, BMT, Stena Oil and Peninsula are among the few suppliers with chemical bunker tankers in their fleets that can deliver B100 stems in non-ARA ports today. Singaporean Consort Bunkers has placed orders for up to 20 of these chemical tankers, while Fratelli Cosulich has another two on order and Peninsula-affiliated Hercules Tanker Management has six with an option for another four.

TFG Marine’s Singapore entity will take four of Consort Bunker’s vessels and one of Fratelli Cosulich’s vessels on time charters. TotalEnergies and Mitsui & Co. have both supplied B100 in Singapore with Global Energy’s Maple chemical tanker.

Because of early entries into this burgeoning B100 market, these suppliers are among the only 1-3 suppliers in a given bunker location. Biofuel bunker demand to date has mostly revolved around Scope 1 and 3 emission reductions, with container liners and car carrier companies as typical uptakers.

But with FuelEU Maritime less than a month away, more companies will be enquiring about stems with higher biofuel contents. They will run some vessels on B100 and average out their greenhouse gas (GHG) intensity reductions across a pool of vessels, or sell their compliance surpluses in one of the many over-the-counter markets that have popped up.

That leaves a golden pricing window for forward-thinking bunker suppliers as biofuel goes from niche to necessity for more EU-trading vessels.

In other alternative news this week, a string of headlines showed that LNG is still very much in vogue.

LNG bunker supplier Titan has expanded a deal to supply mass-balanced liquified biomethane (LBM) to Norwegian shipping firm United European Car Carriers' (UECC) dual-fuel LNG vessels. Since July, over 95% of the fuel delivered to UECC’s vessels by Titan has been mass-balanced LBM.

More and more fleet renewal programmes boast lower-carbon vessels. A.P. Moller-Maersk has had bragging rights for its methanol-capable container ship orders this decade, before recently pivoting to LNG orders and getting some flack from environmental organisations. This week it put in orders for 20 container ships with LNG-capable engines, and with that it concluded its fleet renewal order target this time around.

And Canadian bunker supplier Seaspan Energy has delivered its first ship-to-ship LNG bunker stem to a container ship in California’s Port of Long Beach.

By Erik Hoffmann

 

Photo credit: Global Energy Trading
Source: ENGINE
Published: 9 December, 2024

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