Retrofitting ships to run on green methanol will come with a hefty price tag – LR
Owning vessels running on green methanol will cost twice as much as owning vessels running on biofuel blends, VLSFO, or VLSFO with onboard carbon capture, a Lloyd’s Register (LR) study found.
PHOTO: Chinese shipbuilder Zhoushan Xinya Shipyard is retrofitting Maerk's containership, Maersk Halifax, to run on methanol. LinkedIn of A.P. Moller-Maersk
The LR study revealed that a vessel running on green methanol along with pilot fuel in the EU region would incur approximately $2 billion in total ownership costs over the next 15 years. LR assumed that EU allowances would cost $110/mt over the period.
In methanol-powered combustion engines, a small amount of pilot fuel, like diesel, is needed for ignition. This pilot fuel component usually accounts for 5% of the fuel mixture, with the remaining 95% being green methanol. The use of pilot fuel is critical as methanol burns slower than fossil marine fuels due to its low cetane number.
Alternatively, the total cost of owning a ship equipped with VLSFO and an onboard carbon capture system (OCCS) may range from $700-$800 million over the same 15-year period. An estimated $30 million is assumed to be invested in OCCS installation, with an additional cost of $30/mt for CO2 disposal over the next decade.
The cost of owning and operating a vessel using the B30-VLSFO blend of 30% UCOME-based biofuel and 70% VLSFO is estimated at $900 million between 2026-2040.
High costs of methanol retrofitting
According to the study, retrofitting a ship to run on methanol will require an estimated investment of about $45 million. Retrofitting costs include engine rebuilds, piping, fuel system modifications, tank coating, design, planning and drydock expenses, LR report noted. “Indications suggest that engine and fuel system costs, which will constitute most of the overheads, could range from 10% to 25% of a vessel’s value,” it added.
However, the bunkering of green methanol, which includes bio- and e-methanol, is predicted to be the biggest expense for methanol ship operators during the 15-year period, the study predicted. It also noted that “bunkering infrastructure costs will create added expenses when cleaning methanol bunkers in ports and terminals.”
Cost estimates of bunkering methanol
Grey methanol's price in spot markets ranged from $327-366/mt in February, the study found. When adjusted for calorific content to make it comparable with VLSFO and other fuel types in terms of energy, the price ranges from $684-765/mt. Market estimates suggest green methanol bunker fuel could initially cost $1,000/mt. After adjusting for calorific content, it is estimated to cost $2,090/mt.
For comparison, the price of LSMGO grade was $735/mt at the Port of Rotterdam as of 8 March and its VLSFO was priced at $577/mt.
Rotterdam's B30-VLSFO HBE bunker price was $719/mt as of 8 March, with 30% biofuel derived from palm oil mill effluent methyl ester (POME-ME) blended with 70% VLSFO. The price has been adjusted to reflect rebates through the Dutch HBE system, equating to $869/mt when adjusted for calorific content.
In the current market, B30-VLSFO blends are more expensive than grey methanol on a cost comparable basis. However, grey methanol, derived from natural gas, produces higher well-to-wake emissions compared to B30 blends and cannot be used as bunker fuel to reduce a vessel’s emissions. Therefore, methanol-capable vessels must bunker green methanol to reduce emissions.
Additionally, given methanol’s low energy density compared to conventional marine fuels, "a vessel would require nearly two-and-a-half times more methanol as fuel oil for a specific consumption," as noted in the study. This could lead to a dramatic increase in the cost of bunkering ships that run on green methanol.
By Konica Bhatt
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