Decarbonising shipping with methanol

Methanol

Methanol is gaining traction as a fuel to deliver a viable route to decarbonising shipping and comply with stricter emission regulations.

Methanol is gaining traction as a shipping fuel largely because of new regulation at the International Maritime Organisation (IMO) and in Europe. Methanol (CH3OH) can deliver a viable route to compliance which can keep up with ever tightening regulation by offering both retrofit and replacement options and then allowing grey and lower emission methanol to be blended to meet compliance needs.

A new report from Longspur, ‘Attention All Shipping’, explores the use of methanol to offer both retrofit and replacement options as a shipping fuel to meet compliance requirements. The report predicts a total addressable annual market for methanol in shipping of 179MT HFO equivalent by 2050, which could almost double current methanol demand.

There has been a significant growth in deliveries and orders of methanol fuelled vessels since we published our analysis of the decarbonisation of shipping last year (All At Sea; Methanol and Shipping. Longspur Research 22 January 2022). There are now over 100 methanol fuelled vessels in operation or on order with tankers representing the bulk of existing vessels but containerships dominating new orders. We see this demand as being driven by new and potential emission regulations.

The International Maritime Organisation has designated the Mediterranean as an Emission Control Area for sulphur oxides from 1 May 2025. This means that vessels cannot use very low sulphur fuel oil and will need to find alternatives which could include CH3OH given its negligible sulphur characteristics. The inclusion of the Mediterranean means ships using the Suez Canal as a gateway to the Mediterranean will be covered. The IMO is also introducing tightening energy efficiency limits requiring vessels to improve overall emissions efficiency and this could tighten further towards a 2030 target of a 40 per cent reduction in CO2 emissions.

The EU is also tightening emissions for shipping, with a preliminary agreement to include shipping in the EU emission trading scheme (EU-ETS) from 2024, introducing taxation of marine fuels under the Energy Taxation Directive and perhaps most significantly, introducing significant emission penalties under the FuelEU Maritime Initiative.

These changes could make existing maritime fuels more costly than low carbon alternatives as early as 2025. CH3OH fuel from natural gas (grey methanol) already offers some key advantages such as lower tank-to-wake emissions, complying with EMA sulphur limits and an ability to be blended with low carbon CH3OH to comply with the evolution of EU GHG limits. We see this flexibility as making it a strong option for ship owners now and as a result we see the fuel becoming a major part of the decarbonisation toolkit.

“There is a strong move among ship owners to address decarbonisation and methanol is emerging as a key solution,” said Adam Forsyth, head of research at Longspur. “Regulatory developments from the IMO and EU are raising low carbon shipping up the agenda and methanol is seeing strong interest with over 100 methanol-fuelled vessels now on the water or on order.”

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