CO2 transport an 'opportunity' for shipping, says new EU CCS alliance

Gibson Shipbrokers tackled the subject of onboard carbon capture and storage systems and CCS transport in its weekly tanker market analysis.

"While CCS technology could allow shipping to carry on burning cheaper fuels, and meet emerging environmental legislation, it also offers a new source of cargo demand for the industry, which could over time help offset lost demand from a declining trade for conventional hydrocarbon cargos," Gibson’s analysis said.

According to the shipbrokers, North America currently leads on CCS efforts, accounting for approximately half of installed, planned or currently under construction CCS storage projects.

Europe accounts for around 35% of planned projects, with Asia’s currently planned projects tallying up to just 19.2M tonnes of CO2 storage per year, equalling less than 10% of the existing global project pipeline.

"While the US and Canada lead in terms of CCS projects, much of the activity will be onshore, reducing demand for shipping; however, in Europe, with most projects offshore under the North Sea, shipping will be in much greater demand, either for direct injection via floating infrastructure, or shipping to dedicated onshore injection facilities from across Europe where subsea pipelines will transport captured CO2 into depleted oil and gas fields," Gibson said.

There is, according to the shipbroker, also a reasonable chance of a bottleneck developing that would be advantageous for shipping. If several of the projects currently undergoing feasibility studies are approved, there could be a shortage of shipping capacity available for when the projects are commissioned.

"Currently, just two CO2 carriers are on order and will be dedicated to the Northern Lights project, which commences in 2024. Given current newbuilding lead times and uncertainty over designs, projects coming on stream which require shipping capacity in the 2026 period could find themselves short of specialised tonnage, if orders are not placed soon," Gibson said.

For shipowners, this could create an opportunity for a speculative order, but with most projects still in early stages of development, there is a risk to shipowners of ordering the wrong vessel size or design, according to Gibson. But this risk is likely to dissipate.

"With yards researching designs which can carry ammonia and LPG as well as CO2, it may not be long until shipowners can mitigate the risk through cargo flexibility, giving some owners the confidence to take the plunge into this burgeoning market, while also (potentially) improving their ESG credentials," Gibson said.

Gibson also pointed to flexibility for CO2 project developers who would potentially be able to design facilities to pre-ordered vessel specifications, especially if shipyard availability does not significantly expand.

"Undoubtedly there is a future for CO2 shipping, and while technical and regulatory hurdles need to be addressed, there is a clear will at government and corporate level to develop CCS as a solution to combat climate change. If projects are to be developed by the late 2020s, then time is running out to secure dedicated vessels, which could create an opportunity for those brave enough to order ahead of the crowd," Gibson said.

Shipping and its role in carbon capture and storage will be a key topic at the CO2 Shipping & Terminals Conference being held in London on 27 June 2023. Secure your place here.