Green Fuel: Methanol's Promise

 

“The momentum for green fuel is building, and we are pleased to see strong partnerships across the industry as we continue our joint efforts of making decarbonization in shipping successful.” – Vincent Clerc, CEO of A.P. Moller – Maersk (COP28)

Amid the maritime industry's pressing drive to slash carbon emissions and adhere to stringent regulatory mandates, methanol stands out as a game-changing alternative fuel. Industry pioneers and experts champion methanol's adoption, highlighting its transformative potential for sustainable shipping.

To delve into methanol's pivotal role in steering the industry toward a greener future, we gathered some unique insights from leading firms advocating for CH?OH.

Another Bridge or the Road?

Jon Loken, Director of Quarks Asia, a boutique, Singapore-based consulting firm focusing on the energy transition, highlights the strategic importance of methanol in the maritime sector: “LNG was the first non-conventional fuel that started getting used. What I'm sensing now is whether methanol will become an intermediary fuel or if it will be for the long haul. Even though the number of ships on order that can burn methanol is an impressive 270, many shipowners are on the fence, waiting to see what technology to invest in.”

Methanol has many advantages.

“Operationally, the transition to methanol is relatively easy for the crew to handle and doesn’t require much additional training,” Loken explains. “This is important from a safety perspective. Politically, the pain point of the E.U.’s Emissions Trading System (EU ETS) requires shipping companies to monitor, report and verify their CO? emissions and then surrender allowances for a portion of these emissions on a phased approach. We should expect other regions like Australia and China to adopt similar practices, thus accelerating the use of low-carbon fuels.”

Loken says methanol's established infrastructure, cost-effectiveness and safety make it a viable option for companies looking to meet stringent environmental regulations, particularly along green corridors. These routes, such as the Trans-Pacific, Europe-Asia, Australia-Japan, and North and Baltic Sea Corridors, promote decarbonization via dual-fuel engines running on both alternative and traditional fuels along with the infrastructure development needed for low-carbon fuel bunkering.

“Compared to other alternative fuels,” Loken emphasizes, “methanol’s liquid state at ambient temperature and pressure simplifies storage and handling. This reduces conversion costs and leverages existing infrastructure, making the transition smoother. Methanol can be produced from various feedstocks such as agricultural and municipal waste, natural gas, coal and even captured carbon dioxide, providing elasticity in production. This adaptability makes methanol attractive for different regions and markets, facilitating its integration into the global energy landscape.”

The Methanol Institute

Gregory Dolan, CEO of the Methanol Institute, has been at the helm for 28 years, helping steer the industry towards methanol’s adoption.

“Methanol is very well-positioned right now,” he says. “The last numbers I saw from Clarkson had the orderbook at around 270 vessels including newbuilds and retrofits, exceeding LNG. The cost to retrofit a vessel for dual-fuel methanol operation is less than for LNG, providing even more advantages for methanol. MAN Energy Solutions and Wärtsilä each have over 180 engines on their orderbooks. We see heavy investment from original equipment manufacturers like MAN, Wärtsilä, Caterpillar, WinGD, Hyundai Heavy Industries, China Shipbuilding and Rolls Royce MTU.”

One of the big stories about methanol as a marine fuel is that vessel owners can buy an engine and a ship that runs on methanol today.

“Alfa Laval has sold 100 methanol fuel systems for vessels,” says Dolan. “Unlike some future fuels, methanol is available now. We’ve seen a lot since the first methanol-fueled vessel, the Stena Germanica, which was retrofitted in 2015. From there, Methanex and Waterfront Shipping introduced a fleet of chemical tankers using MAN two-stroke engines, which now have over 500,000 hours of operation on methanol. This experience has matured the technology, making methanol-fueled engines available in almost any bore size.”

Ammonia, another potential future fuel, is still a long way off.

“We might see the first ammonia-fueled engines on boats next year, but that will just be initial demonstrations,” Dolan adds. “We also need to see IMO safe-handling guidelines for ammonia. For methanol, we started the process in 2014 and completed our interim guidelines under the IGF Code in December 2020. This was a game-changer for methanol’s use as a marine fuel. Three months later, Maersk announced that the first carbon-neutral containership would run on methanol. Methanol likely has a five or six-year head start on ammonia. However, decarbonizing shipping and moving away from the annual reliance on 300 million metric tons of diesel bunker fuel will require multiple alternative fuels including methanol, LNG, ammonia and hydrogen.”

