Why Trafigura is leaning towards ammonia as a marine fuel

There are however, grounds for optimism. “I  believe several proposals from IMO have been inspired by that 2020 white paper,” he says, a remark that inevitably prompts the question: what is the right carbon price to drive the transition?

“Four years ago, we estimated a price of US$250 to US$300 per metric tonne. There are many nuances and variables around this figure, as it depends on how revenue distribution will be managed. If you decide to implement a contract with a different structure for allowing green fuels, you may need to impose a lower penalty initially since it will take time before green fuels become widely available.

“Currently, we are hearing figures of US$150 to US$200 per tonne of CO2 equivalent being discussed among IMO members. We have not recently provided an updated figure ourselves because it heavily depends on the structure of fund distribution. Having said that, we remain firm that a carbon penalty of US$250-300 per tonne of CO2e is still required and these numbers are based on accumulated knowledge from our potential hydrogen production sites we are in the process of maturing,” he says before returning to his central theme, “The key point is those burning green fuels must achieve cost neutrality compared to fossil fuels.”

Since 2020, Trafigura has matched its advocacy with investment.

"We are investing in various technologies that could eventually be applied to our controlled assets. For example, we have invested in Daphne Technology that is developing a methane slip abatement solution and emissions measurement tools. We are also trialling new fuels, including biofuels,” he adds, a statement which invites a question on what will ultimately be maritime’s dominant marine fuel.

“We conducted scientific studies with Texas A&M University in 2019 and 2020. Our conclusion was the most likely fuels of the future are methanol and ammonia with green and blue content. When IMO measures emissions on a full well-to-wake basis, these two fuels perform significantly better than alternatives.

“However, as a shipowner considering a new dual-fuel engine with an offtake agreement lasting five to ten years – likely a prerequisite from green fuel developers – the decision becomes complex. The entire supply chain needs to align simultaneously, which is challenging due to the substantial investment required for green fuel projects.”

A cogent response but a critical question remains: will it be methanol or ammonia? “The jury is still out on this matter,” he says. “We recognise challenges with methanol, particularly regarding feedstock availability – the CO2 component. There is uncertainty surrounding long-term CO2 feedstock contracts due to unpredictable industry changes.” This uncertainty, he says, could pose such significant risks it may lead to ammonia becoming the preferred fuel of the future.

“While ammonia has been labelled toxic – a valid concern – it is already a traded and transported commodity today. Significant testing has been conducted without major incidents; however, it remains a risk similar to those faced when LNG was introduced.”

While stressing that as long as there is progress, Trafigura will remain agnostic as to whether ammonia or methanol will be the dominant fuel, it is clear Trafigura has shown more belief in ammonia by investing in ships designed for its use.

In 2021, the trader co-sponsored developments with MAN Energy Solutions, which advanced ammonia technology significantly. “MAN’s chief executive stated without Trafigura’s involvement, their ammonia engine development would not have progressed as far as it has,” says Mr Bach Nielsen, adding, “We take pride in our role during a time when few were considering ammonia seriously. And given our recent investment in dual-fuel gas carriers capable of running on low-carbon ammonia, we have learned valuable lessons that could inform broader industry efforts to transition to alternative fuels. The key lesson is dual-fuel ammonia technology can and will happen. “We do not see technology as a barrier to ammonia becoming a serious contender as a transport fuel of the future and we understand, as expected, the risks associated with ammonia’s toxicity have been significantly mitigated.”

Proof positive of this is Trafigura’s recent order of four medium gas carriers equipped with dual-fuel engines capable of burning ammonia as a low-carbon fuel. This places Trafigura among a select group of companies pioneering ammonia-fuelled vessels, including Exmar, which has ordered dual-fuel LPG/ammonia carriers, and Fortescue, which recently completed the first-ever ammonia bunkering tests. Currently, there are only 19 vessels on order globally for ammonia-fuelled propulsion, with most orders for bulk carriers and only two for gas carriers, even as the technology and necessary infrastructure are still being developed. The Trafigura vessels will be built at HD Hyundai Mipo Dockyard in Ulsan, South Korea, with the first delivery scheduled for 2027.

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