The industry will select different fuels for different types of ships

“Currently biofuel is the only readily available drop-in alternative and will be useful in GHG reduction.  However, these will become increasingly scarce and costly to scale up as competition from other industries, such as aviation, rises,” informs Indra Nath Bose, Advisor, Great Eastern Shipping.

What are the plans at Great Eastern Shipping with regards to emission compliance?

In our organization we have been implementing various technical and operational measures since more than a decade to improve energy efficiency of our vessels and thus reduction of greenhouse gas (GHG) emission.

Various propulsion energy efficiency enhancement devices like Mewis Duct, Propeller Boss Cap Fins, ECO Cap, Rudder Bulb, MT Fast fins, higher efficiency propellers have been retrofitted on identified vessels in our fleet.

We apply superior antifouling coatings on hulls of our vessels to try and maintain them as clean a condition as possible through periodic cleaning of hull and polishing of propellers. We are trying out novel hull cleaning and propeller polishing solutions like in-transit hull cleaning equipment and Ultrasonic Antifouling Device for propellers etc.

We have carried out a trial operating our vessel with lower emission bio-fuel blends successfully.

We are closely monitoring regulatory developments at International Maritime Organizations. In fact, some of us in our organization are actively contributing through Indian delegation at International Maritime Organization in development of policy measures for reduction of GHG emission from shipping industry.

From a ship operator’s point of view which is a better option – buying new ships that operate on eco-fuels or retrofitting the existing fleet?

I suppose by eco-fuel you mean other than fossil fuels i.e. zero / near-zero GHG emission fuels. The decision will depend on various factors viz. time horizon for which one wishes to acquire a vessel and its cost, expected freight rate, bunker fuel cost and regulatory landscape.

International Maritime Organization (IMO) in its latest updated strategy on Reduction of GHG Emissions from Ships (IMO GHG Strategy) sets target of net-zero GHG emissions by or around, i.e. close to, 2050. To clarify the pathway towards net-zero, the strategy includes two indicative checkpoints (a) to reduce the total annual GHG emissions from international shipping by at least 20%, striving for 30%, by 2030, compared to 2008 and (b) to reduce total annual GHG emissions from international shipping by at least 70%, striving for 80%, by 2040, compared to 2008. These 2030 and 2040 targets are extremely challenging.

GHG reduction policy measures and relevant regulatory requirements to achieve above are currently being negotiated at Marine Environment Protection Committee (MEPC) of IMO and is scheduled to be adopted in Autumn of 2025 and enter into force in 2027.

Ships will have to reduce their GHG emission as per the regulatory requirements through mainly use of lower GHG intensity fuels compared to existing fossil fuels (HSFO/VLSFO/MGO etc.).

Currently most popular lower emission fuels for retrofits and newbuildings are methanol, ammonia and LNG.

Existing mechanically controlled engines cannot be retrofitted to operate on these fuels. The engines need to be of electronically controlled type for retrofitment. In any case, existing fossil fuelled vessels can use drop-in bio-fuels and bio-fuel blends to reduce its emission to some extent.

We see some interest among containership operators in carrying out retrofit to Methanol-fuelled ships because of the possibly of greater incentives provided from the market due to sustainability related sensitivity among their customers.

The retrofit costs vary, depending on ship type and capacity, in addition to the type of alternative fuel to be utilised. Engine manufacturers have cited costs spanning from $15m for smaller methanol-fuelled engines up to $45m for the largest vessels retrofitting to dual-fuel LNG propulsion systems. So, the cost of retrofit will play a role in decision making.

Currently newbuilding orders for alternative fuel tankers and bulk carriers is extremely limited. However, more shipowners are turning to ordering “alternative-fuel ready” newbuildings. Alternative-fuel ready classification society notations prepare a vessel for a future retrofit by optimising the initial design on various disciplines including structure, engine and machinery, piping and bunkering, and other requirements.

They may also be offered in various levels depending on the desired readiness level with additional cost, dependent on selected level of readiness, type of fuel, amount of additional steel required, and various other parameters that are assessed on a vessel-by-vessel basis.

