Avoiding stranded assets in a rapidly decarbonising world

“Indeed, it is a conundrum that shipowners and operators are facing,” said Mr Goh. He said traditionally the approach to fleet renewal would be to look at the market, the capacity required, the ship type and the technologies that are available. “But in today’s world, we have to consider the type of propulsion and the regulations that are already in place that will drive shipping towards decarbonization,” he said. This applies to investments in not only newbuild ships but also existing ones, he said, explaining that investments in younger vessels will be required to make them “last the distance, in order to comply with the decarbonisation regulations.”

In the case of its newbuilds, PIL has chosen LNG dual-fuel propulsion “because that’s what we see as the most pragmatic solution,” noted Mr Goh. “For now, we know that in two to three years’ time when the ships are delivered, we will be able to run those ships on LNG with the supply infrastructure in place. At the same time, we are keeping an eye out for other options — methanol, ammonia, and even carbon capture. A lot of consideration has to be given to the supply availability and the infrastructure before we can be confident enough to place the investments,” said Mr Goh.

This pragmatic approach is readily recognisable in PIL’s newbuilding programme, comprising four 8,000-TEU and four 14,000-TEU box ships ordered from China’s Yangzijiang Shipbuilding. In each case, the newbuilds are LNG dual fuel and ammonia ready.

“The notation refers to the LNG tanks which will be fitted with GTT membranes, enabling the tanks to be supported with enhanced scantling to cater for the potential of containing ammonia instead of LNG,” PIL told Marine Propulsion.

Mr Balani noted that shipowners and fuel producers are faced with the classic chicken and egg conundrum: “Shipowners have so many options available to them; various different fuels, all at different stages of readiness. It’s very hard to choose the right one, or the one that will remain competitive for 20-25 years,” he said. “But similarly, when we take that information to the fuel producers of the world, although they can perhaps produce the compliant fuels, they aren’t sure of the amount of demand [nor] where that fuel would need to be supplied, and so they are equally hesitant to invest.”

“We know that in two to three years’ time we will be able to run those ships on LNG”

Mr Balani said this is where collaborations, such as The Silk Alliance, come into play: “The Silk Alliance is a cross-industry collaboration to develop a green corridor in an attempt to bring those two sides of the equation together.” He said a model would also be developed to try and understand how the potential fuel demand and supply can evolve over time, “considering all those various different options and then helping us to select the best strategy to move forward.”

Through The Silk Alliance initiative, LR Maritime Decarbonisation Hub is working to help shipowners overcome these challenges by fostering industry-wide collaboration to develop a viable fleet fuel transition strategy and establish a green corridor in the Intra-Asia container route.

Besides PIL and ING, The Silk Alliance brings together shipowners MSC Shipmanagement, Wan Hai Lines, X-Press Feeders, Yang Ming Marine Transport Corp, shipbuilder Keppel Offshore & Marine Ltd, bunker logistical supplier Singfar International, engine manufacturer Wärtsilä, ship manager Wilhelmsen Ship Management, financial institution the Asian Development Bank and PSA. 

For additional insight on decarbonisation investment strategies and The Silk Alliance, listen to the complete podcast at www.rivieramm.com