Ammonia-powered ships expected to be 50-130 pct pricier to build

The financial cost of building an ammonia-powered gas carrier is poised to outstrip that of an equivalent gas carrier by a staggering 50 to 130 percent over the forthcoming years.

Rendering of the M/S NoGAPS ammonia-powered gas carrier (Image by Breeze Ship Design)

The estimate builds upon findings from interviews with actors across the ship finance space including banks, funds, private equity firms, lessors, export credit agencies, and public investment banks, carried out by the Global Maritime Forum as part of the Nordic Green Ammonia Powered Ships (NoGAPS) project.

The NoGAPS project unites key industry players, including Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping, Nordic Innovation, Global Maritime Forum, BW Epic Kosan Ltd., Yara International, MAN Energy Solutions, Wärtsilä Marine, DNV, Danish Maritime Authority, and external ship designer Breeze Ship Design.

The initiative is developing solutions for a zero-emission ship powered by ammonia, structured in two phases. The initial phase, spanning from 2020 to 2021, focused on overcoming barriers to ammonia adoption as a maritime fuel. These barriers encompassed safety, efficiency, sustainable fuel supply chains, and commercial feasibility, with the aim of creating a proof of concept.

Following the first phase’s success, the second phase of the NoGAPS project commenced in the previous year. Breeze Ship Design secured the design contract for this phase, scheduled until 2025.

During this period, the project endeavors to create an initial ship design that will serve as the bedrock for a shipyard tender, potentially leading to the construction of an optimized vessel for commercial operations in North Atlantic and Northwestern European waters.

The latest report draws on the discussions and evaluations from the second stage of the program.


This disproportionate cost burden that emerged from the latest report creates significant commercial risks for shipowners and lenders alike to pursue ammonia as fuel. Nevertheless, the study found that suitable finance should be available for early ammonia-powered vessels.

The prospect of ammonia-powered gas carriers has been touted as a promising solution towards greener maritime transportation. While the maritime finance sphere acknowledges the multifaceted technical, operational, and safety risks inherent to the early stages of ammonia-powered vessels, these concerns aren’t viewed as insurmountable barriers to investment.

The crux of the challenge resides in quelling the substantial financial outlay associated with these vessels and concurrently addressing the correlated commercial risks that impede their viability.

A quartet of synergistic measures, as unveiled by the study, emerges as potential levers to counterbalance this predicament and unleash a realm of viable financing:

1. Cost-Efficient, Dual-Fuel Vessel Design: Efforts to curtail capital requisites and the associated commercial vulnerabilities are focal points here. This involves streamlining vessel design to optimize cost efficiency while mitigating residual value risks should the widespread availability of clean ammonia not materialize.

2. Competitive Financing Arrangement: A cost-efficient financing arrangement from banks or leasing entities becomes instrumental in buttressing the breakeven point and bolstering vessel chartering prospects.

3. Public Sector De-Risking Measures: This lever pivots around incentivizing through targeted measures. Capital expenditure (CAPEX) grants could be extended to mitigate capital requisites while internalizing the benefits of innovation. Export credit guarantees or concessional finance mechanisms could be employed, diluting credit risk while improving terms.

4. Premium Long-Term Charter with Reputable Charterer: Certainty in revenue generation for shipowners and lenders alike comes to the fore through this lever. Crafting a premium, long-term charter arrangement with a credible charterer assures revenue stability. Simultaneously, it instills confidence for lenders by minimizing credit and residual value risks.

The report said that two options were viewed as relevant for M/S NoGAPS, either a so-called “plain vanilla” deal consisting of a bank loan and a portion of equity or a leasing arrangement in which the shipowner “rents” the ship from a third party. Based on input from banks and lessors, both options should be available on good terms, without a significant risk premium.

Both options will need to be complemented by de-risking measures to spread the cost and risks more evenly across the value chain.

Support from an export credit agency (ECA) – either in the form of a loan guarantee or direct concessional lending – will be important to facilitate lender participation, by reducing credit risk. Meanwhile, access to a grant covering some of the additional capital expenditure (CAPEX) of the vessel will be essential for shipowners, to reach breakeven and improve the vessel’s chartering prospects.

While ECA backing is expected to be available, the study reveals that there is a shortfall in the CAPEX support available for first movers globally.

Norway’s Enova and the EU’s research, development, and demonstration (RD&D) schemes represent best practice in this space and could potentially provide funding opportunities for M/S NoGAPS.

The key lever will be securing a premium long-term chartering agreement with a creditworthy charterer.

Economic viability

The report said that securing long-term chartering agreements is expected to be a significant challenge for early ammonia-powered vessels. Charterers will bear much of the additional cost of operating the vessel, including the fuel cost. To facilitate a long-term chartering agreement, this premium must be substantially reduced.