One needs to be careful about future implications of “alternative fuel ready” newbuildings when the time comes for actual conversion. The cost of conversion needs to be kept in mind for commercial viability. The conversion is not trivial. The cost of conversion should not be so high which cannot be earned back during remaining life of the vessel.

Dual-fuel engines combined with energy-saving technologies should be considered for newbuildings, and this trend is expected to solidify as time progresses and clarity emerges with respect to regulatory measures being developed in IMO.

There is concern about adequacy of shipyard capacity. The Review of Maritime Transport 2023 published by the United Nations Conference on Trade and Development (UNCTAD) urges shipyards to expand quickly to aid with shipping’s green transition. It specifically states that tanker and dry bulk owners are anticipating long waiting times and high building prices. Increasing shipbuilding capacity is crucial to ensure that shipping meets global demand and its sustainability goals.

Clarkson’s newbuilding price index has been climbing since the second half of 2020, reaching 178 points at the end of 2023, up 10% year on year, despite steel prices falling by double-digit percentages during the year. The index rose further, to 181 points at the end of February this year, with the nominal value just 5% shy of the August 2008 peak.

How are you proceeding with training of seafarers for using green fuels onboard ships, storage and safety compliance?

Our diversified training portfolio at GESCO includes classroom courses coupled with hands-on workshop training, computerized training exercises, onboard sailing training, seminars, and webinars. Recently, we launched the SKILL-UP programme to guide career progression and focus on competency management. The best industry practices have been incorporated into our training programmes.

We’re proactively developing our training programme contents to include aspects related to alternative fuels and associated safety measures. Additionally, we are closely involved with various functions of IMO and staying informed about industry changes to ensure that our training programs are in tune with the current regulatory environment and that we are prepared for future challenges.

Enhancing training and education will be vital in the likely scenario of multiple fuels being developed and adopted to meet shipping’s low-carbon future, each with their own safety-related characteristics.

In addition to competency development, our company training matrix comprises environment-related courses such as EEXI, CII & SEEMP III, Environmental Management, Inventory of Hazardous Material (IHM), Environmental Officer Training Course, various courses on different types of Ballast Water Management System, and Exhaust Gas Cleaning System (Scrubber), Basic & Advanced Training for Ships Operating in Polar Waters, etc. All these courses have been further customized to suit the needs of the target ranks.

Among the several fuels available or being tested – Hydrogen, Methanol, Ammonia…etc, which one do you see is largely successful?

I believe, rather than one fuel, the industry will select different fuels for different types of ship, and it is important not to eliminate any of the current options too early as an industry.

At this point in time when no green fuel is under production at scale and available, it is difficult to guess which future fuels will survive, or which of ammonia, hydrogen, methanol, LNG, LPG or additives-rich biofuels might dominate.

Biofuels could play an important role in the short term as they presented no technical challenge.

Nothing combines energy intensity, cost and convenience quite like fossil fuels. Their low-carbon alternatives — will have less energy content and their own safety risks.

Also, we need to understand the variations in physical properties of these fuels and the implications.

Methanol fires are nearly invisible in daylight without the use of special equipment. Methanol is corrosive — and toxic if ingested; 25 ml-90 ml can be lethal compared to120 ml-300 ml for gasoline.

As methanol is a liquid fuel at ambient temperature and pressure, it requires minimal fuel tank specifications, but safety and health protection arrangements remain important.

Due to the experiences already recorded of using it as a fuel for the last decade, safe bunkering guidance has been written and will lead to probable international safety requirements. Class regulations are also in place for newbuilding and retrofit designs to ensure existing safety requirements are met by methanol-powered vessels. Engine designs are maturing rapidly and class societies and engine makers, as well as engineering firms and repair yards, are also building up vital maintenance experience as more engines come into service.

Probably this decade Methanol will provide the most impact on GHG reduction.

Ammonia, another candidate, is not explosive and is easier to store since it does not need to be kept as cold as hydrogen. It also does not burn easily — a trait that creates headaches for engine makers.

However, ammonia is highly toxic. Even relatively low concentrations in air can harm or kill.

Ships have safely carried ammonia for years as a refrigerant and as a cargo. Yet the risk of leaks from these sealed or closed-loop systems are far lower than from its use as a ship fuel.

