LNG is currently the most developed alternative fuel, ABS says

LNG is currently the most developed alternative fuel in terms of bunkering infrastructure and its usage is expected to increase significantly, according to the latest research published by classification society ABS.

Christopher J. Wiernicki, CEO of ABS. Courtesy of ABS.

Major ports worldwide have established LNG bunkering facilities and new projects continue to expand this network. LNG remains a cost-effective option due to its relatively lower price compared to other low-carbon fuels, ABS said in the 2024 outlook, ‘Beyond the Horizon, Carbon Neutral Fuel Pathways and Transformational Technologies’.

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As informed, LNG use is relatively stable, starting at 9% in 2023 and experiencing an increase to 14% by 2028 before stabilizing around 13% by 2040.

LNG is not entirely carbon-free, but certain LNG pathways (biomethane, e-methane) have the potential to significantly reduce emissions compared to conventional fuels, making it a practical choice for compliance and environmental performance improvements in both the short and long term, according to ABS.

Currently, there are 837 new LNG-powered vessels in the global orderbook. There is a substantial increase in containerships adopting LNG, likely due to lower emissions compared to traditional fuels.

“LNG is going to play a leading role in reaching 2050. However, for such a key fuel for the energy transition, it is important to recognize it is itself a fuel in transition. And we will need it to not only evolve but to address and mitigate the risks inherent in its operation today if we are to reach our 2050 objectives,” Christopher J. Wiernicki, ABS Chairman and CEO, said during the LNG Shipping and the New Energy Landscape panel organized at Posidonia International Shipping Exhibition in Athens, Greece, this week.

“LNG is the perfect example of how shipping will be an enabler of the transition as both consumer and transporter of the low and zero-carbon fuels we will need to reach 2050.”

The shift from LNG in the existing fleet to a more diversified set of fuels in the orderbook, particularly green methanol and green ammonia, suggests a trend toward exploring multiple viable options for reducing GHG emissions.

As part of the abovementioned research, ABS identified three crucial factors impacting the shipping industry’s journey to net zero by 2050 – geopolitical instability, scalability of fuel production and retrofits to existing vessels. 

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The adoption of alternative fuels and EETs is critical under an increasingly stringent regulatory landscape. The FuelEU Maritime requirements and similar requirements expected from the IMO introduce new complexities and will require stakeholders to consider how they can pool credits for compliance.

“FuelEU creates a new hurdle to clear every five years to avoid an emissions bill, but its potential impact lies in the way it turbocharges return on investment in alternative fuels technology. The regulation aims to drive fundamental, disruptive change, to reshape the industry around us well before 2050 and reward first movers on emissions reduction technology,” Wiernicki explained.

He outlined the potential for pooling compliance surpluses from lower emission vessels generated under FuelEU to offset compliance deficits of older tonnage or be sold to other operators.

“It is in the regulators’ plan for pooling of surpluses that the game changing nature of FuelEU is most clearly revealed,” he said.

“ABS research indicates the power of pooling will be significant, hugely rewarding pioneers of alternative fuel technologies. What is the value of this new marketplace for compliance? Will we see modern, ultra-low emission vessels effectively running two revenue streams? Or will we see smaller operators pushed out, unable to raise funds to invest in newer assets and lacking the scale needed to pool to reduce the escalating bills attached to older tonnage?”

He highlighted how FuelEU was not only a new reality for vessels trading in European waters because the IMO has indicated it intends to introduce its own version globally in 2027.

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“So, wherever you are, whatever you ship, however it is fueled, there’s a new paradigm at sea. A new lens through which to view everything from trade routes and energy choices to investment decisions: CO2e per megajoule,” Wiernicki concluded.