INTERVIEW: Methanol bunkering gaining traction as shipping hunts for green fuels, says MI COO

Methanol bunkering continues to garner support from major shipping companies as they see it as a viable fuel option over LNG amid steady prices and an expected ramp-up in bio and e-methanol facilities worldwide, Chris Chatterton, COO of Methanol Institute, told S&P Global Commodity Insights.

"The order book for methanol-fueled ships is gaining ground ... all box ships ordered in January and February were methanol dual-fueled," Chatterton said in an interview March 11.

With a record ordering of 22 methanol-powered ships in February, the order book stays strong, as it is seen rising from 5 in 2023 to 81 through 2028, according to maritime classification society DNV data.

Maersk, CMA CGM, Hyundai Merchant Marine, and other shipping giants in the past few years have sparked additional interest in methanol and methanol bunkering. Additionally, there has been a significant rise in Germany's MAN's methanol dual fuel engine order book, which stands at over 110 units currently, putting to rest many counterarguments against the company in the alternative fuel space, Chatterton said.

Skeptics have cited the lack of ample infrastructure, ready availability of green methanol, technology, and a void in adequate policy measures -- lack of robust standards as well as operational procedures for bunkering methanol -- as impediments to its widespread adoption.

However, the benefits of methanol as a marine fuel cannot be overlooked even as shipping makes strides to overcome challenges related to its accelerated use, Chatterton said.

Methanol's advantage

"Methanol is a highly pure product to begin with," Chatterton said, adding that it is the simplest of alcohol molecules and is already quite efficient to use.

It is traded at 99.85% purity, meaning that any kind of add-ins or moisture in it is very minimal, Chatterton said, adding that the chemical is maintained like that throughout the supply chain.

Methanol is liquid at ambient temperature, which greatly reduces infrastructure costs. This means funds could be better spent on the engine technology or on the vessel side versus storage and handling infrastructure, he added.

According to the Methanol Institute, over 80 renewable methanol projects globally are projected to produce up to 8 million mt of e-methanol and bio-methanol annually by 2030, with shipping companies also helping scale its availability by strengthening the supply chain.

In December 2022, Maersk said that it had inked a ninth strategic partnership to drive the global production capacity of green methanol and secure the supply of the green fuel for its 19 methanol-enabled container ships on order. HMM has also signed agreements with multiple fuel suppliers to ensure methanol supply for its ships as it readies to receive delivery of its nine 9,000 twenty-foot equivalent unit methanol-fueled container ships from 2025.

Meanwhile, various maritime players are also collaborating to develop and implement safe handling guidelines relating to operating procedures for methanol bunkering in Singapore in a formal way, Chatterton said. This is significant because Singapore is a key pivot point for bunkering that the global maritime industry can emulate, he said.

Price volatility

"Nobody can predict which way energy markets go ... even a market as large as LNG has a high volatility," Chatterton said. "In methanol markets, we don't have that because methanol is more than just a power plant fuel."

LNG prices exploded in 2022, tracking the impact of the Russia-Ukraine war, leading to some capital destruction, Chatterton said.

The Platt JKM DES spot price hit a record $84.762/MMBtu March 7, 2022, S&P Global data showed, reflecting the impact of the Russia-Ukraine war. Meanwhile, Asian spot LNG prices averaged $33.98/MMBtu in 2022, surging from $18.60/MMBtu in 2021.

As the price of a gas-ready ship can be up to 30% above that of a conventional fuel vessel, the capex is still a significant consideration, Chatterton said.

"Once shipowners took delivery of these vessels, they couldn't even run them on LNG because they would blow out on a running cost basis, being rendered uncompetitive," Chatterton said, adding that methanol prices have been less volatile compared with LNG prices on an energy equivalent basis.

Conventional methanol has been also on par with marine gasoil price-wise on an energy equivalent basis for some time, Chatterton said.

S&P Global publishes methanol bunker fuel calculations converted to LNG and oil energy content equivalents as well as bunker fuel prices by calorific value for direct comparison purposes.

On March 13, Methanol Bunker Rotterdam (LNG) was assessed at $975.3750/mt, Methanol Bunker Rotterdam (Oil) at $769.0460/mt and conventional Methanol Bunker Rotterdam at $403.28/mt, S&P Global data showed.