In an exclusive interview with Future Fuels, Mr Indra Nath Bose, Advisor, the Great Eastern Shipping Company Ltd, shares his views on the energy transition currently happening in shipping industry in general and its impact on the Indian coastal ships in particular.
Marine industry’s current worry is the impending regulations that are for milestones of 2030 and 2050, what do you think is happening to meet the deadlines of 2030, especially with reference to marine industry and Indian ship-owners’ perspective?
2030 is a short-term goal where IMO has got a GHG reduction strategy, which was framed in 2018. That says the energy intensity i.e., the grams of CO2 emitted per tonne/mile of cargo carriers or transport work must reduce by 40% by 2030, compared to 2008 base level. So, we are talking about this particular goal. There are a couple of regulatory measures; one is Energy Efficiency eXisting ship Index, (EEXI) which at present about 68% of bulk carriers worldwide will not meet that standard without doing certain technical modifications like fitting energy saving devices, or reducing the engine power. So similar is the situation among the Indian fleet and Indian register shipping deals with Indian fleet very much. So, their estimation is that most of the Indian vessels averaging about 17% will require reduction of main engine power ranging from 25% to 45%.
The second one is an operational carbon index. That means what we talk about EEXI is a design index which we do it one time, that has to be done in 2023, and it remains unchanged. The other one is operational per tonne mile of unit carriage transport work. How much CO2 you are emitting and your emission should be below or benchmark is like telling a car owner it’s okay you have bought Bharat IV and this is your standard, but every year you have to reduce your CO2 per tonne mile. So, accordingly ships have to be operated to make sure that emissions don’t exceed that benchmark. It’s a very harder task than EEXI which is a simpler task than CII which is an operational one. It’s going to have a lot of implications on commercial operations of the ships, because ships are chartered out with chartered parties you will have different kind of agreement with to say that ships can maintain a particular rating which is permitted by law, otherwise you will get inferior rating and you will have to do certain corrective measures.
For Indian ships being older profile ships there will be more problem here and Indian ship owners will have to take all kinds of actions to reduce their energy consumption and do everything possible from fitting energy saving devices to changing the electric lights to LED lights, then using antifouling coatings, operational measures, taking care of the hull, propellers, etc. All these things have to be done to make sure you remain in compliance with regulatory requirement for CII rating.
The big shipping lines have started off using LNG as fuel, we have seen exclusive LNG-fuelled ships. Another major shipping line has started using methanol as its fuel. What is the story with LNG and methanol and where do we progress after these two fuels?
I need to describe a little bit about fuel. Today, we use fossil fuel which we pull out from underground and use it. It is a combination of hydrogen and carbon. Fuel will continue to be hydrogen and carbon but the feedstock used for producing that fuel, and production pathway will be different from what it is fossil fuel today.
For example, to have a green fuel like green methanol, green ammonia, and green hydrogen you need to have green energy. That means it must come from renewable sources like wind and solar power. Feedstock you use must come from renewable sources, for example split the water which consists of hydrogen and oxygen split it to get the hydrogen and use that hydrogen. Use carbon from biological sources or capture the carbon air directed or from funnel of some existing plants and use that carbon in manufacturing fuel. Same is the process for green methanol and green ammonia.
Right now, methanol is already being used in engines for last five to six years and about eight product tankers are using it. As methanol is the most transported chemical in the world, they take it from cargo and use it, and that methanol is produced from LNG, and it can also be produced from coal. So, they don’t give you environmental benefit, the benefit will come if you use green methanol.
Now some container and shipping lines are trying to develop green methanol with green sources of energy in seven different parts of the world. Methanol is a viable fuel it’s easy to handle compared to ammonia and hydrogen which have a lot of safety concerns. We can see methanol being in use in 2050 in good measure, but that will be green methanol.
For LNG there is a lot of debate about environment benefit of it. Today, we are measuring carbon footprint of a marine fuel based on how many grams of CO2 has been emitted for burning one gram of fossil fuel on the ship, we are not bothered about how much CO2 has gone out in production, refining, and transportation. Some of the fuels in production pathway will have a lot of emissions. If you make the methanol from coal, it’s no environmental benefit there.
So, to capture this IMO is developing a Life Cycle Assessment (LCA) of Carbon Capture and Utilization guideline, and each of the fuel based on feedstock and production pathway will have a carbon emission factor from production to ship tanks and from ship tanks to propeller. So combined we will know how much CO2, methane, NOx and all sustainability issues will be captured. This guideline will tell us which fuel is more environmentally beneficial than the other and they will be listed out. This is under development and the work has already started on these two or three months ago and some data already available now, but not much data on the green production path are available yet.
