LNG dual-fuel vessels offer faster payback than methanol and ammonia, says SEA-LNG

Investments in LNG dual-fuel vessels offer shipowners a shorter payback period than methanol, ammonia, or VLSFO, a new analysis from industry coalition SEA-LNG has found.

As disclosed, SEA-LNG completed its initial analysis of the IMO Net-Zero Framework following MEPC 83, using the independent Z-Joule cost of compliance calculator to assess the commercial implications of the new regulations. The coalition concluded that the LNG pathway offers the best returns. In addition to the shorter payback period, the LNG ships are reported to give shipowners a commercial advantage through fuel optionality and access to widespread established infrastructure.

It is understood that SEA-LNG examined the investment case for a 14,000 TEU container vessel operating a trans-Pacific route from Japan to the U.S. West Coast. It compared LNG, ammonia, and methanol dual-fuel vessels against a vessel fueled by VLSFO over a 15-year investment period.

The total cost of the different fuel pathways was driven by CapEx, the carbon intensity of the fuels, and the fuel price, the coalition revealed, adding that for both fuel price forecasts and carbon intensity values, it used assumptions from DNV’s analysis of the candidate mid-term measures discussed at MEPC 82.

“Both high-pressure and low-pressure LNG dual fuel engines offer a relative payback period of between 4.5 and 5 years compared with VLSFO because of lower compliance costs due to LNG’s lower greenhouse gas fuel intensity (GFI). Methanol and ammonia fuelled vessels do not pay back over the 15-year investment horizon,” SEA-LNG said.

The coalition also modeled the investment case for a 14,000 TEU containership operating on the Rotterdam-Singapore trade route using the same fuel price forecasts. In this case, the vessel is reportedly subject to both IMO and EU decarbonization regulations – the latter for 50% of the voyage. Here, the payback for LNG-fueled vessels was reduced to about 3.5 years, mainly due to the effect of FuelEU Maritime in the early years of the analysis period, SEA-LNG claimed.

As stated, the IMO Net-Zero Framework now requires further detailed analysis and feedback from the industry, as well as coordination with EU initiatives and the specific concerns of other member states, prior to formal ratification later in 2025. According to SEA-LNG, there are also details surrounding the IMO Net Zero Fund and the Zero and Near-Zero-Emission Fuels (ZNZ) Reward Mechanism that will not be addressed before 2027.

Steve Esau, Chief Operating Officer of SEA-LNG, noted: “While many details need to be decided, the IMO Net-zero Framework provides a clear basis for maritime decarbonisation and should, in principle, enable all fuel pathways – be they LNG, methanol or ammonia – to compete on a level playing field. For this to continue, it is imperative that the ZNZ Reward Mechanism is designed in a fuel agnostic and technology neutral way.”

Peter Keller, Chairman of SEA-LNG, concluded: “The industry continues to make major investments in the LNG pathway. These ships can use LNG, bio-methane and e-methane, and reduce greenhouse gas emissions and cut local pollution today. The IMO position, as well as the EU regulations, both affirm the pathway is heading in the right direction and offers a practical and realistic route to compliance, starting right now.”