The study examines whether and how the premium can be tackled, and the results suggest that the cost gap can be closed on M/S NoGAPS’ potential route between the US Gulf and Northwestern Europe. Were M/S NoGAPS to bunker US ammonia, the gap could be closed by as early as 2026. This applies to both blue ammonia – produced by conventional means with applied carbon capture and storage – and green ammonia – produced with electrolytic hydrogen -, which could reach a premium of just 2% and 3% already by this point.

The vessel could also approach cost parity by 2030, with a premium of no more than 10%, in other scenarios, including if it were to bunker with more expensive ammonia produced in Northwestern Europe. These results are primarily driven by the significantly policy progress made over the last two years. It is shown that the hydrogen production credits under the US Inflation Reduction Act and EU Fit for 55 package would reduce the cost of NoGAPS by ~20% and ~10% each.

While these policy measures would greatly support the business case, they would not be sufficient to close the cost gap on their own. Rather, a combination of both public sector and industry action will be required to close the gap this decade. Among the industry actions assessed, sourcing lowest cost clean ammonia and slow steaming would make the largest contribution.

  • Pathway 1: The simplest pathway would be for the vessel to bunker in the US, where the highly competitive cost of ammonia created by the IRA could make using either blue or green ammonia viable if suitable action is also taken within the value chain. Bunkering in Northwestern Europe would be more expensive than the US, leading to a cost premium until the early 2030s. Were M/S NoGAPS to also bunker in Europe, it would, therefore, need to:
  • Pathway 2: Pull all the cost reduction levers examined and use blue ammonia during its initial years of operation, before transitioning to green ammonia once the cost is reduced, or
  • Pathway 3: Pull all the cost reduction levers examined as well as an extra lever, to close the remaining gap. Several possible extra levers exist that could do so, including a fuel subsidy, such as Contracts for Difference, which is being considered under the EU Innovation Fund; offsetting the remaining cost through the FuelEU Maritime pooling mechanism; passing the remaining cost on to the end customer as a small green premium; or the International Maritime Organisation (IMO) introducing a basket of strong mid-term policy measures in a timely fashion, by no later than 2027.

Overall findings and key actions NoGAPS

The analysis gives a positive outlook for commercialising M/S NoGAPS. It suggests that it should be feasible to close the cost gap facing the vessel if suitable action is taken within the value chain and sources of public sector support can be accessed. When combined with the remaining contractual and financial levers, this should make the project bankable, activating lender interest.

The deep-dive, therefore, confirms the core conclusions of the first NoGAPS report that the project has a strong strategic business case, with the potential to be among the first clean ammonia powered vessels deployed internationally.

As immediate next steps, the project partners should consider actions to:

  • Optimise the fuel strategy for M/S NoGAPS, based on the opportunities afforded by the Inflation Reduction Act, including the expected availability of IRA-subsidised blue and green ammonia.
  • Explore the requirements and timelines for bidding for relevant CAPEX and fuel subsidies.
  • Reach out to ECAs, especially in North Asia, to confirm the potential to access a loan guarantee for the vessel.


The analysis holds implications for the entire shipping sector. Transitioning to zero-emission vessels requires strong policies that make economic sense. An agreement like the Inflation Reduction Act and Fit for 55 package between the US and Europe is setting the stage for this policy framework. Routes between these continents offer a unique opportunity for zero-emission shipping to become viable within this decade.

National and regional policies will be crucial drivers of zero-emission shipping’s emergence. Other governments can follow suit, accelerating progress. These efforts would complement the International Maritime Organisation’s mid-term measures and establish leadership in the maritime transition and hydrogen economy.

Key policy measures include expanding CAPEX grants for timely ship building and subsidies for clean hydrogen-based fuels. Industry pioneers can explore cost-effective fuel options through emerging hydrogen subsidies like those from the IRA.

Nordic region

Finally, the analysis highlights several opportunities for the Nordic region. To seize the opportunities in the field of technological innovation in zero-emission shipping and accelerate shipping decarbonisation, policymakers in the region should consider:

  • Accelerating the development of policies to close the cost gap for and increase the availability of clean ammonia for shipping in the region, following the example set by the US. Contracts for Difference are being advanced by Nordic governments, which could be effective means of doing so. To support the sector’s target of at least 5% uptake of zeroemission fuels by 2030, policy action should be taken as soon as possible.
  • Increasing the availability of CAPEX subsidies for demonstration and early deployment of ammonia-powered vessels and infrastructure by applying best practices from Enova across the wider region. This should include consideration of how such funding can complement EU funding and promote the decarbonisation of deep-sea shipping.
  • Exploring how Nordic ship finance, including national export credit agencies, can be best mobilised to support first-mover projects.