As the 2020 low sulphur deadline looms, methanol will be added to the marine fuels mix – and would suit small container ships
Shipowners and operators build assets for the long term but must take a short-term view of the markets in which they will trade. Seen in this context, IMO’s 2020 sulphur cap, while important, is the start of the conversation about clean fuels, not the end.
The shipping industry is focused on 2020’s near-term effects, but the likely impact of this piece of regulation extends beyond its intended environmental goals. Despite being shrouded in a fog of contradictory reporting and analysis, we know that bunker prices will rise in 2020 and there will be shortages and pinch points where supply and demand are out of step. All bets are off if we revert to a sustained higher world oil price regime.
In the past, shipowners have tended to go where the bunkers are low cost – even if that means some risk to quality – but given the supply position, it seems less likely that they will be able to source low sulphur fuel oil (LSFO) or gasoil in future without having long-term agreements in place.
Even after supply/demand normalises, the post-2020 era will be one of higher fuel prices, making alternatives more attractive to owners planning newbuildings in the next few years. A sustained high price for LSFO or gasoil, especially when some form of carbon levy is added, might be a boost to LNG but could also make methanol competitive as a marine fuel for newbuildings and conversions alike.
Granted, it will take some time for methanol to be adopted across the global fleet, but as the marine fuels market moves from a spot business to one defined by longer-term contracts, it becomes more attractive.
An obvious candidate is the small container ship sector. Far less costly or complex than LNG to install, methanol is liquid at atmospheric pressure so requires less tank space and offers simpler, safer installation and handling.
As the world’s most widely shipped chemical commodity, an additional benefit of methanol is its availability at ports around the world. Wherever you see tank farms at port facilities, you are likely to have methanol storage capacity – and that includes most major container ports.
Methanol’s safety profile should also be better understood. Safe handling practices draw on a long history and experience in shipping and industrial use. No more harmful than diesel or gasoline, methanol is miscible in water and so is far less hazardous to the environment than heavy fuel oil, biodegrading rapidly in the event of a spill.
As a low flashpoint fuel, methanol is subject to the revision of the IGF Code. Further guidance should be available this year and full regulatory approval by 2023.
The environmental argument for methanol is irrefutable. Like LNG, methanol addresses the SOx/NOx/PM emissions question and provides 2020 compliance but unlike LNG, methanol offers a future pathway to a low and zero-carbon emissions profile, enabling it to be part of the gradual decarbonisation of shipping.
Methanol production already offers a wide range of feedstock and process technologies for future-proof, zero-carbon biomethanol and several plants are already producing low-carbon methanol through a carbon capture/re-injection production loop, as well as from biomass.
To generate a like-for-like comparison of the costs of methanol versus LNG or LSFO, the industry requires a better means of pricing than the current link to posted contract pricing.
The Methanol Institute has been working with industry partners including Lloyd’s Register to develop an online cost comparison tool. Available free of charge, the calculator enables owners and operators to understand the comparative fuel costs associated with HFO, LSFO, LNG and methanol-based propulsion.
Methanol may not be the fuel of the mass market by 2020, but owners able to think beyond the next few years to the next phase of maritime regulation should be considering what the marine fuel market will look like, and how alternatives such as methanol fit into that future.
Chris Chatterton is chief operating officer at The Methanol Institute