A misconception by parties keen on supplying methanol as a bunker fuel at Singapore port is rising and needs to be addressed, observed methanol industry expert Chris Chatterton.

The Maritime and Port Authority of Singapore (MPA) on December 2023 issued the Expression of Interest (EOI) for the supply of methanol as a marine bunker fuel in the port of Singapore document to the bunkering sector.

In it stated: “The Participant shall propose methanol product(s) with a carbon intensity (CI) not greater than 90 gCO₂e / MJ (well-to-wake) for bunkering in Singapore”.

Several industry stakeholders have expressed to Chatterton difficulties in meeting the stated CI of 90 gCO₂e / MJ due to conventional grey methanol produced using current modern methods having a CI of between 90 to 95 gCO₂e / MJ, or even higher in some cases, on a life cycle assessment basis.

Further, the parties were concerned of significant higher costs when considering the premium between fuel oil (HFO and LSFO) and more expensive green [carbon neutral] methanol.

“Guys, don’t sweat the premium! When we talk about green methanol in premiums, we are referring to 100% green methanol here and nobody is going to burn this product in commercial operations due to costs unless it is economically viable under prevailing policy or they are able to transfer these costs to cargo owners,” he exclaimed.

“Questions persist on how to meet the CI specification and some players are wondering if the methanol can be blended or needs to come direct unchanged from the manufacturing complex. This needs to be addressed but is technically very simple to do.”

Chatterton recommends the bunkering industry to utilise the Mass Balance Approach – a concept familiar with the chemical industry – which traces the flow of materials through a supply chain as a compliant method to lower the specific CI content of methanol for use as marine fuel (combusted).

Source: International Sustainability & Carbon Certification (ISCC)

“Not all methanol production plants are created equal and when you purchase methanol you are going to get a CI certificate stating the carbon dioxide (CO₂) equivalent per Megajoule (MJ) from well-to-plant gate basis,” he informed.

“And just by blending the certified grade with a portion of green carbon neutral methanol you can effectively lower the CI value of conventional conventional methanol to meet the 90 gCO₂e / MJ specification required by MPA.

“Singapore is an ideal hub to receive and trade varying specifications of certified grey, blue and green methanol from not only China, Middle East, but from any corner of the world, efficiently and cost-effectively."

Availability of green carbon neutral methanol from China

Globally, “pilot” production projects are expected to produce over 6 million metric tonnes (mt) of green methanol in 2025, with up to 4 million mt coming from China, stated Chatterton who added a large portion of China’s green methanol will be derived from wind power, which is arguably the lowest cost wind resource with the highest capacity factor globally.

“Northeast China has a very high onshore wind capacity factor at above 95% which is amongst the best in the world and enough to provide baseload power rivalling utility scale gas fired powerplants,” he explained.

“China is also a world leader in renewable power production, whether solar or wind by a factor of two and has more than twice the renewable power capacity than USA.

“Further, China is the largest producer of renewable power equipment of any kind in the world and by far also the cheapest because they produce at scale; whether it’s wind towers, rotor blades, turbines, or solar panels - China is the outright leader in production capacity and has been so for many years.”

Most of China’s pilot scale projects set to produce green methanol are already in the final investment phase. To date, pilot projects in operation could only produce between 100,000 to 200,000 mt of green methanol per annum, and low volumes have resulted in higher prices for the green material.

However, once scaled up, these pilot projects will be able to produce 2-3 times more product to eventually lead to a softening of market pricing for green methanol, noted Chatterton.

Future prices and procurement of green methanol

“Therefore, there is no need to be too worried about the current methanol premium over HFO. There are certainly organisations able to provide methanol at more flexible terms, but these term contracts typically are for a longer duration,” he continued.

“A similar development took place for shipping’s transition to IMO 2020, when all majors instructed bunker suppliers needed to enter into long term contracts for at least a year to secure 0.50% sulphur limit VLSFO.”

Moving forward, Chatterton believes the combined factors of increased availability of green methanol, more efficient renewable power and power equipment cost structures, resulting in economies of scale will mean more affordable methanol from 2025 onwards – particularly from China.

“The green methanol producers in China are mainly pursuing ISCC EU certification which means it is compliant for use in Europe. With FuelEU kicking in, it will be even more ideal for shipowners to switch to using lower carbon and carbon neutral methanol as a sustainable marine fuel,” he ends.

Related: MPA receives 50 submissions for EOI to supply methanol bunker fuel in Singapore
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Published: 20 May 2024