Alternative Fuels

Study: LNG-capable fleet could reach total ‘value at risk’ of ~USD 1trillion by 2030

Shipowners should consider not ordering LNG-capable ships and investing in conventionally fuelled ships which are designed for retrofit to zero-emission fuels, says UCL Energy Institute study.

Published

2 years ago

September 21, 2022

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A new study by UCL Energy Institute released on Tuesday (20 September) revealed that the rapidly growing LNG-capable fleet could reach a total “value at risk” of ~USD 1trillion (USD 850 billion) by 2030.

The study found that if policies that incentivise shipping to decarbonise in line with the Paris Agreement were in place by the end of the decade, the LNG-capable fleet would compete against zero emissions shipping, whilst also being incentivised to switch away from the use of fossil fuel.

Whilst policy and competition would affect all ships built to use fossil fuels, the analysis suggests that more expensive LNG-capable assets (also known as LNG dual-fuel) would see reductions in their value to match the value of similar aged but lower cost conventional vessels designed to use fuel oil.

The report titled Exploring methods for understanding stranded value: case study on LNG-capable ships found that the write-down of the full USD 850 billion value at risk is not realised if LNG-capable vessels retrofit to run on scalable zero emission fuels (hydrogen and hydrogen-derived fuels such as ammonia). Under these circumstances, the stranded value is estimated at approximately 15-25% of their value (USD 129-USD 210 billion if the LNG-capable fleet grows strongly this decade).

The study said LNG has been portrayed as transitional fuel for the shipping sector, but there is growing scientific evidence that shows the environmental benefits are limited, if not negative, compared to LSHFO (Low Sulphur Heavy Fuel Oil), when considering a full lifecycle analysis of emissions and accounting for greenhouse gases (GHG) emissions.

The least-cost pathway for shipping to meet its required shift away from fossil fuels is to a mix of electrification in short-sea shipping, and use of scalable hydrogen and hydrogen-derived fuels such as ammonia and methanol for deep-sea shipping.

Marie Fricaudet, lead author and PhD student at UCL Energy Institute, said: “This report is a first attempt to extend the research on stranded power generation assets and unburnable fossil fuel reserves to the shipping sector.”

“The findings highlight that the risk of stranded assets is also very material in the shipping sector. The longer we leave the LNG transition running and then switch, the more painful it will be and technology lock-in during this crucial decade will create more resistance to change later.”

The report shows a boom in the ordering of LNG vessels over the recent years, with 65% of the newbuilding deliveries by 2025 being capable of running on LNG as a marine fuel, up from only 10% a couple of years ago. Yet, the size of the LNG-capable fleet (by dwt and number of ships) is currently small, therefore there is still time to anticipate regulatory and technology developments and manage exposure to a class of assets that may be particularly exposed to stranded value risk.

Public funding has played a major role in financing LNG vessels through various government run schemes, directives and export credit agencies, such as the NOx Fund in Norway, the European Union’s directive on the deployment of alternative fuels infrastructure, the European Investment Bank and the Japanese and Korean Export Credit Agencies.

Dr Tristan Smith, co-author and Associate Professor at UCL Energy Institute, said: “As this decade proceeds, we will continue to experience more and more severe impacts from climate change. This will further grow pressure both in markets (ESG) and policy negotiations to align assets to a rapid shift to zero emissions. Anticipating this pressure is straightforwards, and whilst the best solutions for zero emissions international shipping are still emerging, it is already clear that LNG-capable shipping is not well positioned and faces a higher risk of stranded value during the transition.”

The study argued that governments should not use public funding to exacerbate the creation of stranded value and identifies methods that investors can use to identify the risks posed by climate change on shipping assets.

The report said shipowners and financiers should consider not ordering LNG-capable ships and investing in conventionally fuelled ships which are designed for retrofit to zero-emission fuels.

“For existing LNG-capable ships, investors should consider ways to manage the risk of stranded value – e.g. factoring in the cost of retrofit (or other actions to remain compliant) at the point of newbuild or using a steeper than linear depreciation curve,” it said.

For policy makers, the report asks for urgency and clarity of future regulations, especially around when and how methane emissions will be considered, to help investors in both existing ships and newbuilds consider and anticipate the potential impact of regulation on values.

