Decarbonizing the high seas

Kann opens with the assumption that there is a race, mainly between methanol and ammonia, and that someone wins it. Loo interrupts to reject the premise before he finishes setting it up. Shipping is already multi-fuel: several grades of fuel oil sorted by sulfur content, marine gas oil, liquefied natural gas burned in dual-fuel engines, and drop-in biofuels. The reason it stays that way is structural rather than technical. In aviation an airport takes delivery of one fuel and every aircraft that refuels there gets it. In shipping the fuel changes hands many times on its way to the vessel and each owner or operator sources its own, so there is no chokepoint where a single choice could be imposed on everybody. The heterogeneity that makes the industry look indecisive is what a fragmented supply chain produces.

Within that portfolio the methanol-versus-ammonia question does have an answer, but a conditional one. Which you prefer depends on whether you think production or infrastructure is the binding constraint. Methanol is a liquid that existing handling systems can cope with, it is already produced at roughly 100 million tons a year, and it has been bunkered since 2015, in tiny bespoke volumes. So if infrastructure is the bottleneck, methanol wins. If production is the bottleneck, ammonia wins, because a given quantity of hydrogen yields twice as much ammonia as methanol, and methanol additionally needs a carbon source that has to be biogenic or captured from the air. Loo adds that on long-run cost alone ammonia should beat electrofuel methanol. The catch on the ammonia side is that it is toxic, so crew training, emergency response and safe transfer all have to be built before it scales. Maersk illustrates how unsettled this is: it committed to methanol dual-fuel vessels and moved upstream into methanol production, and is already saying it will look at alternatives, because the volume it needs dwarfs what the world makes.

A physical constraint then redraws the map. Both ammonia and methanol carry far less energy per unit of volume than heavy fuel oil, roughly a factor of two and a half for the same distance. That forces every owner to choose between carrying less cargo and refueling more often. A survey Loo’s centre ran with BCG found that 60% would rather refuel more often, and that more than half of ships today have a favorite port where they refuel over half the time. Bunkering is extraordinarily concentrated: Singapore alone handles about 50 million of the world’s roughly 300 million tons, more than the next nine hubs combined. Loo expects that pattern to break apart, with new ports emerging wherever ammonia and methanol get produced, which makes fuel production siting and shipping route design one problem rather than two.

The timing is what makes the episode uncomfortable. No green premium is being paid; Loo says flatly that there is no willingness to pay one. What moves the market is regulation, and the regulation is fast. The International Maritime Organization revised its strategy in July 2023 from a 50% cut by 2050 to net zero at or near 2050, with interim targets of 20%, striving for 30%, by 2030. Kann calls that remarkably ambitious given how long ships last and take to build, and Loo agrees without softening it. The arithmetic is why: the Global Maritime Forum calculates that hitting 20% requires about 10% green fuels by 2030, which is tens of millions of tons a year of ammonia or methanol against an ammonia market where only about 20 million tons is traded internationally at all. Those volumes cannot exist in five years. So the near-term levers are the unglamorous ones. Efficiency measures already cut emissions about 30% since 2008, though trade growth absorbed the gain, and another 30% is needed by 2030 from technologies such as wind propulsion and air lubrication that are not being adopted anywhere near fast enough. Onboard carbon capture sits behind that as something Loo will only call worth exploring.