In 2020, Maersk’s former Chief Executive Officer (CEO), Søren Skou, firmly dismissed LNG (liquified natural gas) as a viable option for decarbonisation of its fleet. Citing its status as a fossil fuel, he expressed a preference to leap directly to carbon-neutral alternatives. This stance was underpinned by concerns over LNG’s methane “well-to-wake” emissions. At that time, Maersk placed its bets on (green) methanol, positioning it as the preferred fuel for a zero-carbon future.
Fast forward four years and with 25 dual-fuel methanol container ships in service or on order, Maersk took everyone by surprise when market rumours emerged that the company was about to order up to 22 LNG-fuelled container ships. On August 7, the company came forward announcing a massive fleet renewal plan, including a turn to liquefied bio-methane (bio-LNG). The main difference between bio-LNG and LNG is that bio-LNG is produced from organic waste materials, making it a renewable energy source, while LNG is derived from fossil fuels.
The plan aims to secure 800,000 TEU in dual-fuel capacity by 2030, aligning with Maersk’s 2021 fleet renewal strategy. It involves 50 to 60 vessels, with 300,000 TEU owned and 500,000 TEU chartered. The dual-fuel ships will use a mix of methanol and bio-LNG.
Vincent Clerc, CEO of Maersk, said that to meet its requirements within existing shipyard capacity Maersk has opted for multi-year orders. Delivery is expected to be spread out evenly between 2026 and 2030. “Most of these ships are already ordered, or will be in the coming weeks,” Clerc said.
Maersk said it was working to secure offtake agreements for bio-LNG to ensure that the new dual-fuel gas vessels provide GHG reductions in this decade. Once delivered, around 25% of Maersk’s fleet will have dual-fuel engines, supporting the goal of using green fuels for 25% of ocean cargo by 2030. Overall, the company has set a target of becoming net-zero in 2040.
Clerc said the decision to use bio-LNG was made to mitigate risks due to the uncertainty surrounding the availability and prices of green fuels, as well as the evolving regulatory landscape. “Therefore, to reach our decarbonisation agenda in an economically competitive way, there was a necessity for us to hedge some of the bets that we are making on technology,” he added.
Maersk’s move has not gone unnoticed. The NGO sector was unhappy, calling the decision a step back from the progress made so far. However, many see it as Maersk coming to grips with the reality of challenges such as availability, lack of infrastructure for alternative fuels like methanol, and pricing.
Commenting on Maersk’s move, CEO of Vespucci Maritime Lars Jensen, said the shift was merely an adjustment to the company’s decarbonisation plans. “They have found themselves in a situation where there just isn’t enough green fuel in the coming years. So, I see this as Maersk adjusting near-term to the realities of the market,“ Jensen said in a recent virtual panel discussion.
Gregory Dolan, CEO of the Methanol Institute, agrees, explaining that shipping is about managing risk and having fuel options that support risk management. “This is reflected in Maersk’s recent decision to look at LNG newbuilds in addition to methanol vessels they already have on the water or in shipyards,” Dolan said in a comment for WorldCargo News.
Betting big on methanol
To be fair, Maersk has been very proactive in securing offtake agreements with green methanol producers across the globe, including Equinor, among others, which is supplying green methanol to the company’s inaugural methanol fuelled feeder Laura Maersk in Rotterdam. In the long term, the feeder will be fuelled by e-methanol from a plant in Denmark, operated by European Energy, which is expected to come on-stream in the second half of 2024.
Maersk’s vote of confidence in methanol has spurred orders in the container shipping sector, including from CMA CGM, Ocean Network Express, and Cosco Shipping. The current order book for methanol-powered containerships stands at 183, based on DNV’s data, with 19 already ‘in operation’.
Read more: Getting to grips with methanol bunkering
The most recent orders for dual-fuel methanol-powered container ships include twelve 13,000 TEU vessels for ONE, and up to 20 vessels for Wan Hai in the 8,000 TEU and 8,700 TEU capacity.
There have also been setbacks. In early August, Danish energy company Ørsted ceased development of its FlagshipONE e-Methanol facility in Sweden that was expected to supply up to 55,000 tonnes of e-methanol annually. Ørsted ascribed the move to a slower-than-expected development of the liquid e-fuel market in Europe.
Transition fuel or fuel in transition?
On the other hand, LNG has gained significant traction as a practical transition fuel for the shipping industry, overcoming the long-standing chicken-and-egg dilemma regarding bunkering infrastructure. This progress is marked by the expansion of LNG bunkering facilities from 141 ports in 2022 to 185 in 2023, with 50 more planned by 2025, according to Clarksons’ data.
Fears have been raised that investing in LNG dual-fuel ships could be a risky move, potentially leading to stranded assets. As a result, companies like CMA CGM have started to turn their focus to greener versions of LNG, such as bio-LNG and e-LNG. These fuels are produced by blending LNG with biogas or synthesising it using renewable energy and green hydrogen.
