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Argus Media Q&A: Methanex says future of biomethanol is in shipping

Methanex, one of the largest methanol producers, told Argus in an interview, how it sees the future of biomethanol in the shipping industry and challenges in developing the new bunker fuel.

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Canadian firm Methanex, one of the largest methanol producers, told Argus how it sees the future of biomethanol in the shipping industry, and the challenges the development of this new fuel could face. The firm recently completed what it dubbed the first 'net zero' shipping voyage fuelled by biomethanol blend.

27 March 2023

What role do you think renewable methanol will play in achieving net zero emissions in the shipping industry?

Methanol has emerged as a leading alternative marine fuel as shipping companies recognise its low-carbon potential. Currently, there are more than 125 vessels operating or on order and many more projects under development for methanol newbuilds and conversions.

As most new vessels are starting to come online over the next couple of years, regulations and bunkering infrastructure are being developed in ports globally to support the transition. Because methanol is already used in over 120 ports and is handled and bunkered similarly to diesel, we expect the transition to be relatively straightforward for methanol compared with other alternative fuels.

How was the 'net zero' of your first biomethanol voyage counted?

During the 18-day voyage, net-zero greenhouse gas emissions on a lifecycle basis — including the production process — were achieved through the use of a fuel blend, comprised of 80pc ISCC certified bio-methanol with 20pc natural gas-based methanol.

The bio-methanol used in this voyage was produced from renewable natural gas (RNG) derived from captured methane from animal manure feedstock, which would have otherwise been emitted into the atmosphere. Instead, burning it as a fuel, which releases CO2, has a far lower warming effect than the previously captured methane, which is 25x more potent than CO2 according to the EPA. Marine gasoil (MGO) was also used as a pilot fuel, representing approximately 5pc of the fuel used.

Bureau Veritas then conducted an audit of the greenhouse gas emission calculations from the biomethanol fuel blend — plus all the other fuels — consumed during the voyage. Also, the Climate Neutral Commodity, an independent certification party validated the net-zero voyage against best practices as defined by the ISCC and issued the certification.

Do you see the demand for renewable methanol mainly coming from the shipping industry or elsewhere?

We see significant demand potential emerging in the marine sector as a large and growing number of shipping companies are ordering — or considering — methanol vessels as greenhouse gas regulations become more stringent. We are also seeing increasing interest in lower-carbon methanol for use in other fuel and chemical applications.

How does the demand for green methanol compare with green ammonia? Does green methanol have a competitive advantage, if any?

One of the unique qualities of methanol versus ammonia is that it is a liquid fuel under ambient conditions. This makes methanol easy to transport, store and bunker using standard safety procedures that are similar to the well-established procedures for diesel. Thus, the cost of methanol-fuelled vessels and land-based infrastructure to store and supply methanol is significantly lower than other alternative fuels that require pressurization or cryogenics.

Methanol also has a higher volumetric energy content than alternative fuels such as ammonia or hydrogen and requires less frequent bunkering as well as being more environmentally benign compared with other options as it dissolves in water and biodegrades rapidly.

What are your future plans for green methanol production?

While today we produce methanol from natural gas, methanol can also be made from renewable sources, such as renewable natural gas, biomass, and green hydrogen combined with recycled carbon dioxide. Because our manufacturing facilities have a lifespan of several decades, and the process to make methanol remains largely the same regardless of feedstock used, we can easily modify existing infrastructure to produce lower-carbon methanol. Methanex is currently exploring pathways to gradually decarbonise our existing plants using alternative feedstocks or renewable electricity.

In addition, pursuing staged investments allows us to adjust production based on product demand and feedstock availability. We also plan to invest an additional $1 mn in 2023 to refine the potential scope and for a Carbon Capture and Storage (CCS) investment in Geismar, Louisiana.

This year, we will also conduct a technical and economic feasibility study using green hydrogen at existing plants to produce methanol with a lower carbon intensity. If the concept proves viable, lower-carbon methanol could be produced alongside conventional methanol at some of our sites, to match the growing market needs for low-carbon methanol.

What challenges are you facing in achieving these plans?

'The green premium' refers to the gap between the cost to produce lower-carbon methanol and what customers are willing to pay for it. While we are seeing the gap narrow, this remains a key challenge to scaling the production of blue or green methanol.

