Singapore — A number of ammonia-fueled ships will likely hit the waters well before 2030, with gas carriers likely to emerge early adopters, as international shipping gears up for the International Maritime Organization's greenhouse gas emission cut targets, industry experts told S&P Global Platts.
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"We know there is some uncertainty about when ammonia technology will become available ... but we also know it's coming much more quickly than was initially anticipated," Stephen Crolius, president and director at US-based consultancy firm Carbon Neutral Consulting, or CNC, said.
In April 2018, the IMO laid out its strategy on greenhouse gas, or GHG, emissions, aiming to cut the shipping industry's total GHG emissions by at least 50% from 2008 levels by 2050, and to reduce CO2 emissions per transport work by at least 40% by 2030.
In November 2020, the IMO's Marine Environment Protection Committee 75 strengthened the Energy Efficiency Design Index, or EEDI, phase 3 requirements.
"The IMO has set a very good ambition statement to match the global maritime sector with the Paris Agreement," Trevor Brown, director at the Ammonia Energy Association said, adding that while individual companies and ports will still implement their own strategies, IMO's broad vision for decarbonization will help them.
In the short run, many fuels, including LNG, are being used and will continue to be as they help in achieving compliance with current rules, Milton Bevington, an environmental expert and co-author of CNC's 'The Ammonia Report', said.
LNG can reduce carbon intensity by 20%-30%. If contributions from speed reduction and energy saving expedients are added, the 40% reduction target may also be within reach.
However, in 2030, the IMO's 50% emissions reduction target will be just 20 years away—well less than the normal replacement cycle for ships and other long-lived assets and LNG by itself won't be enough, Bevington said.
Companies that find a way to achieve 2030 compliance with an approach that will already put them at or near 2050 compliance will benefit, Crolius said.
In this context, ammonia holds a sweet spot while other bunker fuel alternatives such as methanol and hydrogen will also gain more traction, he said.
Being 'Ammonia Ready'
Ammonia is already a global commodity and is available in hundreds of ports, Brown said, adding that the phrase being "ammonia ready" is already gaining recognition globally.
An ABS classed Suezmax tanker will be the first ammonia-fuel ready vessel in the world, which is positive, he said, adding that this goes to show that "something that will work today and will also work tomorrow, and you are not going to have to replace that vessel."
While there are concerns about ammonia being hazardous, it is no more dangerous than some current fuels, Brown said.
"When it comes to ammonia, the codes and regulations that have been long established in the refrigeration industry need to be translated to the existing IGF codes ... But I don't think it is a problem," he said.
There are going to be ammonia gas carriers using ammonia as a fuel and cargo, and ports with ammonia terminals that will now add a new section for bunkering and loading.
"So, it's going into those places where ammonia safety is already hard-weighted," Brown added.
Cost of ammonia, financing push
The current price of ammonia (on a $/GJ basis), is in the same ballpark as other low-sulfur bunker fuels -- at the high end, typically, but is not unaffordable, the three sources said.
When it comes to hydrogen versus ammonia, a lot more people are familiar with hydrogen, they said.
"What people don't realize is that about 90% of the cost of making ammonia is hydrogen," Brown said.
"Making hydrogen into ammonia so that we can store it and transport it is from a cost perspective is negligible but from an operational perspective gives fantastic flexibility," he added.
Meanwhile, the cost of retrofitting an LNG terminal to be an ammonia terminal versus the cost of fitting an originally designed ammonia ready LNG terminal also gives enormous cost benefits in planning that transition, Brown said, citing a recent white paper by Black & Veatch.
Meanwhile, a push from financiers would also likely help to accelerate the uptake of ammonia as a bunker fuel, the three sources said.
For some reason, ammonia is not on the radar of a lot of energy investors because it is still seen as an agricultural commodity right now, Bevington said.
"We think that is going to change very quickly," as more information around its viability disseminates, he said.
"Many companies in this [energy transition] sector that are confused by what to do. So, they are adopting a wait and see strategy but that is not the lowest cost pathway," Brown said, adding that companies need to assess their compliance solutions now.