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SEA-LNG: Lifetime fuel costs of LNG pathway expected to be half of methanol and ammonia

Analysis shows lifetime cost of complying with regulatory regimes like FuelEU Maritime for LNG-fuelled vessels will be around half that of methanol and ammonia powered alternatives over coming decades.

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Global multi-sector industry coalition SEA-LNG on Thursday (15 June) said its analysis showed the lifetime fuel costs of meeting key European decarbonisation targets for shipping through the LNG pathway are expected to be roughly half that of the methanol or ammonia pathways.

Building on recent work by the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS) projecting fuel costs for alternative marine fuels out to 2050 (see Figure 1) and using long-term price benchmarks for ammonia, methanol and LNG as a marine fuel, SEA-LNG has calculated the cost of compliance with FuelEU Maritime regulations for a typical 14k TEU newbuild container vessel coming into operation in 2025.

FuelEU Maritime requires vessels to reduce the intensity of greenhouse gases produced by their energy consumption in coming years against a benchmark of the fleetwide average in 2020. 

Grey versions of ammonia and methanol start at a significant disadvantage to LNG. The additional greenhouse gas emissions involved in producing ammonia and methanol from natural gas means that respectively these grey fuels emit 47% and 14% more GHG emissions than VLSFO on a well-to-wake basis. Fossil, or grey LNG, offers up to 23% immediate GHG emission reductions compared to VLSFO on a well-to-wake lifecycle basis.

What this means is that owners opting for LNG-fuelled vessels will be able to meet the reduction targets until 2039 without needing to blend their fuel with low-carbon bio-LNG or renewable synthetic e-LNG. By contrast, owners of methanol and ammonia fuelled vessels will need to include significant proportions of a green fuel immediately to meet the regulations, vastly inflating their fuel bills.

Assuming an average fuel burn for the typical 14k TEU newbuild container vessel of 146 tonnes of VLSFO equivalent per day (as per Figure 2 above), a methanol-powered vessel would require a 14% green fuel blend to comply with FuelEU Maritime in 2025 at a fuel cost of almost USD55m per year, assuming the use of biomethanol. An ammonia powered vessel, if such a thing existed, would require a 33% green fuel blend to comply and face a fuel bill of about USD80m per year if using e-ammonia. LNG by contrast would require no blending with a fuel bill of just over USD20m per year. 

By 2040, LNG would require a 14% green fuel blend and annual fuel costs are expected to reach around USD25m, assuming the use of bio-LNG. Methanol’s green fuel blend requirement, will have increased to 40%, resulting in an annual fuel bill of just over USD 55m, assuming the use of biomethanol - the effects of the increased volume of biomethanol required offset by the falling costs of the green fuel. For ammonia the blend ratio will have increased to 53% with a blended fuel cost of approximately USD70m – the effects of the increased volume of e-ammonia required more than offset by the falling costs of the e-fuel. By 2050, SEA-LNG analysis shows that all three fuel options will have significant blends of green fuels in the form of bio- and e-fuels and we expect to see a convergence in overall fuel costs.

In summary, this simple analysis shows (as illustrated in Table 1, below) that the LNG pathway to compliance with FuelEU Maritime offers massively lower fuel costs than both the methanol and ammonia pathways, particularly in the first 15 years’ of the vessel’s life – a period critical for vessel financing decisions. The methanol pathway is approximately 2.5 times more expensive and the ammonia pathway 3.5 times more expensive.

Similar analysis can be undertaken for other sectors and while the absolute numbers will be different the cost ratios for the different pathways will be similar.

SEA-LNG COO Steve Esau, said: “Our analysis shows that lifetime fuel costs of achieving net-zero emissions through the LNG pathway are expected to be roughly half that of those for methanol and ammonia. This underlines the importance of understanding the implications of the journey to net zero as well as the destination. LNG offers GHG reductions today and a low cost, incremental solution for decarbonisation.”

SEA-LNG added it is currently developing a cost of compliance calculator that will enable ship owners, investors, charterers, and operators to explore the commercial implications of different fuel choices in complying with EU and IMO regulations.

