49
FEATURE:
Shipping’s Headwinds – The Drivers for Decarbonisation
As the COVID-19 pandemic spread, crude prices declined and its demand surged. This has pushed up the demand for both crude and product tankers.
While the containers and dry bulk shipping sectors are reeling under economic recession, higher demand to move and store cheaper crude and refined oil products has pushed up the freight earnings for tanker owners. A VLCC owner can now earn around $200,000/day for moving crude from the Persian Gulf to China. Freight rates for moving 90,000 metric ton cargoes of gasoil and jet fuel from the Middle East to Europe can cost a trader a record high of more than $5.5 million.
The onshore tanks for crude and refined products are filling up fast and therefore trading companies are now going for the next best option – floating storage. Dozens of ships which are not storing oil, are instead in a long queue waiting to discharge their cargoes, as COVID-19 induced lockdown has reduced consumption at destinations.
Alternatives to fossil-based fuels
IMO 2020 was the start of a major pathway to a cleaner shipping industry. Looking ahead, the next challenge is decarbonisation with Net Zero emissions by 2050. So, what needs to happen by 2030 and is the shipping community ready?
Shipping has a number of technology and zero-carbon fuel choices but there is no doubt that how shipping decarbonises will be closely linked to how the wider energy system decarbonises. Fuels derived from biomass such as bio-methanol and bio-gasoil, and renewable electricity like hydrogen and ammonia, and also the production of these from natural gas using carbon capture and storage (CCS) are all options to decarbonisation of shipping. In the case of bio-mass fuels or fuels derived from natural gas, total lifecycle emissions are to be considered.
Regardless of which zero-carbon fuels emerge as favoured, from an on-board technology perspective ZEVs are likely to be technologically possible in the next two years. However, to be confident around future investment, it will also require confidence around the fuel supply chains, both availability in the quantities required and the land-based infrastructure in place.
With virtually all
50,000 or so merchant ships burning heavy fuel oil (HFO), marine distillate oil (MDO) or liquefied natural gas (LNG), consideration will need to be given to how ships that are financed, designed and built in the 2020s can switch to a non-fossil fuel later in their operational life.