Cost of emissions compliance favours LNG over methanol, says SEA-LNG study 

Analysis from industry organisation SEA-LNG shows 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.

The analysis builds on recent work by the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping projecting fuel costs for alternative marine fuels out to 2050.

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 14,000-TEU newbuild container vessel coming into operation in 2025.

Grey (produced with hydrocarbon feedstocks) ammonia and methanol start at a significant disadvantage to LNG as the additional greenhouse gas emissions involved in producing ammonia and methanol from natural gas mean respectively, these grey fuels emit 47% and 14% more GHG emissions than VLSFO on a well-to-wake basis.

By contrast, according to SEA-LNG, grey LNG offers up to 23% immediate GHG emissions reductions compared with VLSFO on a well-to-wake lifecycle basis.

According to SEA-LNG, this means 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.

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 of 146 tonnes of VLSFO for the typical 14,000-TEU newbuild box ship, a methanol-powered vessel would require a 14% green fuel blend to comply with FuelEU Maritime in 2025 at a fuel cost of almost US$55M per year, assuming the use of biomethanol.

For a hypothetical ammonia-powered vessel, this would mean a 33% green fuel blend to comply and a fuel bill of US$80M per year if using e-ammonia.

LNG would require no blending and a fuel bill of just over US$20M per year.

By 2040, LNG would require a 14% green fuel blend and annual fuel costs are expected to reach around US$25M, assuming the use of bioLNG. Methanol’s green fuel blend requirement will have increased to 40%, with the annual fuel bill topping US$55M, assuming the use of biomethanol.

For ammonia, the blend ratio will have increased to 53% with an estimated blended fuel cost of approximately US$70M – the effects of the increased volume of e-ammonia required more than offset by the falling costs of the e-fuel.

SEA-LNG remarked that by 2050, its analysis shows “all three fuel options will have significant blends of green fuels in the form of bio- and e-fuels” and the group expects convergence in overall fuel costs.

Particularly for the first 15 years of a vessel’s life, the SEA-LNG analysis shows the LNG pathway to compliance with FuelEU Maritime offers lower fuel costs than both the methanol and ammonia pathways which are approximately 2.5 times and 3.5 times more expensive respectively.

These conclusions mirror those made by analysts at financial institution ING in May. Senior economists at ING believe while synthetic fuels hold great promise, the uncertainties associated with the cost of production, energy efficiency and technological advances make it difficult to predict the future competitiveness of synthetic fuels in shipping.