Global methanol demand is currently 90 million metric tons, making it a top-five widely shipped chemical commodity. Methanol storage capacity is available at 120 ports worldwide with more bunkering and dedicated bunker vessels continually being introduced into major ports.

There’s also a growing pipeline of renewable methanol projects and over 23 million metric tons of bio-methanol and e-methanol supply projected by 2029.

Methanol is not without its challenges, however, mainly because it has half the energy density of diesel and thus requires twice the volume.

Dolan is unfazed: “Because methanol is a liquid at ambient temperature and pressure, you have flexibility in where you place the tanks. You can even use the double-wall hull for containment. This means you're not losing as much cargo capacity as you would with cryogenic fuels like LNG, ammonia or hydrogen. For reference, new Maersk vessels can complete a global roundtrip on one fill-up of methanol.”

Methanol’s Economics

Current spot market pricing for methanol is around $325 per metric ton (MT) in ports such as Houston, Rotterdam or Singapore. Given that methanol has half the energy content of diesel bunker fuel, it requires twice as much for the same output.

“Even so,” says Dolan, “at $325 per MT it remains cost-competitive with current diesel bunker fuel. Producing renewable methanol like bio-methanol or e-methanol is more expensive. However, as Maersk has noted on several occasions, even if they paid twice as much for renewable methanol, the cost to move a pair of sneakers from Shanghai to LA would only increase by five cents on a $50 pair of sneakers. Major customers are now willing to pay more for green shipping certification.”

Another part of the equation, particularly with the FuelEU Maritime Initiative and the EU ETS, is that they will increase the cost of compliance to continue using diesel bunkers.

“That cost will rise from $300/MT next year to over $2,000/MT by 2050,” Dolan states. “So when you look at using bio-, e- or conventional fuel with a blend of methanol and compare the cost of compliance with diesel, there will be a real economic incentive.”

He adds: “If you look at FuelEU’s maritime pooling mechanism – under which ships will be allowed to pool their compliance balance with one or more other ships with the pool having to meet the greenhouse gas intensity limits on average – a recent report from AATI Climate shows that one e-methanol vessel reduces emissions so much that 70 HFO-fueled vessels could be compliant when pooled. In contrast, an LNG vessel could only offset five HFO-fueled vessels.”

A Net-Zero Carbon Fuel

Dolan expounds on how methanol can be referred to as carbon-neutral.

“If you look at the methanol molecule CH?OH,” he explains,” there's always a carbon in the molecule. Recognizing that methanol is a liquid fuel with the highest hydrogen-carbon ratio and you only have a single carbon, we don't have much of a carbon problem. We can also view that carbon as a resource. If you're producing renewable methanol from biogenic sources like biogas/biomass, you're not putting additional CO2 into the atmosphere; instead, we now see greenhouse gas (GHG) reductions of 60 to 95 percent. In some cases, depending on the feedstock, like if you’re using biogas from dairy manure, there’s actually negative carbon intensity. So now we can look at methanol as being part of the solution. This facilitates the transition to low-carbon and net-carbon-neutral fuels.”

Dolan concludes, “If we look further in the future to technologies around direct air capture, you're taking CO2 out of the atmosphere, then you combine it with green hydrogen to produce an e-methanol, and again have a negative carbon intensity. I'd also point out the emerging technology we see, like onboard carbon capture. If you have a carbon and a methanol molecule, you're able to collect it from the ship’s stack, take that carbon out, put it in the hold, bring it back to shore as liquefied carbon, then take that liquid carbon and use it to make more methanol. We can see a whole circular economy built around methanol with carbon capture, particularly for renewable fuels. That's incredibly exciting.”

Methanol offers several key benefits as an alternative fuel for shipping. It can reduce greenhouse gas emissions, is biodegradable and is less harmful in case of spills, making it safer for the environment.

Additionally, its established infrastructure and availability, cost-effectiveness compared to traditional fuels, and versatility in production from various feedstocks make it a viable option for meeting stringent environmental regulations.

But is that enough to secure methanol as the leading investment in maritime’s voyage to carbon-neutral shipping? – MarEx

Sean Holt is a frequent contributor to the magazine.