Ammonia engines also bring the potential problem of “ammonia slip” — stray amounts of unburned ammonia released into the air, just as LNG engines can release methane.

Engine makers are optimistic the problem is solvable and engines, tanks and fuel supply system will be available around middle of this decade.

Ammonia also needs liquid fuel to ignite it — as much as 30% — which will have to come from biofuels.

Hydrogen is much more easily ignited than natural gas, with even a weak static discharge enough to ignite hydrogen in air. It is also flammable over a much wider range of air concentration and can explode under certain conditions. The industry currently has little or no knowledge of hydrogen, either compressed or liquefied — and, correspondingly, no experience.

Hydrogen is explosive and must be cooled to -253° Celsius.

4 stroke and 2 stroke engines for Hydrogen are expected for commercial application later this decade.

Currently biofuel is the only readily available drop-in alternative and will be useful in GHG reduction.  However, these will become increasingly scarce and costly to scale up as competition from other industries, such as aviation, rises.

Observers continue to predict a mix of future fuels, with batteries or hydrogen on shortsea ships — and methanol, ammonia or e-LNG for oceangoing ships.

The current regulatory framework of IMO is focused on vessel emissions (tank-to-wake) rather than the overall life-cycle emissions of a given fuel (well-to-wake). Also, currently only CO2 emission is considered and no other GHG emissions e.g. methane. However, it is recognized throughout the industry that the life-cycle GHG footprint of fuels provides the most complete description of their environmental impact.

The IMO GHG Strategy sets target of reduction of GHG emission on Well to Wake basis. MEPC 81 (March 2024) has adopted 2024 Guidelines on Life Cycle GHG Intensity of Marine Fuels. It lists all possible identified marine fuels based on feedstock used, production pathways and energy converters onboard ships (IC engines, fuel cells etc.) and provides GHG intensity (gCO_2eq/MJ) i.e. GHG emitted per unit of energy for each of those fuels. Default GHG intensity values of very limited number of fuels have been provided now the remainder will be updated as more data becomes available.

This GHG intensity value will be critical for GHG Fuel intensity standard now being developed and future choice of fuels.

The focus of talks about future fuels usually revolves around their technical and performance credentials, but that is only part of the challenge. Scalability and the economic viability of the whole production supply chain and logistics are equally important, and shipping industry needs to take these into consideration when weighing the benefits of alternative fuels. It is essential to consider these issues because there are economic and financial implications.

MAN has published a paper assessing decarbonisation measures including two-stroke ammonia and methanol engines, and conventional fuel engines with onboard carbon capture.

It found that onboard carbon capture would be the costliest solution despite using cheaper conventional fuel, while it also reduced emissions less than by using ammonia and methanol engines with zero- or low-emission fuels.

It found two-stroke ammonia engines would offer the highest emission reductions for the cost, followed by two-stroke methanol engines.

At any rate, no e-fuels will be available without a massive increase in renewable power supply. A recent study, commissioned by the International Chamber of Shipping, found shipping will need about as much as the total renewable energy produced worldwide today.

Producing power through wind turbines and solar panels have various sustainability implications. There is a good possibility that sustainable true zero-carbon alternative will be found in molten salt nuclear reactors onboard ships not withstanding whole load of political and regulatory problems ahead of it.

How do you see the adoption of green fuels impact operating cost and profitability of ship operators? 

All lower carbon alternative fuels will be far more expensive than the fossil fuel varieties we are using today. To give you an example, literature study shows the cost of bio-MGO between 2020 and 2030 ranges from 630 USD/tonnes VLSFO-eq. to 2653 USD/tonnes VLSFO-eq with average cost at 1100 USD/tonne VLSFO-eq. This large span reflects that bio-MGO may be produced from many different sources of feed stocks. There can also be significant regional price-differences for feed stocks. Green fuels produced using renewable electricity will cost far higher. Overall, most fuels will have a lower cost in the time-period 2040-2050 compared with 2020-2030. Especially, this is the case for electro fuels, where contributing factors include falling investment cost for renewable electricity generation and conversion plants, as well as higher hydrogen electrolysis efficiency.