We are currently working to develop concepts, test feasibility and liaise between customers and suppliers on this. As markets and regulations shift and government incentives evolve, we are continually working to understand what solutions our customers want, gauge their willingness to pay a premium for blue or green methanol, and facilitate the supply needed to meet demand.

By Portia Kentish

 

Photo credit and source: Argus Media
Published: 30 March, 2023

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LNG Bunkering

Titan completes first STS LNG bunkering operation in Cuxhaven

Port of Cuxhaven in Germany had previously only seen LNG operations conducted via truck and currently only permits LNG bunkering at one berth, says Titan.

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Titan completes first STS LNG bunkering operation in Cuxhaven

LNG bunker fuel supplier Titan on Thursday (11 July) said it completed the first-ever LNG bunkering operation by ship in the port of Cuxhaven.

Titan’s bunker vessel Optimus successfully delivered LNG to dredger Vox Ariane operated by its long-term client Van Oord. 

“Our ship-to-ship bunkering in Cuxhaven represents a pioneering step in the region's LNG infrastructure development, as the port had previously only seen LNG operations conducted via truck and currently only permits LNG bunkering at one berth,” it said in a social media post. 

“LNG infrastructure development is part of a broader trend, with more ports across Germany adopting LNG operations to support shipping’s clean fuels transition.”

Titan added the improved LNG bunkering capabilities in Cuxhaven, a Niedersachsen Ports GmbH & Co. KG port, also opened up the pathway to maritime decarbonisation via liquified biomethane (LBM) and then renewable e-methane going forward.

 

Photo credit: Titan
Published: 12 July, 2024

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LNG Bunkering

UECC “Auto Achieve” receives first LNG bunker fuel delivery by barge in home country

Firm said it received the first ever supply of LNG by barge to their multi-fuel LNG battery hybrid car carrier in the Port of Drammen, Norway.

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UECC “Auto Achieve” receives first LNG bunker fuel delivery by barge in home country

Norwegian roll-on/roll-off shipping line United European Car Carriers (UECC) on Wednesday (10 July) said it received the first ever supply of LNG by barge to their multi-fuel LNG battery hybrid car carrier Auto Achieve in the Port of Drammen on 4 July.

The firm said this was the first time UECC received LNG by barge to any of their vessels in their home country Norway. 

“We also believe that it was the first time LNG was delivered by barge to any vessel in Drammen, and most likely the entire Oslofjord,” UECC said in a social media post.

The LNG was supplied by the Molgas Energy Holding vessel Pioneer Knutsen, owned by Knutsen Group OAS.

“UECC is very pleased to see the expansion of the LNG barge network in Norway,” it said. 

 

Photo credit: UECC
Published: 12 July, 2024

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FuelEU

OceanScore reveals ship segments set to feel EUR 1.3 billion sting of FuelEU penalties

Container segment will bear the brunt of FuelEU costs, accounting for 29% of gross penalties, followed by RoPax on 14% with tankers and bulkers each on 13%, says firm.

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OceanScore Managing Director Albrecht Grell

Hamburg-based technology platform OceanScore on Tuesday (9 July) said the financial impact of FuelEU Maritime is focusing the minds of shipping companies as they face potential penalties for non-compliance with greenhouse gas (GHG) intensity reduction targets - and OceanScore has identified those segments set to be hit hardest.

The following is an article by OceanScore elaborating on the matter:

Vessels in the passenger/cruise, container, RoPax, bulker and tanker segments will have significant cost exposure from the complex regulation due to be implemented from 1 January next year, despite a relatively modest initial target of a 2% cut in GHG intensity, according to OceanScore.

The firm’s data analytics team has calculated that shipping will rack up total FuelEU penalties of €1.345 billion in 2025 through analysis of the 13,000 vessels over 5000gt trading within and into the EU/EEA that are subject to the regulation. This is based on data on trading patterns and fuel mix from 2022 - the last full year currently available.

Containers bear burden

The team has been able to determine FuelEU compliance balances and resulting penalties for each vessel using OceanScore’s proprietary data modelling incorporating AIS data, Thetis emissions data, bunker intelligence and advanced analytics/AI. It has factored in the likely fuel mix for each vessel between EU ports and to/from the EU, as well as in ports.

Vessels will be hit with a penalty of €2400 per tonne of VLSFO-equivalent for failing to meet the initial 2% reduction target relative to a 2020 baseline for average well-to-wake GHG intensity from fleet energy consumption of 91.16 gCO2e per megajoule (MJ) - or emissions per energy unit. The GHG intensity requirement applies to 100% of energy used on voyages and port calls within the EU/EEA and 50% of voyages into and out of the bloc.

