Ensuring maritime ammonia supply – a herculean task
The global maritime industry demands in the region of 300 million tonnes of heavy fuel oil annually. Taking into account the difference in comparative energy density, this represents a potential annual demand for roughly 780 million tonnes of low-carbon ammonia fuel. In reality, this estimate can be reduced because – on certain trades and in certain segments – other fuel alternatives simply make more sense. But still, if low-carbon ammonia is to eventually provide just half of the global requirements for future shipping, we still have a herculean task ahead of us to develop sufficient supply.
However, the future of maritime ammonia is not only dependent upon massive production development, it also faces challenges associated with the financial and regulatory landscape in shipping. Ammonia shares such issues with other new fuels, but by many measures ammonia stands as the best long term option for maritime fuel transition. Therefore, it is worth reflecting upon these challenges through the ammonia lens.
As the negotiations at the IMO mature, maritime ammonia must position
On the 10th June 2022, UMAS (University Maritime Advisory Service) published An Overview of the Discussions from IMO MEPC 78 (International Maritime Organisation, Marine Environment Protection Committee 78th meeting). Seen through the lens of low-carbon maritime ammonia fuel development, the report contains some fascinating insights.
- The IMO – through improved membership engagement with the initiative for fuels transition – is signalling to the industry and its future fuel providers that forward-looking investment is sensible. Ammonia must respond appropriately to this signal.
- The IMO is coming around to addressing the price gap between traditional versus new fuels and, again, ammonia must be positioned.
- “Well to Wake” life cycle assessment (LCA) now sits firmly on the GHG reduction regulatory menu at the IMO.
The report also describes increased drive & enthusiasm. This meeting held at the IMO in London during June 2022 was not expected to be, and indeed was not in itself a milestone event, but it revealed an important shift in weight. The existing ambition at the IMO for GHG reduction is for 50% compared to 2008 levels by 2050. MEPC 78 saw an unprecedented shift toward a “Zero by 2050” goal. As maritime GHG emissions have greatly increased since 2008, this shift represents a step change in ambition.
A basket of policy measures for a fair, just and equitable transition
IMO Member States comprise all levels of economic development. Consensus-driven as it is, fairness has been essential to progress negotiations. It has been generally accepted that global, market-based measures are needed to promote the uptake of renewable fuels. Discussion at MEPC 78 took the direction around funds generated by measures like carbon pricing being redirected to disadvantaged members to support equitable change. It was agreed to follow ISWG (Inter Sessional Working Group) recommendations to commit to the development of a basket of policy measures with an agreement target of MEPC 80 (June 2023), and thus possible implementation by 2025.
High-impact investment required
With a “Zero by 2050“ goal to be realised in just 28 years, the investment case is perhaps challenged for net zero and intermediate “transition” fuels with complex life cycle evaluation criteria. To be effective in reaching such a target, IMO measures will have to drive a rapid transition involving high volumes of investment. It will also most likely require revenues from pricing mechanisms to be redirected with consideration for not only equitable transition but also to support key enabling sectors, particularly of course the fuel value chains. It could be argued that for the investment to have the required high impact it must be directed toward the fuel type which satisfies clearest (and lowest) LCA profile, widest maritime scope and highest eligibility as the long-term solution.
Adoption of LCA guidelines: next year?
Regarding such an LCA framework, MEPC 78 also accepted from ISWG 11 (Intersessional working group 11) the recommendation for a commitment to LCA guidelines for maritime fuels, a draft of which is already on the table. It is likely that a framework for maritime LCA assessment can be adopted by MEPC 80 in just 12 months’ time. Satisfactory consideration for low-carbon ammonia maritime fuel would ideally be incorporated with such a framework and the associated impact on ammonia project investment profile fully appreciated.