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Trafigura: Global South has huge potential to produce hydrogen-based bunker fuels

24 May 2023

Commodity trading firm Trafigura Pte Ltd on Tuesday (23 May) published new research highlighting the vital role that hydrogen-based fuels will play in decarbonising shipping – and the enormous potential for countries in the ‘Global South’ to produce green ammonia and green methanol to satisfy growing global demand for these low-emission fuels.

The whitepaper titled ‘Charting a course to a greener future for shipping: Low-emission fuel supply and the opportunity for the Global South’ highlighted fuels of the future including hydrogen as a feedstock, methanol, ammonia and biofuels as well as Trafigura’s analysis on low-emission fuel supply production. 

“Our research estimates the ‘Global South’ could produce almost 4,000 exajoules per year of competitively priced green hydrogen, against projected annual shipping demand of 20 to 40 exajoules. This could provide developing countries with the chance to develop new export industries and create thousands of skilled jobs,” said Margaux Moore, co-author and Head of Energy Transition Research and Venture Investments at Trafigura. 

“It will, however, only be realised if the shipping industry can agree on ambitious decarbonisation targets and, crucially, implement a global price on carbon for marine fuels.”

According to the whitepaper, eletrofuels produced in the Global South could be two times more competitive than those produced in Europe. 

“At USD2.00 per kilogramme of green hydrogen, the estimated production costs of electrofuels in the Global South is approximately USD750 per tonne, whereas in Europe, with higher electricity prices, it would be closer to USD1,200 to USD1,500 per tonne,” it said. 

“Even at USD4.00 per kilogramme of green hydrogen, electrofuels produced in the Global South would still be 20 percent cheaper than electrofuels produced in Europe, where we assume a cost of USD5-6 per kilogramme for green hydrogen,” it said. 

The whitepaper used the term electrofuels to describe shipping fuels derived from green hydrogen, which is produced from electrolysis of water using renewable power. 

The paper also found that Latin America, sub-Saharan Africa, the Middle East and Oceania have the potential to produce up to 3,852 exajoules of renewable hydrogen, almost 100 times the amount required to decarbonise the shipping industry.

According to Trafigura’s internal research experts, the global demand for bunker fuel is expected to reach 290 million a year or around 5 million barrels of high sulphur fuel oil per day by 2030. 

The firm also expects methanol bunker demand to reach at least 3 to 4 million mt per year by 2027 taking into consideration the current order book for methanol dual-fuelled vessels according to its research. 

Trafigura said the International Maritime Organization (IMO) is in the process of revising its initial GHG strategy and 2023 presents an important window of opportunity to set a zero, or at minimum net zero, GHG emissions target by 2050, together with ambitious goals for 2030 and 2040. 

By agreeing and implementing demanding science-based decarbonisation targets in its revised GHG Strategy, the IMO can accelerate the development of low- and zero-emission fuels and establish global fuel standards, which together will attract the investment needed to overhaul the infrastructure of the global shipping industry and retrofit, or build, new ships at scale, the firm added. 

“Delaying action will only add to the eventual cost of decarbonisation. The IMO needs to decisively move forward to tackle the shipping industry’s emissions and start the journey to a sustainable and resilient future,” added Rasmus Bach Nielsen, Global Head of Fuel Decarbonisation at Trafigura and co-author of the whitepaper.

Note: The white paper titled ‘Charting a course to a greener future for shipping: Low-emission fuel supply and the opportunity for the Global South’ can be downloaded here.


Photo credit: Trafigura
Published: 24 May, 2023

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