It will be available by 2023 or 2024 where we can judge whether LNG is giving benefit to us or not. So, those who have invested in LNG is it a problematic investment? This is questionable, because there are certain people in the industry sector who believe that LNG is not an answer. It is a fossil fuel after all and you are locking your investment for another 20 to 30 years and that’s not good for the earth. There are some sections of people in the industry are saying that at least LNG is giving some benefit, and what is happening in exploration and production is a global issue and not just for shipping, so we are promoting LNG everywhere. So, these are the two interest groups, and only after the LCA guidelines comes in we will know how much beneficial or not we will have a clearer view.
Does that mean we will have a clear picture by the first quarter 2024 that which fuel will be more beneficial?
Yes, what is being developed is a sort of an interim guideline and it is being said that this will be updated as more information and data comes in, meanwhile a lot of research will be going on actually measuring, and we will put in only the fuel for which has confirmed values are available, because ship owner is investing for the next 25 to 30 years in a ship lifetime. So, we will have a more confirmed future fuel to be used by 2024, going by the present developments.
Could you please tell us what will be the impact of CII and EEXI on coastal ships?
As I said in the first question, the ships are older and EEXI applies to some of the ships, however, it won’t apply to tugs and dredgers, it only applies to bulk carriers, tankers, gas carriers, and container ships for these main ship types there is a reference line or standard it’s already there in MARPOL convention.
So, for those ships EEXI will have significant impact as power will be limited unless the ship owner goes for retrofitting energy saving devices, but that commercially may not be viable because of the remaining life of the vessel. If the remaining life is very short it doesn’t make any sense in investing money in that. So, the choice will depend on ship owner on case-to-case basis for a ship. More ships will be reducing their engine power and that way more ships will reduce their speed and therefore, there will be a shortage of tonnage, and you may need more number ships to complement that.
CII is an operational carbon intensity of the ship. Every year you have to calculate how much the ship has emitted, and whether it has met the benchmark or not. If it is inferior then it has to take corrective action to bring it back. Just to add to that, this is valid until 2026 calendar year. As of now we have 2% carbon reduction target every year from 2023 to 2026 calendar year beyond which 2027 to 2030 is not decided. It will be decided in 2025 based on how the shipping world performed in 2023, and 2024 calendar years and these will be taken to decide on further reduction measures.
The earlier target set by IMO was 40% reduction by 2030 compared to 2008 base levels. There are many in the IMO who are saying that 40% target is not good enough it has to be more. So, whether it is more or less or this is good enough will be decided in 2025. So, CII target may get more intense. As we saw in the IPCC third working group report that has been published recently says that the carbon emissions must be reduced. So, we expect more stringent CII requirement could be implemented.
Considering the challenges before the ship owners with regard to all these guidelines and the kind of fuel options that are available, how do you see the ecosystem or landscape of India from the perspective of what the government, the industry, and other stakeholders are doing? Are all these interested groups on the same page or what needs to be done to ensure the transition happens smoothly?
Ship owners can’t do this alone, because fuel may come from land and ship owners and the marine industry don’t deal with it. The energy producer is somebody else. Worldwide this realisation is coming that we cannot do it alone. We have to have coordination of all stakeholders, energy producer, fuel producer, transporter of that fuel, and not only those other consumers like shore-based energy sector, cement, steel mill they will all require the fuel. So, we need to get together, work together in having establishment here and it’s a good thing that India is taking initiative to become a hydrogen hub, it’s a futuristic outlook.
We need to have all stakeholders to come together for producing green hydrogen and to ensure that fuels become available at a commercially viable cost. Today, the VLSFO fuel which we use is available at a cost of $670, and green methanol which is going to be manufactured will cost about $2,000 to get the same energy value of VLSFO. So, we need to make methanol competitive by cutting its cost, it may not happen easily we need other instruments to make it competitive. All these things have to be worked together with the stakeholders.
There must be a lot research and development work should go on. Currently, around 258 research projects are going on worldwide and we need such things going on in India, maybe in some corner it is going on we don’t know. It is necessary that our ministry the alternative sources of energy which looks after that together with stakeholders in shipping can work together to get that fuel required.
The interview can be viewed on You Tube at https://youtu.be/L3ssgFdAVvwTags: Ammonia, coastal shipping, Hydrogen, Indra Nath Bose, Marine Industry, Methanol, the Great Eastern Shipping Company Ltd