Many moving parts make low carbon fuels bunkering a challenge

One of the constraints on the potential of low carbon marine fuels is the ability of ship owners and operators to bunker it. 

This, in turn is a function of the types of fuels that are gaining popularity, which then feeds into availability, and the willingness of suppliers to invest in the necessary bunkering and supply chain infrastructure.

However, before looking at the supply end of the market, a quick sampling of the demand side numbers will give an indication of the direction of travel. Which shipowners, running what types of vessels on which routes and the ports that service their calls are the main determining factors 

These are of course to some extent variations due to national imperatives such as Japan's ammonia adoption plans, but ultimately basic market forces prevail.

According to Clarksons' figures for 2022, alternative fuel newbuilds accounted for a record 61% of tonnage ordered during the year and comprised 39% of the global order book.

Ambiguous definitions such as vessels "ready" to be powered by the alternative fuels make the actual demand tricky to estimate. For example while DNV's Alternative Fuel Insights says that there are 81 confirmed orders for methanol fuelled ships due for delivery by 2028 and 25 such vessels currently in operation, Clarksons says there were 130 ammonia-ready and six hydrogen-ready vessels on order in 2022.

From anecdotal evidence methanol seems to be leading the race, followed by ammonia, driven mainly by country-level initiatives in South Korea and Japan.

Among containerships, recent high-profile orders for methanol-powered ships include those by top lines Maersk, CMA CGM and MSC as well as others such as South Korea's HMM and China's Cosco. Top Japanese line ONE meanwhile has hedged its bets ordering 10 ships that can use both ammonia and methanol.

Some bulkers seem to be favouring ammonia due to their trading patterns while tankers and other specialist vessels are also skewed towards methanol as operators positively assess the availability options in their respective markets.

But in real world terms, a snapshot of recent orders suggests that determining actual demand will be far from straightforward. While Cosco placed orders for four 16,000-teu containerships due for delivery in the second half of 2025, only one of them will actually be propelled by methanol and even that on a dual-fuel basis, which simply adds to the 12 methanol dual fuel 24,000-teu vessels it ordered in October 2022.

In the bulker segment, J. Lauritzen's twin 81,200-dwt methanol-fuelled vessel order is also designated for dual fuel which the Danish shipper is touting will be the world's first zero emission-capable bulkers. With the option of falling back on conventional fuel, there is no guarantee of demand for alternative fuels even though the vessels are capable of using them.

Nevertheless, ports need to plan ahead and best mitigate the risk that comes with it.

Unsurprisingly, the bets are on methanol, and ports gearing up to bunker it are in the majority. They are being led by the world's top bunkering ports Singapore and the Amsterdam-Rotterdam-Antwerp (ARA) port complex, which are among the first to put in place actual infrastructure as well as the standards and protocols necessary for practical operations.

In the Middle East, a Proman joint venture with ADNOC is set to develop a methanol production facility with output aimed at the bunkering market.

Meanwhile in Australia's Port of Melbourne plans have been announced to establish a green methanol bunkering hub by a consortium including Maersk, CMA CGM Oceania subsidiary line ANL, Svitzer, Stolthaven Terminals and local energy companies HAMR Energy and Able Energy.

Overall, DNV's Alternative Fuel Insights estimates there are about 56 ports around the world that are capable of bunkering methanol.

Interestingly, the US East Coast is shaping up as an emerging ammonia bunkering hub, with some of the industry's heavy hitters looking to take advantage of the burgeoning green ammonia facilities being developed in the southeast in particular.

Class society ABS and major container line Maersk are leading a consortium comprising top ship manager Fleet Management, Georgia Ports Authority, Maersk McKinney-Moller Center for Zero Carbon Shipping, Savage Services Tote Services and Sumitomo Corp to jointly conduct a feasibility study on ammonia bunkering at the Port of Savannah.

The well developed US oil and gas industry has also been able to quickly make use of its expertise to get into methanol bunkering. In April Proman's joint venture with tanker operator Stena Bulk carried out the first barge-to-ship methanol bunkering operation on the US Gulf Coast at the Port of Houston.

Clarksons notes that Japan in particular has been a key driver behind ammonia. With a firm directive from the government to support its use as a marine fuel, Japanese companies are incentivised to gain expertise and build up supply networks.

Major Japanese companies such as MOL and NYK have ordered ammonia bunker vessels not only for their home market but have also brought their expertise to other markets that have an interest such as Singapore.

Ammonia supply networks are also being built up with Japanese power giants such as Jera and conglomerates such as Itochu signing deals with a slew of partners in the Middle East and the US for green ammonia production and supply.

The Global Maritime Forum-led consortium comprising top iron ore miners BHP and Rio Tinto and bulker owners Oldendorff and Star Bulk is also making good progress with its plan for an iron ore transportation green corridor between Australia and East Asia that will likely be fed by green ammonia.

The Port of Rotterdam started barge-to-ship methanol bunkering on a trial basis as far back as 2021 and will expand this to full commercial operations in the second half of 2023. 

Coincidentally, or otherwise, Maersk launched the world's first methanol-powered containership in April and the vessel, to be deployed on its Baltic feeder services out of Rotterdam, is reportedly on schedule for delivery this summer.

Rotterdam expects to launch ammonia bunkering trials sometime in 2024.

Singapore, while a little slower getting into the game, probably has the most comprehensive approach to meeting the needs for alternative fuels bunkering, adopting what it calls a multi-fuels approach while also forging ahead with putting a regulatory and safety framework in place.

While betting a little more on the role of methanol in shipping’s future fuel mix, Singapore has also called for expressions of interest to develop ammonia and hydrogen bunkering.

An order placed in October 2022 will see local firm Global Energy Group taking delivery of Singapore's first dedicated methanol bunkering vessel in the last quarter of 2023 while other firms have placed orders for multiple units of larger vessels of up to 12,000 dwt for progressive delivery up to 2026.

On the regulatory side, the Maritime and Port Authority of Singapore has joined a Joint Study Framework for ammonia bunkering safety while the Singapore Chemical Industry Council's Standards Development Organisation is leading a working group to develop a Technical Reference (TR) for methanol bunkering.

Singapore, as the world's top bunkering centre, has multiple TRs for the bunkering industry that help maintain standards, quality and safety of the product.

Further up the supply chain, six companies, again including key player Maersk, will set up Asia's first green methanol plant with a capacity of 50,000 metric tons/year in Singapore.

On a macro basis, steps are also being taken on the regulatory side. The International Association of Ports and Harbors Clean Marine Fuels working group has published checklists for bunkering liquefied gas, including liquefied hydrogen, since 2022 and is set to publish its bunkering checklists for alcohol-based fuels, including methanol, as well as ammonia and compressed hydrogen soon.

Low carbon marine fuels bunkering at ports is progressing at a steady pace and for all intents and purposes much in line with the pace at which vessels which will use them are coming on the market. 

Demand will ramp up rapidly once the huge backlog of newbuild vessels start coming into operation, and there may be concerns that bunkering facilities are not being put in place across the shipping network quickly enough.

However it is important to put in place infrastructure and operating frameworks that will be able to meet the more rigorous standards required of these new fuels, which have different operating characteristics from the traditional fuels that the industry has used for so long.

As ports race into this bold new era, much work remains to be done to make sure the global shipping industry is able to use green fuels safely and efficiently.