METHANOL FUEL MORE ECONOMICAL ON CAPEX AND OPEX THAN LNG

Tuesday, July 27, 2021 

Methanol as a commercially and technically viable marine fuel is gaining greater traction over other alternative bunkers, including LNG, as more shipowners adopt the clean-burning fuel as price spreads narrow and production ramps up. That was the key takeaway from a Maritime AMC-organised virtual conference on Alternative Fuels.

Speaking at last week's conference, Greg Dolan, CEO of the Methanol Institute, a trade body whose shipowner members include Maersk, Stena Bulk, MSC, MOL and Oldendorff Carriers, predicts that methanol production costs will fall to become more competitively priced than traditional diesel bunker and other alternative fuels. Dolan suggested that the move to methanol would also help shipowners avoid the proposed carbon tax on diesel, which could be between US$250 and $450/t of CO2.

“There’s a call by many including the world's largest shippers for a carbon tax on diesel fuels. That would dramatically change the pricing picture for marine fuels and the only available alternative fuel options today are advanced biofuels, LNG and methanol,” he said.

As a transitional fuel, methanol is supported by IMO in its recent adoption of safe handling guidelines under the IGF Code for low flashpoint fuels.

“This has been an important milestone in the growth of methanol as a marine fuel,” Dolan said. “And while LNG paved the way for methanol, methanol adoption can be a model for ammonia and hydrogen in the future.”

According to Dolan, methanol production increased last year to 100Mmt, doubling production in a decade. He said production could reach 500Mmt by 2050, as predicted in a joint Methanol Institute/International Renewable Energy Agency report released earlier this year.

Commenting on those shipowners that have already announced plans to include methanol within their fuel pool, Dolan told attendees at the webinar that first movers, such as Maersk, understand “there is little time left to wait on potential solutions that might fulfil 100% of their 2050 goals. They know we don't have 30 years to wait.”

Maersk announced in March that its first methanol-burning vessel will launch in 2023, seven years ahead of schedule. The company also mooted an order for twelve 15,000TEU methanol-fuelled containerships.

Another advocate is Proman Stena Bulk. The joint venture between shipowner Stena Bulk and methanol producer Proman is planning to build six 50,000dwt tankers with methanol dual-fuel engines for delivery in 2023. A further three vessels owned solely by Proman, scheduled for delivery in 2022 and 2023, will be traded globally for shipping chemicals and clean petroleum products.

Anita Gajadhar, MD Proman Marketing, Logistics and Shipping, said: “For us, methanol is a proven fuel capable of meeting the shipping industry’s carbon reduction targets. When you look at the long-term pricing, it is competitive when compared to alternatives, like MGO. It is easy to bunker, it is safe to bunker, and it is widely available as bunker in 122 ports.”

Gajadhar claimed that methanol is currently being traded at a price lower than LNG in some ports, and is less to bunker than biofuel, currently traded at US$1,200/t or more.

“Methanol is actually going to be a little bit cheaper than some of the biofuels that are available in the market today…. In terms of CAPEX, it is also a lot cheaper to modify vessels for methanol than it is for LNG,” she said.

Methanol-fuelled newbuilds also cost less than a LNG-burning ship, according to engine builders MAN Energy Solutions and Wärtsilä.

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