January 05, 2023 | Oil and Gas
Shipowners and charterers are under pressure to reduce the greenhouse gas footprint of their fleets amid easier access to capital for carbon-neutral projects, new environmental regulations and customer expectations on sustainability.
Resolutions by the International Maritime Organization and the European Union to impose a levy or to limit carbon emissions are expected to kick in this year, putting further pressure on shippers to shift from fossil fuels to alternative or sustainable marine fuels.
The shipping industry is said to be responsible for about 3% of global carbon emissions, roughly equivalent to Japan's total annual carbon emissions.
Today, the trend of large fuel vessels powered by liquefied natural gas dominates the market in terms of order size and fleet numbers.
However, the energy crisis because of the Russia-Ukraine war and international mandates have forced shipowners to look for alternative marine fuel sources such as methanol, ammonia and hydrogen.
The big question, however, for the shipping industry is where to start its decarbonization effort.
Short-sea shipping or support vessel segment seems an obvious contender given its high vessel utilization and fuel consumption.
Moreover, most renewable fuels lack the energy density required to support longer ocean voyages.
Of the total North American maritime-related emissions, the offshore support vessel fleets, tugboats and push boat fleets make up nearly 50% of all emissions, according to Blue Sky Maritime Coalition.
In the last two years, large ports and shipowners have tried out an array of clean fuels for offshore support vessels used by oil and gas companies. For example, the port of Antwerp has ordered the creation of ultra-low emission hydrogen-powered tugboats.
Support vessels are also being run on battery hybrid technology to reduce greenhouse emissions . In 2022, several charterers in North America and Europe ordered battery hybrid support vessels or signed contracts to retrofit their vessels.
A major barrier to alternative marine fuel adoption remains cost and availability.
However, the situation is expected to improve amid initiatives such as green corridor – shipping routes dedicated to vessels that run on clean energy. Twenty-two countries have already committed to creating six zero-emission shipping routes by 2025, including a route between Shanghai and Los Angeles.
For charterers, freight rates as well as the use of particular vessels will be strongly governed by national and regional environmental policies.
Implementation of ship rating systems such as the Carbon Intensity Indicator are expected to affect the charterer’s insurance coverage and liability. This will force more charterers to move to vessels powered by alternative fuels.
In the short term, the use of conventional fuels such as very low sulfur fuel oil and marine gas oil is expected to decline because of advances in tri-fuel engines that can run on both polluting fuels and clean fuels.
Author: Chetan Chaudhari