Photo credit: Shaah Shahidh on Unsplash
Published: 21 September, 2022

Bunker Fuel

SIBCON 2024: EnterpriseSG to launch new Singapore standard for e-BDN

EnterpriseSG, through the Singapore Standards Council, will launch a new Singapore Standard 709 Specification for Digital Bunkering Supply Chain Documentation.

Published

18 hours ago

October 10, 2024

Admin

SIBCON 2024: New Singapore standard on digital bunkering to be launched

Enterprise Singapore (EnterpriseSG), through the Singapore Standards Council (SSC), will launch a new Singapore Standard (SS) 709 Specification for Digital Bunkering Supply Chain Documentation, according to Maritime and Port Authority of Singapore (MPA) on Wednesday (9 October).

MPA said the new standard will ensure data consistency and interoperability between digital systems and facilitate smoother transactions through trusted and verifiable digital bunkering documents.

This comes following Amy Khor, Senior Minister of State for the Ministry of Sustainability and the Environment and the Ministry of Transport, announcing that from 1 April 2025, all bunker suppliers will be required to provide digital bunkering services and issue electronic bunker delivery notes (e-BDNs) as a default.

The move was decided following successful pilots conducted since 1 November 2023 with bunker suppliers, including the top 10 bunker players, in Singapore.

To further enhance transparency and transaction integrity in bunkering operations, MPA will also introduce a centralised e-BDN record verification facility. This enables key stakeholders to verify the e-BDN received against the information transmitted to MPA.

EnterpriseSG has also launched the revised Singapore Standard (SS) 648 Code of Practice for Bunker Mass Flow Metering to include data integrity and transmission requirements in line with this new digital standard.

In the first eight months of 2024, MPA said Singapore saw strong growth of approximately 7% in total bunker sales over the same period last year, reaching over 36 million tonnes. Biofuels and liquefied natural gas bunker sales surpassed 700,00 metric tonnes.

To support the operationalisation of a higher mix of low-carbon alternative fuels, both EnterpriseSG and MPA are developing the Singapore standards for methanol bunkering and ammonia bunkering by 2024 and 2025 respectively.

The standards will cover custody transfer requirements, safety procedures and crew competencies, to ensure safe bunkering operations and handling of these fuels.

MPA also announced that three major shipping lines — Hafnia, K-Line, and MOL — are in early discussions to join the Singapore - Port of Los Angeles (LA)- Port of Long Beach (LB) Green and Digital Shipping Corridor (GDSC) initiative.

Each partner would be expected to spearhead a project to advance the corridor’s decarbonisation and digitalisation goals, such as the adoption of net-zero fuels, Just-in-Time route optimisation, and energy efficiency technologies such as wind-assisted ship propulsion.

The addition of the new partners will significantly strengthen the GDSC’s capacity to drive innovation in sustainable shipping practices and accelerate the adoption of zero/near-zero emission fuels and green technologies along the corridor.

Photo credit: Maritime and Port Authority of Singapore
Published: 10 October, 2024

Alternative Fuels

SIBCON 2024: SGMF releases methanol and ammonia bunkering guidelines

SFMF published Bunkering Guidelines for Ammonia and Bunkering Guidelines for Methanol, as well as Emergency Response Guide for Ammonia; also revealed new brand to reflect four key future marine fuels.

Published

18 hours ago

October 10, 2024

Admin

SIBCON 2024: SGMF releases methanol and ammonia bunkering guidelines

SGMF on Wednesday (9 October) announced the release of the Bunkering Guidelines for Ammonia and Bunkering Guidelines for Methanol, as well as the Emergency Response Guide for Ammonia.

During the 23rd Singapore International Bunkering Conference (SIBCON), SGMF also revealed its new brand reflecting the organisation’s current activities in the four key marine fuels for the future: LNG, methanol, ammonia and hydrogen.

SGMF is a membership-based organisation leading safe maritime decarbonisation with members across the full value chain of marine fuels, including suppliers, operators, owners, equipment manufacturers, class societies, port authorities, individuals and training organisations.

