Chemical Market Analytics Blog

Methanol as a Marine Bunker Fuel

An end-use for methanol that is currently in its infancy – but which has significant global potential – is as a bunker fuel for ships.

The advantages of using methanol as a ship fuel are:

  • It is a liquid, is relatively easy to handle and can utilize existing storage tanks
  • It is widely available, does not contain sulphur and benefits from a near complete combustion

The disadvantages of using methanol as a ship fuel are:

  • It has a low flashpoint, is corrosive, and is miscible in water
  • Its lower volumetric energy content, which means that twice the amount of space is required to generate an equivalent amount of energy as conventional bunker fuels

Chemical Market Analytics’ previous view was that Methanol’s lower energy content compared with traditional bunker fuels means it is not suitable for long voyages but has a niche opportunity in short-haul voyages or inland waterways: ferries, barges, tugboats, pilot vessels etc. While this is still partially true, the increasing pressure of the sustainability agenda has prompted a growing number of announcements of newbuild ships that are capable of running on methanol. Therefore, methanol may have a more mainstream future as a marine fuel than previously thought.

There is almost unlimited potential for methanol demand into marine fuel, especially in the growing Emission Control Areas (ECA) zones, where sulfur oxides (SOx) emissions are limited and strictly controlled.

Chemical Market Analytics has a live and rapidly expanding database of current and announced ships that are capable of running on methanol.

In terms of economics, the gap between the fuel oil price and the methanol price has generally not been favorable in the interim period – at least until 2019 and 2022, when high crude oil prices made the economics for methanol more favorable.

Regulatory Environment

In 2008, the International Maritime Organisation (IMO) re-set the maximum allowed content of sulfur in bunker fuel, from 3.5% by weight, to 0.5%. This new limit came into force on 1 January 2020.

ECA zones superseded Sulfur Emission Control Areas or SECA zones. There are ECA zones in North America, the Baltic Sea and North Sea and English Channel, Puerto Rico and the US Virgin Islands; in mainland China, the Pearl River delta; the Yangtze River; and Bohai; and in South Korea. Additionally, there are many countries where specific sulphur caps at the anchorage, in-berth, coastal or inland waters apply based on their domestic law.

In the ECA zones, when the new regulation took effect on 1 January 2015, the maximum permitted sulfur content in marine fuel fell from 1.0 percent by weight to 0.1 percent. Few modifications had been made to ships to address this specification change. There are various options for the decrease in allowable sulphur emissions to be achieved.

Growth prospects

In addition to the general growth opportunities that have been opened up by regulatory changes, there are some discrete areas of activity relating to the use of methanol as a marine fuel. We have Methanol producers burning their own cargo as fuel and Large shipowners making a commitment to methanol as a fuel.

Conclusions

Given the environmental challenges facing the shipping industry to lower exhaust emissions of sulphur in particular, there will undoubtedly be far-reaching changes in the mix of bunker fuels to meet international and local emission requirements. Many shipowners are adopting a range of options.

Chemical Market Analytics’ previous view was that Methanol would only play a limited role in the bunker fuel mix in the next 10 years based on economic grounds and on its lower energy content. The current view is that methanol has an opportunity to become much more of a mainstream marine fuel, partly based on its improved economics in a higher crude oil price environment, and partly because shipping companies are being much bolder in their commitment to methanol on the following assumptions:

  • Supply: demand will ultimately be satisfied by renewable methanol
  • Proof of concept: evidence that the new engines can run efficiently and reliably on methanol and can switch to pilot fuel when required; proof that the methanol infrastructure at ports can be delivered quickly and cost effectively
  • Cost: the capital cost of building or retro-fitting vessels to run on methanol versus other fuels; and the variable cost difference of the range of fuels available relative to the varying amounts of space required to store these fuels

The global marine sector consumes over 200 million metric tons of bunker fuel every year. It would only take a small percentage of this total to be converted to methanol for this end-use to become a significant application for the methanol industry.

In view of this changing landscape for methanol as a marine bunker fuel, Chemical Market Analytics has revised upwards its methanol demand outlook for this sector.

Join the Chemical Market Analytics World Methanol Conference on the 15 – 17 November 2022 to learn more about the future of methanol as a marine fuel.

This year’s conference will be held in person in Barcelona, Spain, and will include speeches from some of the industry’s leading companies, as well as experts from Chemical Market Analytics.

Written By:

Mike Nash
Vice President, Syngas Team Lead
Chemical Market Analytics by OPIS, a Dow Jones Company

Xiaomeng Ma
Director (Asia)
Chemical Market Analytics by OPIS, a Dow Jones Company

Javier Ortiz
Director (Americas)
Chemical Market Analytics by OPIS, a Dow Jones Company

 

Geoffrey Mullett
Director (EMEA/India)
Chemical Market Analytics by OPIS, a Dow Jones Company

Shreya Kansara
Senior Analyst
Chemical Market Analytics by OPIS, a Dow Jones Company