Marine demand for e-methanol and green ammonia will exceed supply in the near-term – ICS
E-methanol and green ammonia supply could lag the anticipated maritime demand in the short-term, shipping-focussed industry body International Chamber of Shipping (ICS) has said in its latest newsletter.
PHOTO: Concept of Proman Stena Bulk's methanol-fuelled vessel. Proman Stena Bulk
Methanol producer Proman expects maritime demand for methanol to exceed synthetic or e-methanol production capacity in the near term, according to the newsletter ICS Leadership Insights.
Likewise, growing demand for green ammonia from shipping and other sectors also threatens to outpace its production capacity. This could lead to a “costly bidding war for a scarce resource”, ICS has warned.
E-methanol demand likely to outstrip supply
E-methanol or synthetic methanol is produced using 100% biogenic carbon dioxide (CO2) and green hydrogen. Biogenic CO2 is typically captured through bioenergy with carbon capture and storage (BECCS) or through direct air capture (DAC). E-methanol is virtually free of greenhouse gases and can cut a ship’s CO2 emissions by 95% compared to conventional marine fuels on a well-to-wake basis.
There is “a significant delta between projected green methanol demand and availability, suggesting that the short-term shortfall would need to be filled with low-carbon alternatives, produced from fossil fuels but with emissions captured,” ICS reported citing Andrew Craig, executive director of corporate finance at Proman.
Craig predicted that more than 100 methanol-fuelled vessels would enter service from 2024, signalling an additional demand of 1 million mt/year of methanol, ICS wrote. He estimated maritime demand for methanol to grow to a staggering 10 million mt/year by 2027, based on current orders.
However, ICS’ preliminary analysis of the current production pipeline indicated that not all methanol-powered vessels will initially run on green methanol. “The short-term shortfall would need to be filled with low-carbon alternatives, produced from fossil fuels but with emissions captured,” ICS recommended.
Sectoral competition over green ammonia set to intensify
Turning to green ammonia, the ICS newsletter highlighted that green ammonia would become a “mainstream” green marine fuel and hydrogen carrier by 2050, according to Dominik Schneiter, chief executive at engine manufacturer Winterthur Gas & Diesel (WinGD).
Citing the International Fertilizer Association (IFA) estimates, the ICS noted that 3.5 million mt of green ammonia capacity will come into operation in the next five years, with 85 million mt of capacity currently under construction.
A caveat, however, is the increased competition from the agriculture sector.
“Around 70% of fossil ammonia – or 127 million tonnes [127 million mt] – is currently used to produce nitrogen fertiliser, making agriculture a key driver in demand for a renewable alternative,” ICS stated.
Meanwhile, 85 million mt of potential production will cover only “under half of the demand from agriculture by 2030, according to IRENA's (International Renewable Energy Agency's) projections,” ICS reported.
As a solution, ICS has urged the shipping sector to partner with agriculture-based industry to secure investments in green ammonia production. It will enable them to scale up supply to meet both sectors' demands and avoid a price war for "scarce" green ammonia in the future.
“The fertiliser industry holds a huge amount of knowledge about the practicalities of producing, trading and storing ammonia, and has shown its eagerness to collaborate with the shipping sector. We see these two markets playing out in parallel rather than one leading the way over another,” the newsletter reported citing Laura Cross, market intelligence director at IFA.
By Konica Bhatt
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