No one will run vessel on alternative fuels as long the cost remains higher than that of fossil fuels. In view of this, policy measures are being developed at IMO to incentivise use of alternative lower emission fuels.

As technical measure there is proposal of a GHG Fuel Standard (GFS) that would set a regulatory limit on the average GHG intensity of fuels used by ships. The GHG intensity declines over time and ships can comply by using such fuels. It can be implemented in a similar way as the current regulations on the sulphur content of the fuel. In order to reduce GHG emissions to zero, the limit value would need to follow a step-by-step reduction trajectory from its current level to zero by around 2050. The GFS creates certainty about the demand for low- and zero-GHG fuels and reduces risks for ship owners, fuel producers and fuel suppliers.

As economic element policy measures are being developed to ensure that those ships operating on fuels with lower GHG intensity than required by GFS will be compensated for the price differential between that fuel and GFS standard fuel. There will be commensurate reward for overachieving ships. And ships which are not able to meet GFS standard i.e. underachievers will be paying for their excess GHG emission on per tonne basis. Simply put, underachievers’ contribution will be used to reward the overachievers.

As economic measure there is also a proposal of bunker levy with a feebate mechanism. Combined with the GFS the role of the Levy would be to assist and facilitate the transition by providing economic incentives for the use of low- and zero-GHG fuels, narrowing the price gap between the latter and traditional fuels.

Such framework of technical and economic measure will ensure commercial viability of energy transition because ships powered by a wide spectrum of fuels and technologies, with a correspondingly wide range of operating costs, will be operating in the same trades. The fuel/technology spectrum will include conventional fossil-based fuels, biofuels, blends, and e-fuels that may be produced using a variety of energy sources which are 100% renewable, partially renewable, or fossil fuel based. Moreover, it will also include several technologies, including wind-assisted propulsion, direct electrification, fuels cells, etc. The operational costs of these different fuels and technologies will vary significantly as will the Well-to-Wake (WtW) GHG reductions achieved.

We must await Extraordinary Session of MEPC in Autumn of 2025 to see the final legislation of the above technical and economic measure.

The cost of decarbonization will reflect on ship operating cost and freight cost.

How are the emission reduction standards set by IMO going to impact the chartering agreements for shipowners?

Some of the existing Charter Party Clauses are based on practices that have evolved over 150 years and originate from when vessels transitioned from sail to steam and are now dinosaurs that refuse to lay down and go extinct. Some of these clauses mainly try to safeguard split incentives between Owners and Charterers and maximise their respective profitability with no concern for mutual benefit of emission reduction and safeguarding the planet. Vessels are operated on warranties and not optimal energy efficiency performance. The underlying principles in most standard Charter Party terms reward inefficiency rather than incentivize efficiency.

Carbon Intensity Indicator (CII) Regulation which entered into force in January 2023 is an example.

In practice CII is an operational measure, requiring individual ships to limit their carbon emission per unit transport work below a given benchmark and the responsibility for compliance rests with the shipowner.  This necessitate changes to how the ship is used and operated. Potentially, this could require changes to speed, route and cargo capacity. Some Charters feel it restricts their right to take operational decisions under traditional Charter Party terms and are not agreeable to such terms.

One cannot always blame Charterer for it. For instance, the need for vessel to arrive at a loading port within the laydays often stems from shippers’ and/or end users’ requirements. Charterer merely contracts the freight element and hence is unwilling to be drawn into the sale contract between shippers and the buyers (or end-users). In current times, it is not even the shipper but a trader who steps in and takes a position on the cargo contract thereby assuming the responsibilities for shipment. Therefore a wholistic approach is needed to deal with the current inefficiencies of the c/p and for that purpose all stakeholders in movement of the cargo from shore – ship – shore needs to be identified. The key Charter Party clauses need to be rewritten thereby laying the foundation to redefine the rules of engagement between Owners and Charterers. The incentives of Owners and Charterers now have more overlaps, creating a relationship where collaboration and trust are prerequisites for mutually beneficial outcomes. Emissions reduction and financial savings come together. We need to implement ways of working together that financially benefit both parties, as well as the environment.