Note: The full analysis can be read here

Related: SEA-LNG slams ‘Say No to LNG’: Campaign based on ‘false contention’
Related: Énestas joins SEA-LNG to share insights on Mexican and U.S. LNG bunkering
Related: SEA-LNG publishes overview of LNG as bunker fuel for 2022 to 2023
Related: SEA-LNG: Bio-LNG is the most readily available solution to decarbonise shipping
Related: SEA-LNG: New independent study confirms bio-LNG’s role in shipping’s decarbonisation
Related: SEA-LNG calls UCL report on LNG capable ships ‘a flawed academic exercise, detached from reality’
Related: SEA-LNG slams ICCT: Report on LNG Pathway makes ‘flawed assumptions based on outdated data’
Related: SEA-LNG: LNG retrofits will rate higher under CII than HFO/scrubber or VLSFO alternatives
Related: SEA LNG: Compare ‘apples with apples’ to cut emissions and costs

 

Photo credit: Cameron Venti from Unsplash
Published: 16 June, 2023

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LNG Bunkering

Singapore: Pavilion Energy supplies LNG to TFG Marine dual-fuel bunker tanker

“MT Diligence” was refuelled with 34 cubic metres of LNG bunker fuel, supplied by Pavilion Energy, marking the first LNG bunkering of TFG Marine’s bunker vessel.

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Singapore: Pavilion Energy supplies LNG to TFG Marine bunker tanker

Global marine fuel supply and procurement firm TFG Marine on Monday (20 May) announced the completion of the first liquefied natural gas (LNG) refuelling of its dual-fuel bunker tanker MT Diligence this week in Jurong Port, Singapore.

The 34 cubic metres (m3) of LNG to power the MT Diligence was supplied by the Marine division of Singapore-headquartered Pavilion Energy. 

“Deploying a vessel that can be powered by LNG as well as conventional low sulphur marine fuels helps TFG Marine to meet its licence requirement with the Maritime and Port Authority of Singapore (MPA),” TFG Marine said in a social media post.

Singapore: Pavilion Energy supplies LNG to TFG Marine dual-fuel bunker tanker

“Built and operated for TFG Marine by CBS Ventures Pte Ltd, the 5,000 dwt MT Diligence has been designed to our technical specifications, including stringent safety considerations and has joined our supply fleet this year in the major bunkering centre of Singapore.”

Manifold Times previously reported TFG Marine christening the first LNG dual-fuel bunker tanker to join its fleet.  

The newbuild vessel, MT Diligence, has joined the company's low sulphur fuel oil and biofuel supply operations in the major bunkering centre of Singapore.

Related: LNG dual-fuel bunker tanker “MT Diligence” joins TFG Marine fleet for Singapore ops

 

Photo credit: TFG Marine
Published: 21 May 2024

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Methanol

Argus Media: Low-carbon methanol costly EU bunker fuel option

Despite GHG emissions savings that low-carbon methanol provides, it cannot currently compete on price with grey methanol or conventional marine fuels.

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Ship owners are ordering new vessels equipped with methanol-burning capabilities, largely in response to tightening carbon emissions regulations in Europe. But despite the greenhouse gas (GHG) emissions savings that low-carbon methanol provides, it cannot currently compete on price with grey methanol or conventional marine fuels.

17 May 2024

Ship owners operate 33 methanol-fueled vessels today and have another 29 on order through the end of the year, according to vessel classification society DNV. All 62 vessels are oil and chemical tankers.

DNV expects a total of 281 methanol-fueled vessels by 2028, of which 165 will be container ships, 19 bulk carrier and 14 car carrier vessels. Argus Consulting expects an even bigger build-out, with more than 300 methanol-fueled vessels by 2028.

A methanol configured dual-fuel vessel has the option to burn conventional marine fuel or any type of methanol: grey or low-carbon.

Grey methanol is made from natural gas or coal. Low-carbon methanol includes biomethanol, made of sustainable biomass, and e-methanol, produced by combining green hydrogen and captured carbon dioxide.

The fuel-switching capabilities of the dual-fuel vessels provide ship owners with a natural price hedge. When methanol prices are lower than conventional bunkers the ship owner can burn methanol, and vice versa.

Methanol, with its zero-sulphur emissions, is advantageous in emission control areas (ECAs), such as the US and Canadian territorial waters. In ECAs, the marine fuel sulphur content is capped at 0.1pc, and ship owners can burn methanol instead of 0.1pc sulphur maximum marine gasoil (MGO). In the US Gulf coast, the grey methanol discount to MGO was $23/t MGO-equivalent average in the first half of May. The grey methanol discount averaged $162/t MGOe for all of 2023.

Starting this year, ship owners travelling within, in and out of European territorial waters are required to pay for 40pc of their CO2 emissions through the EU emissions trading system. Next year, ship owners will be required to pay for 70pc of their CO2 emissions. Separately, ship owners will have to reduce their vessels' lifecycle GHG intensities, starting in 2025 with a 2pc reduction and gradually increasing to 80pc by 2050, from a 2020 baseline.