According to SEA-LNG, a coalition supporting LNG as a marine fuel, bio-LNG and e-LNG could be key to achieving net- zero shipping. A 2021 study commissioned by SEA-LNG and SGMF (the Society for Gas as a Marine Fuel) estimates that LNG can reduce GHG emissions by up to 23% compared to current oil-based marine fuels.
Steve Esau, COO of SEA-LNG, told WorldCargo News that the 23% reduction in GHG emissions achievable with LNG in two-stroke high-pressure engines aligns with the IMO’s 2030 target of a 20% GHG reduction. He also noted that bio-LNG offers even greater potential, with emissions reductions of up to 80%, and up to 190% when biomethane is produced from anaerobic digestion of waste materials (such as manure).
SEA-LNG argues that once demand from other sectors is taken into account, bio-LNG could meet up to 3% of the total energy demand for shipping fuels in 2030 and up to 13% in 2050. If used as a 20% blend with LNG, it could cover up to 16% and 63% of global shipping demand by 2030 and 2050, respectively.
Additionally, Sphera’s 2nd Lifecycle GHG Emission Study projects that by 2030, methane slip from LNG will be nearly eliminated due to ongoing technological advancements. Furthermore, as indicated by SEA-LNG, about 75% of LNG-fuelled vessel orders use 2-stroke diesel engines, which have “already eliminated methane slip”. For low-pressure engines, methane slip has been reduced by over 85% in the past 25 years.
LNG dual-fuel ordering frenzy
The appetite for LNG-powered new builds shows no signs of subsiding. Recent orders include CMA CGM placing an order for twelve LNG-powered 15,000 TEU vessels. MSC has ordered twelve 19,000 TEU LNG-fuelled boxships and is also reported to have ordered twelve 21,000 TEU LNG dual-fuel vessels and up to 18 LNG-powered containerships from separate yards.
Seaspan Corporation has revealed orders for 27 dual-fuel vessels (23 LNG-powered and 4 methanol-powered) with multiple customers as part of its financial report for H1 2024.
Overall, Clarksons’ data shows that 109 LNG dual-fuel vessels have been ordered in 2024 up to June. There are now more than 550 LNG-fuelled vessels in operation, a number expected to double by 2027.
For container ships alone, 1.59m TEU capacity has been contracted so far in 2024, which, according to BIMCO, is the third highest level since 2008. Out of this, about 55% of capacity ordered year-to-date is powered by LNG, and 20% with methanol (plus another 15% as methanol “ready”).
Many of the vessels are slated for delivery in 2027 or 2028. Jensen highlighted the need for fleet replenishment, given that a substantial portion of the existing fleet consists of ageing vessels that should have been scrapped years ago but were retained due to the pandemic and subsequent market disruptions.
Additionally, Jensen emphasised the importance of decarbonisation targets, stressing that “most carriers have clear targets for gradual decarbonisation,“ which requires the acquisition of newer, more environmentally friendly ships.
Availability of bio-LNG
Biomethane production is rapidly expanding, particularly within Europe and North America.
“SEA-LNG members are prepared to offer bio-LNG bunkers in around 70 ports worldwide, particularly in Europe and the USA, with developing interest and uptake in Asia. It’s fully compatible with existing LNG bunkering infrastructure, as well as LNG-powered engines, i.e. the assets exist; it’s a question of decarbonising the fuel,” Esau said.
“And with the influence of shipping giants such as Maersk opting for the fuel, we could see supply and demand grow even further in the coming years.”
Esau added that global development of clean electricity is essential for scaling up e-methane production. “However, unlike many of its counterparts, e-methane can already be used in existing LNG- fuelled vessels, eliminating the need to build new ships, transportation, storage, or bunkering infrastructure in order to benefit from the outcomes. This gives e-methane a 10-year head-start compared to many alternatives,” he said.
Defying the odds
Israeli shipping company ZIM has been a staunch supporter of incorporating LNG-powered vessels in its newly built fleet and now operates 10 x 15,000 TEU LNG-powered vessels and 12 out of the 18 X 8,000 TEU vessels it has committed to on long-term lease deals. The company claims it has successfully reduced its costs per TEU by replacing older, less efficient chartered vessels with newer, more cost-effective ships.
“We have also seen financial benefits from our utilisation of LNG since it has proven to be more cost-effective than LSFO. We are also pleased to see that other shipping companies are increasingly recognising the advantages of LNG-powered vessels,” ZIM President and CEO Eli Glickman said in an earnings call in mid-August.
ZIM now operates two separate services on the Asia to US East Coast trade with LNG-fuelled vessels.
source: https://www.worldcargonews.com/shipping-logistics/2024/11/out-with-the-new-and-in-with-the-old-turning-back-to-lng/
