The Fuels of the Future
The transport sector and transitional fuels
Looking beyond the chemical factory and beyond the chemical industry itself, the replacement of diesel with new or “alternative” fuels is the next big transition. This transition relates to the chemical industry in two ways: first, chemistry is important in the development of green(er) fuels. Secondly, in a carbon-credited world, whereby carbon is increasingly quantified, heavy industries look at their carbon footprint more holistically, counting the significant CO2 released during the transport. Logistics suppliers are brought into the spotlight. “The biggest trend for logistics suppliers is to approach renewable energy sources. Major ocean carriers experiment with new energy, such as hydrogen, solar, or wind power, to curb greenhouse gas emissions and air pollution,” said Alexander Donau, regional head at Leschaco Asia Pacific.
The shipping industry emits about a billion tons of carbon yearly – the equivalent of 3% of global GHG emissions, according to Sudheer Vijapurapu, managing director of New Asia Shipbrokers (NAS). Regulatory developments like the International Maritime Organization (IMO)’s greenhouse gas emission regulation (GGE) requirement to reduce GGE emissions by 40% between 2008 and 2030 has put more pressure on the industry to explore alternative fuels. Also, the IMO’s cap on sulphur emissions, which came into effect in January 2020, has created a framework to distinguish between low sulphur and high sulphur fuels. However, Vijapurapu said these directives are inconsistent and often vague: “Regulations in the shipping industry are mostly ‘grey’ and their impact is often doubtful,” he said.
Jan Harnisch, global COO at Europe-based Rhenus Logistics Air & Ocean, also thinks that the logistics industry has not been under the same level of pressure to be greener as the chemical industry. “The trend to go green is more internally motivated,” he said.
Logistics companies can help their customers reach their sustainability goals by offering carbon-low alternatives. For instance, Rhenus has started an initiative called RHEGREEN through which it offers its customers flying options that allow them to reduce 40% of CO2 per shipment. Although greener alternatives are still sometimes turned down due to the price difference, Harnisch has noted that younger people and smaller companies, in particular, are more prepared to choose the greener alternative.
Whether to define a sustainability competitive advantage, to abide by tighter - and tightening - regulation, or simply to contribute to the good of the environment, the logistics sector is experiencing a mindset shift when it comes to sustainability. Players in this sector stay on top of developments in transitional fuels, and major ocean carriers are more actively engaged in R&D in this space. Vopak, together with Japanese company Itochu, has recently announced it will be studying ammonia as a marine fuel, checking the feasibility of an onshore storage facility for ammonia at its Banyan terminal in Singapore. A net-zero-emission fuel, ammonia is one of the transitional fuel candidates.
Ammonia, LNG, methanol, hydrogen and biofuels – these are the potential “future fuels” under the radar of the shipping industry, each having the potential to help shipments align with IMO regulations and indirectly contribute to reducing the overall carbon footprint of their cargoes, chemicals or otherwise. The big question remains which of these will be brought into the mainstream since most are still at an early conceptual stage. Costs, scalability, safety, logistical aspects, but also CO2 coefficients are considered in making these judgements.
“In coming years, petroleum-based products will remain the primary commodity, but questions about what will be the next mainstream alternative fuel and how will this be produced and stored are gaining more momentum.”
Mark Lim, Commercial Manager, Stolthaven Terminals
Hydrogen aspirations
A clean fuel that only produces water when consumed in a fuel cell, hydrogen is a net-zero emissions fuel with high aspirations. The abundance of hydrogen in water, organic matter and hydrocarbons make it an attractive option, but difficulties around extraction and safe transportation due to its highly inflammable nature put to question its suitability for widespread use.
Currently, blue hydrogen, or hydrogen produced from natural gas reforming and electrolysis, is the most common type, whereas green hydrogen made from renewable sources poses greater challenges around extraction and costs. The uptake of green hydrogen as a transitional fuel will therefore be consonant with the cost evolution of renewable energy sources. The cheaper these become, the greater the chances of success for hydrogen use. Its success is also tightly related to policy developments. More countries have announced hydrogen initiatives and the EU’s hydrogen strategy gears towards 10 million tons of hydrogen production by 2030.
Undeterred by these challenges and uncertainties, Linde, the world leader in hydrogen production, is investing in hydrogen refuelling stations (HRS), bringing the infrastructure closer to the consumer. The company believes that once the use of carbon-based hydrogen is facilitated the industry can work backward to make the fuel greener.
In the shipping space green hydrogen will require world-scale infrastructure from one port to another, which is a commensurate task. Bill Bryant, MD APAC & MEA at Stolt-Nielsen, said: “(Hydrogen) developments will realistically come through in the 2040s or 2050s.”
Meanwhile, Stolt is taking part in a pilot to build a liquid green hydrogen (LH2)-powered ship (HySHIP project), an example of small-scale experimentation with the fuel.
“With the International Maritime Organisation’s (IMO’s) regulation on sulphur emissions in force and the development of further IMO regulations, we are also seeing more orders for new ships to be built to run on LNG, and more countries developing LNG terminals.”