As with the EU Emissions Trading System (EU ETS), it is the container segment that will bear the brunt of FuelEU costs, accounting for 29% of gross penalties, followed by RoPax on 14% with tankers and bulkers each on 13%.

“It is critical for shipping companies to determine a baseline for expected FuelEU costs to secure proper planning and budgeting processes to compare different mitigation options, as well as to decide what to do with outstanding compliance balances,” says OceanScore Managing Director Albrecht Grell.

“This will require, to a higher degree than the EU ETS, a corporate strategy to determine how to reduce the compliance balance/deficit, how to commercialise a surplus and deal with deficits that remain.”

Wide spread of vessel liabilities

OceanScore has found that liabilities per vessel will differ widely across the various segments due to increasingly diversified fuel choices, including greater uptake of biofuels and LNG. Passenger vessels will be penalised the most with an average of €520,000 per vessel annually, followed by RoPax at €480,000 and RoRo at €314,000, with an average penalty for container ships of only €214,000, according to OceanScore.

Grell points out there are also massive discrepancies between vessels within these segments, with a number of ships in the passenger and RoPax segments exposed to penalties of between €1.8m and €2.5m, and payment obligations for some container ships approaching €1m. This is driven by higher energy consumption simply due to vessel size and trading profile.

While penalties will arise from so-called compliance deficits for vessels using conventional fuels, surpluses totalling an estimated €669m will be generated mainly by vessels fuelled by LNG and LPG with significantly lower carbon intensity.

LNG carriers will account for 78% of the total market surplus and gas carriers 8%, while a further 8% will be generated by container ships that have seen a modest uptake in alternative fuels in recent years.

Pooling can halve costs for the industry

Taking into account this estimated compliance surplus, the net cost of FuelEU penalties for shipping from 2025 would be €680m, which indicates that pooling of vessels can roughly halve the gross burden for the industry.

Penalties will, in segments typically using conventional fuels with comparable carbon intensities such as HFO, LFO or MDO, be roughly proportional to the overall fuel consumption, thus correlating with the EU ETS cost.

Initial costs of FuelEU for most conventionally fuelled vessels, prior to pooling, will be around one-third of those associated with the EU ETS next year when the latter regulation will have 70% phase-in. But ultimately FuelEU is likely to prove a much more costly affair as the requirement for GHG intensity cuts rises to 6% by 2030 and then accelerates to reach 80% by 2050.

“It is therefore incumbent on shipowners to define their strategies not only towards fuel choices and the use of onshore power but also towards handling of residual compliance balances such as pooling, banking and borrowing of balances, to mitigate the financial impact of FuelEU. However, pooling will also come at a cost, while banking and borrowing will incur interest costs and only push liabilities into the future,” Grell explains.

‘Sound administrative processes’

He further points out that pooling compensations paid between different shipping companies will effectively divert cash flow away from the EU that it would otherwise have earned from FuelEU penalties – but that this effect is intended by the regulator to “reward” early adopters of clean fuels.

Another factor that will curb potential income for the EU from this regulation is that the compliance gap has been reduced to only 1.6% by 2022, as average GHG intensity from shipping has come down by 0.4% to 90.82 gCO2e per MJ, mainly due to increased LNG carrier calls to Europe after gas supplies via pipelines from Russia were halted when the latter invaded Ukraine. Given this trend and increasing adoption of biofuels, the 2% compliance gap will probably be closed before the first tightening of reduction targets in 2030.

Grell says the priority for shipping companies, especially at this early stage while cost exposure is relatively low, is to get to grips with the complexity of the regulation and tackle the risks arising from the fact the party liable for penalties - the DoC holder, or possibly shipowner - is not the one responsible for emissions, which is typically the charterer.

“As well as having costs oversight, companies require reliable monitoring and reporting mechanisms with high-quality emissions data. They must also have in place complex contractual arrangements and sound administrative processes to manage compliance and mitigate the financial consequences of the new regulation,” Grell concludes.

Related: FuelEU: New regulation leaves DoC holder with fuel liabilities risk, says OceanScore
Related: ‘Big opportunity’ for bunker traders, suppliers on upcoming FuelEU regulation, forecasts OceanScore

 

Photo credit: OceanScore
Published: 12 July, 2024

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