The penalty for exceeding the GHG emission intensity is set by the EU at €2,400/t ($2,596/t) of very low-sulplhur fuel oil equivalent. Even though these regulations apply to EU territorial waters, they affect ship owners travelling between the US and Europe.

Despite the lack of sulphur emissions, grey methanol generates CO2. With CO2 marine fuel shipping regulations tightening, ship owners have turned their sights to low-carbon methanol.

But US Gulf coast low-carbon methanol was priced at $2,317/t MGOe in the first half of May, nearly triple the outright price of MGO at $785/t. Factoring in the cost of 70pc of CO2 emissions and the GHG intensity penalty, the US Gulf coast MGO would rise to about $857/t. At this MGO level, the US Gulf coast low-carbon methanol would be 2.7 times the price of MGO. By comparison, grey methanol with added CO2 emissions cost would be around $962/t, or 1.1 times the price of MGO.

To mitigate the high low-carbon methanol costs, some ship owners have been eyeing long-term agreements with suppliers to lock in product availabilities and cheaper prices available on the spot market.

Danish container ship owner Maersk has led the way, entering in low-carbon methanol production agreements in the US with Proman, Orsted, Carbon Sink, and SunGas Renewables. These are slated to come on line in 2025-27. Global upcoming low-carbon methanol projects are expected to produce 16mn t by 2027, according to industry trade association the Methanol Institute, up from two years ago when the institute was tracking projects with total capacity of 8mn t by 2027.

By Stefka Wechsler

 

Photo credit and source: Argus Media
Published: 21 May 2024

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Bunker Fuel

Bunker Holding, 123Carbon and BV launch carbon insetting solution

Bunker Holding has concluded its first blockchain-powered carbon insetting operation in a new partnership with 123Carbon and Bureau Veritas.

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Bunker Holding:Bunker tanker vessel supplying marine fuel to a cargo ship at anchorage

Marine fuel supplier Bunker Holding on Thursday (16 May) said it has concluded its first blockchain-powered carbon insetting operation in a new partnership with carbon insetting experts 123Carbon and Bureau Veritas.

This insetting partnership allows for the additional cost delivery of lower carbon, alternative marine fuels – such as sustainable biofuel – to be shared by carriers, freight forwarders, and cargo owners within the same value chain; allocated based on a globally accepted book and claim methodology.

“We’re excited to work with 123Carbon and Bureau Veritas, as we believe in complete transparency of how insets are created and transferred. Insetting is not new, but one concern within the maritime sector is under what circumstances alternative fuels are supplied, and who owns the emissions reductions,” said Tobias Troye, Head of Carbon Solutions at Bunker Holding.

By combining its alternative fuel supply expertise, its global access to low-carbon fuels and extensive carrier network with 123Carbon’s secure platform, Bunker Holding said it can offer carriers, freight forwarders, and cargo owners complete transparency and assurance regarding how their insets reduce maritime emissions.

“We are delighted that Bunker Holding not only uses our advanced platform for the issuance of the certificates, but has also chosen a fully branded solution to deliver the certificates in a secure environment to its customers,” said Jeroen van Heiningen, Managing Director of 123Carbon.

Working with 123Carbon’s blockchain-based insetting platform, and Bureau Veritas as third-party assurance partner to verify the fuel intervention and all related documentation, ensures that all insets are issued according to Smart Freight Centre’s Book & Claim methodology and 123Carbon’s assurance protocol.

To facilitate the intervention, Bunker Holding connected three different parties: the cargo owner, who wishes to reduce their scope 3 emissions and is willing to pay the “green premium”, the ship operator, to decarbonise its vessels through the use of biofuels, and the biofuel supplier, to deliver safe, high-quality low-carbon fuels. Due to the commitment from the cargo owner to purchase scope 3 insets, Bunker Holding was able to offer the biofuel at a more competitive cost to the ship operator, enabling the carrier to use biofuels instead of conventional fossil fuels.

“As a group, we are operationalising our decarbonisation strategy, and one key component has been to develop our alternative marine fuel supply capabilities, among others by securing fully certified biofuel availability in more than 100 ports around the world. The relative higher cost of alternative fuels may still prevent carriers to bunker it. However, carbon insetting helps bridge that gap, as it enables cost sharing and also sends an important demand signal to alternative fuel producers to scale up production,” said Valerie Ahrens, Senior Director of New Fuels and Carbon Markets at Bunker Holding.

 

Photo credit: Bunker Holding
Published: 21 May 2024

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