Tan Soo Koong, CEO, Singapore LNG Corporation (SLNG)
LNG, short-term reality
While the wide-scale use of hydrogen remains theoretical, LNG is already a reality and about 175 LNG-powered ships are operating around the world. With lower CO2 emissions compared to other fossil fuels, LNG is considered a “bridging” fuel and the handiest one until other GHG-free alternatives are found.
Singapore has put itself forward as an ideal LNG hub in Asia Pacific, a region which accounts for 70% of global LNG demand. As a leading bunkering hub with 20% of the global market share, Singapore has a good chance to become a major hub for LNG. The country invested in LNG infrastructure such as building the second terminal operated by Singapore LNG Corporation (SLNG). SLNG has four storage tanks as well as two jetties with a yearly throughput capacity of 11 million tpa.
Pavilion Energy and Shell Eastern Production are the two major LNG importers in Singapore. In March this year, the Maritime and Port Authority of Singapore (MPA) awarded a third LNG bunker supplier licence to Total Marine Fuels, for a five-year term starting in 2022. Total is already operating the world’s largest LNG bunker vessel in the Port of Rotterdam and it will launch a new LNG bunker vessel in France. Total also chartered two VLCCs (very large crude carriers) equipped with LNG propulsion that will be delivered in 2022.
Though it is the only operational alternative fuel that can help in the race to IMO 2030 targets, LNG alone is insufficient to reduce GHG to the required level. Moreover, LNG emits methane, a gas that can be more dangerous than CO2. Given these reasons, “transitional fuel” best describes its use as a compromise between heavier fossil fuels and green fuels.
Methanol, in the middle
If hydrogen is still too far from achieving market application and LNG only partially answers the question of lowering GHG, methanol fits right in the middle of this equation, with better application viability, greater versatility in terms of production and uses, and a wider range to become “greener” as it can be produced from both fossil fuels and renewables. When burned, methanol only emits low levels of nitrogen oxide without giving off sulphur or other particulates. Like hydrogen, the decarbonization impact of methanol depends on its origin. Most of the methanol produced today is made from fossil fuels – gas, most commonly, and coal in China. At the other end of this spectrum is e-methanol, generated from renewables, through which CO2 is absorbed. Low-carbon methanol (LCM) is part of a benign cycle to create hydrogen and low-carbon fuels and it can also be used as a raw material to create (Bio) olefins, formaldehyde or acetic acids. “Low-carbon methanol (LCM) finds itself in the middle of different GHG reducing pathways all in their nascent stage. These markets are still very young, small in scale, and with great potential to grow,” said Mark Berggren, CEO, Methanol Market Services Asia (MMSA).
As a marine fuel methanol has many advantages; it is easier to handle compared to LNG or hydrogen and it can be transported and stored in tankers, therefore not requiring complex pipelines. Its main safety downside is that it burns with an invisible flame, thus requiring greater precautions. Though more expensive than fossil-based alternatives, methanol is positioned to reach parity with mainstream fuels faster than other candidates like hydrogen. Moreover, methanol can be used in conjunction with other fuel solutions: an excellent hydrogen carrier, methanol can answer the challenge of hydrogen transportation.
With the growing usage of methanol as a marine fuel and in fuel blending as an energy source, or as a feedstock, demand for the molecule is on the rise. Following these trends, Canadian company Nauticol Energy identified an opportunity to supply blue methanol to Asia. Nauticol is developing one of the largest methanol facilities in the world in the natural gas abundant region of Alberta, Canada. The Grand Prairie facility is a US$3 billion investment with a processing capacity of 280 million cubic feet of natural gas a day, and 3.4 million metric tons of methanol per year. “The large scale capacity sets the site for global reach,” shared Mark Tonner, CEO of Nauticol Energy: “The uptake in biodiesels and fuel blending, especially for maritime transportation and in energy applications, are some of the key demand drivers, with the biggest market found in China. The positive environmental attributes of methanol qualify it as a solution in today’s context of curbing CO2 emissions. Nauticol has recently announced that our plant will be constructed with integrated carbon capture and sequestration (CCS),” he explained.
In the midst of the pandemic Nauticol Energy reached an agreement with Singapore-based Fortrec Chemicals & Petroleum, a commodity trading company, to market methanol in Southeast Asia and China. Michael Lambert, CFO at Fortrec, sees multiple opportunities for methanol in Singapore and beyond: “The Jurong Island petrochemical players have a well-established business model, but environmental pressures also lead them to open up to methanol, though this is a slow uptake. A growing sector is in marine fuels, methanol being used mostly as a blending fuel to lower sulfur levels. Methanol could be a transition fuel and a viable greener alternative to heavy fuels for terminal operators and bunkering terminals.”
A joint report by Deloitte and Shell published last year concluded that there is no viable alternative deep-sea shipping fuel that allows the IMO’s 2030 agenda to be met. To have a shot at meeting these targets the first net-zero ships would have to enter the global fleet by around 2030. Currently, the more feasible marine fuel options are dependent on hydrocarbons.
Image courtesy of Hanson Lu on Unsplash