While the search for the perfect alternative fuel continues, SGMF said methanol and ammonia are two of the fuels that the global merchant fleet has identified and is looking to implement, emphasising the importance of these guidelines.

Methanol – With the first vessels already running on methanol, and many more on order, methanol is ahead of the curve in terms of adoption. It has also overtaken regulation, meaning that these early adopters are having to put forward safety solutions that have not yet been documented, and bunker suppliers using existing chemical carriers are trying to second guess what conversion and equipment may be needed to make their vessels physically compatible with the ships being produced. These methanol bunkering guidelines have been published as a first draft to highlight the key safety factors that need to be considered when designing and bunkering a vessel of any type with methanol.

Ammonia – Despite ammonia (NH3) not yet being commercially available as a marine fuel, this bunkering document provides guidance to all the stakeholders currently investigating and developing the bunkering of ships with fully refrigerated (-33°C) ammonia.

A range of potential hazards are expected with bunkering ammonia and to date there is very limited experience, with only one series of bunkering trials conducted as at March 2024.

As a result, Bunkering Guidelines for Ammonia draws primarily on the current experience of LNG bunkering, the wider ammonia marine transport industry and the shoreside ammonia production and transport industry experience.

“The overall aim of these guidelines is therefore to ensure that ammonia-fuelled ships are bunkered safely, reliably, efficiently and in an environmentally responsible way, targeting the avoidance of operational or fugitive emissions of ammonia,” SGMF added.

These publications have been compiled with extensive input from the SGMF membership, as well as with collaborative support from the Global Centre for Maritime Decarbonisation (GCMD) and the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMCZCS).

Note: The bunkering guidelines are available in the shop on SGMF portal and the Emergency Response Guide for Ammonia can be downloaded through its free resources section.

Photo credit: SGMF
Published: 10 October, 2024

LNG Bunkering

Bunker One to launch physical LNG bunker fuel supply in January 2025

Firm has established Bunker One LNG BV, which will manage the physical LNG fuel portfolio, including last-mile delivery, and will be headed by Managing Director, Michael Behmerburg.

Published

18 hours ago

October 10, 2024

Admin

Bunker One to launch physical LNG bunker fuel supply in January 2025

Bunker Holding’s physical supply division, Bunker One, on Wednesday (9 October) said it is set to launch LNG bunker supply in northwestern Europe as of January 2025.

Building on its existing successful activities supplying alternative fuels, Bunker One is expanding its current fuels portfolio by adding physical LNG and mass balanced LBM (Liquefied Biomethane). Bunker One expects to be ready to commence first physical LNG deliveries in January 2025.

Bunker One has established a new entity, Bunker One LNG BV, which will manage the physical LNG fuel portfolio including last-mile delivery and will be headed by Managing Director, Michael Behmerburg.

Peter Zachariassen, CEO of Bunker One, said: “We are extremely pleased to be welcoming Michael Behmerburg to steer our Bunker One LNG entity. Michael brings a wealth of experience that is important for us to navigate properly in the upcoming transition.”

Bunker One LNG BV has chartered the 10,000 cbm LNG Bunker Vessel, Coral Fraseri.

Michael Behmerburg, said: “We are working hand in hand with the vessel’s owner Anthony Veder to bring the vessel into operation. The vessel will undergo a regular class renewal at the end of 2024, during which several modifications will be carried out to enhance her capabilities as an LNG bunker vessel.”

The purpose of the modifications is to prepare the vessel for best-in-class service to the majority of seagoing vessels, including tankers, container ships, and car carriers. Bunker One LNG BV is currently in the process of securing bunker permits which will cover key ports in Northwest Europe.

Valerie Ahrens, Senior Director of New Fuels and Carbon Markets at Bunker Holding, said: “We are very excited about this move to include physical supply of LNG and LBM as part of Bunker Holding’s fuel offering, which builds on our successful activities supplying LNG through third parties.”

“Fossil LNG can offer up to 23% in greenhouse gas (GHG) reductions compared to conventional fuels and accompanies shipping’s transition to a multi-fuel future. Hence, we regard LNG as a stepping stone to bio-LNG and e-LNG, which will help the industry achieve the mid-century decarbonisation targets set by the IMO.”

Photo credit: Bunker Holding
Published: 10 October, 2024