Shipping's decarbonization journey gains momentum but roadblocks exist: panel

Although some progress has been made to increase the momentum of international shipping's decarbonization, roadblocks still linger as the industry navigates through this drastic transition, with the Russia-Ukraine crisis unleashing some important lessons as far as the switch to cleaner fuels is concerned, industry experts said March 16.

"In the last few months, we have finally seen some action, which was something that was missing... until then, there was a lot of talk about decarbonization but not much action," Timothy Cosulich, CEO Marine Fuel Fratelli Cosulich, said at the S&P Global Commodity Insights Asian Refining and Petrochemicals Summit.

Anoop Singh, head of tanker research at Braemar ACM Shipbroking, said that the industry was making greater efforts now to move away from fossil fuels, with the impact being more pronounced in certain shipping segments such as container ships.

The shipping industry has not been very proactive in adopting change, particularly when it implies huge investments and extra costs, Cosulich said. "Moving to greener fuels certainly implies higher costs and that is certainly one of the roadblocks we have."

"The other issue which we have seen, [albeit] on a smaller scale with the implementation of the IMO 2020 is a chicken and egg situation where suppliers are not moving because they are waiting for the owners and operators to choose [a marine fuel] and owners/operators are waiting before they order their new vessels to see what the solutions are, and they wait for suppliers to make a move," Cosulich added.

From a charterers perspective, Sarah Greenough, head of maritime sustainability and supply chain excellence at BHP, said that aligning and achieving industry consensus on long-term industry goals was a challenge.

The prioritization of future fuels, availability of required equipment and infrastructure, and scaling up of cleaner fuels both in terms of volume and accessibility also presented impediments to hastening shipping's decarbonization journey, she said.

Decarbonization requires more collaboration from different industry stakeholders -- to get the regulators on board, the shipyards on board, the engine makers on board, a basic framework to be put in place, a network of bunkering ports worldwide which have both the requisite infrastructure and availability of cleaner fuels -- Khalid Hashim, Managing Director at Thailand-headquartered Precious Shipping Public Company Limited, said.

Exercising caution amid risks

The Russia-Ukraine crisis has "added a little bit of a shock and complexity in our [industry's] efforts to decarbonize [in the short run]," Cosulich said.

In the long term, it highlights "that we've been late in going through the process of making the industry less dependent on oil... independent from fossil fuels," he said, adding that it showed the importance of forging ahead with decarbonization efforts in a timely manner and with more motivation.

Many shipowners might now be pondering whether it was a good idea to move to LNG fuels in the first place, given how concentrated the supply of gas is in different parts of the world, Singh said.

A shock like this will likely raise more questions in the minds of shipowners on whether a shift to gas is that simple, easy and a one-way ticket to cleaning up economically, Singh said.

"So I think it's going to create more caution and people sitting on the fence will look at this and make it a good reason to say it's too risky... We don't have alternatives available; we don't have sufficient confidence that methanol will be available to solve the problem or ammonia will be able to solve the problem," he said.

The switch from dirty to clean fuel, be it for shipping or for the rest of world, is being targeted in an unrealistic timeframe, Hashim said.

"Normal changes such as this in terms of energy usage require maybe two or three decades, and we are trying to shorten this time horizon to an unrealistic level," Hashim said.

"All the renewables in this world, they cannot even cover a fraction of the energy that the world needs, and therefore is no question in my mind whether this war was there or not. This is going to be a much longer transition period than we had anticipated," Hashim added.

LNG a vital transition fuel

For the next 10-15 years, LNG will likely play a relatively important role in the bunker fuel mix, after which a mix of options -- methanol, ammonia, hydrogen --might come to exist, depending on how different technologies evolve, Cosulich said.

BHP has already said that it was tapping LNG as a marine fuel, with the company welcoming MV Mt. Tourmaline -- the world's first LNG-fueled Newcastlemax bulk carrier that it had chartered from Eastern Pacific Shipping -- in Singapore in February for its first LNG bunkering operation.

"I think we're all in alignment though that LNG is not the end game and largely will be a transition fuel, but it us a great solution to deliver abatement here and now," Greenough said.

Meanwhile, BHP is also exploring other alternatives including green ammonia, green methanol, she said. "I think we also see biodiesel, bio-LNG playing a smaller part in the transition as well," she added.

One big push back against LNG comes because of methane slip, not so much on ships but in the value chain or the supply chain, Singh said. However, he said that this was a problem that could be fixed.

"In my view, a more sensible thing to do right now is to make ships that are equipped to burn LNG fuel and then let the economics dictate going forward... In many ways, LNG is a sensible choice or is the least bad choice. There is no perfect choice today," Singh said.