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Added Oct 9, 2020

The Future of Green Shipping

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We are proud to have participated in HAEE’s Energy Transition Symposium as one of the 100 plenary speakers recently on September 30th, 2020.

Vortexa Lead Freight Analyst, Arthur Richier, discussed the future of green shipping in his presentation, discussing topics such as IMO goals, and the challenges and available solutions for global tanker fleets and alternative fuels and their availability. Read below the wrap up of Arthur’s presentation, which you can watch below.

 

Looking at the industry as it stands, we can see that change is necessary. With alternative fuels becoming more of a future trend, combined with the drive to decarbonise shipping, there are available solutions to easing climate change. But with change comes obstacles, so is the industry really ready for it?

 

IMO Goals: Decarbonizing Shipping

Firstly, the goals set by the IMO for the shipping industry which include:

  • 40% reduction in carbon intensity of emissions by 2030, which is intended to reach a 70% reduction by 2050, compared to 2008 levels
  • 50% reduction in greenhouse gas emissions by 2050

“These goals are ambitious but ambition is what you need when tackling a problem of this scale.” Arthur noted. “The industry must aim for a global regulatory alignment and as I am sure many policy-makers in the room know already, that is no easy feat. If we look at scrubbers, some ports have banned them, others not. There also needs to be a real focus on cross-sector R&D.”

Whatever solution is decided, alternative fuel production and bunkering infrastructure will need to scale up. This coincides with a comprehensive report by Shell estimating the cost of decarbonising shipping at close to $1.65 trillion, which by no means is a small amount.

 

Challenges and Solutions

With such a capital-intensive, costly, and slow changing industry, especially with large costs for newbuild VLCCs, solutions can be difficult to agree and standardise with no clear cut alternative. Some of these solutions have involved scrubbers, which came in as a response to IMO 2020 regulations, which may be a little too late to make much of an impact.

“You still end up emitting more GHG when using LSFO than HSFO with a scrubber. Alternative fuels, we produce too little of them, and is it worth ramping up their production, considering that will also put a strain on our resources and necessitate tremendous amounts of investments” Arthur discussed.

 

Vortexa Snapshot: Global Tanker Fleet

At Vortexa we track the global oil and gas carrier fleet, which stands today at approximately 11,000 vessels. Keep in mind there is roughly the same amount in terms of dry bulk carriers and on top of that you have about 20,000 general cargo, container, and cruise ships to name a few other categories.

Two data sets are important here:

  • Only 9% of the global tanker fleet is equipped with scrubbers with the recent pandemic putting a halt to scrubber installations
  • The 2nd point: the age profile of the fleet is an important one. If you consider the trading age to be 20 years – we’ll have 55% of the global fleet replaced by 2030. And by 2050, none of the tankers we see today might be in operation by then.

This begs the questions: what is the commodity of the future and what is the energy commodity of the future that will be transported by 2050?

 

Alternative fuels: do we have enough?

The current industry standard is fuel oil. At Vortexa we track cargo flows data or in-transit volumes and we can see LNG has really started to be produced at scale in the last 3 years, to the extent there is now more of it on the water than fuel oil on a bpd basis. That would tick the box for LNG as an alternative fuel, of its availability.

Other options for fuels for the future include:

  • Ammonia (global production levels are still very low compared to fuel tons discharged)
  • Methanol
  • Biofuels
  • Hydrogen (really being touted as the fuel of the future, which is great as it can be created from carbon capture)

What are the limitations:

  • Low energy density, meaning you would have to carry a lot more to have the same energetic output
  • Lack of infrastructure
  • Storage/safety requirements: no one would want a repeat of the disaster that struck Lebanon earlier this year

The Verdict

Ultimately the industry is ready to an extent. There is a market demand for change with regulatory incentives in place and technological capabilities available, with more to come.

“Quoting the aforementioned Shell report, from a shipping operator: “We can build rockets that come back from the moon but not make ships green?” Maybe scientists should stop focusing on making square watermelons and instead really start looking into solving the climate change challenges we face today.” Arthur concluded. 

Today, the reality is that we don’t have a clear alignment on a solution. It will be really difficult to replace all these assets and build the infrastructure and the main question remains: who is going to foot the bill?

Below you can also see the panel and live Q&A from the HAEE Energy Transition Symposium with Lloyd’s Panagiotis Mitrou and S&P Global Platts’ Charlotte Bucchioni.

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