Fuel Preference Analysis
Nov. 17, 2023
Weekly Highlight 11.17.2023 – Fuel Preference Analysis
As we approach 2024, the CII regulatory requirements for reporting energy efficiency per vessel are coming into play, and shipowners are paying attention. Looking at NB orders from 2019, we see that 98% of VLCC owners opted for the scrubber option. If we compare that with 2023 YTD orders we notice that scrubber preference for VLCCs is in decline as 60% fewer vessels were ordered fitted with scrubber compared to 2019 (Figure 1) and instead shipowners are opting for dual fuel technology. Suezmaxes follow a similar trajectory to VLCCs. Meanwhile, smaller vessels show a different pattern, with LR1s favoring scrubbers in 2023 as the cheapest alternative for new regulatory compliance, whereas zinc coated MRs could carry and burn methanol (6.2% of 2023 MR NB orders are methanol fueled). Due to the multitude of options available there has not been a clear winner for alternative fuel as owners consider the availability of fuel in ports as well as their costs, and compliance requirements. It seems that the size of the vessel and the trade patterns are big determinants of the fuel selection.
Figure 1: Scrubber as % of NB Orders 2019 vs 2023 Figure 2. 2023 Alternative Fuel as % of NB Orders
Source: McQuilling Services
So far, the only available bunker fuels under the current technology that could potentially meet IMO 2050 requirements are: Green Methanol, Green Ammonia, and Green Hydrogen (from natural gas + carbon capture and storage). Meanwhile, grey methanol, LPG and LNG could be used as an intermediate approach to meet IMO 2030 requirements, with shipowners showing greater preference for gas-fueled vessels. Methanol seems to be not far behind due to availability (125+ ports now have methanol storage), auxiliary system complexity, and experience. Ammonia is the most controversial of them all, where high toxicity and low density still present challenges for wider adoption. It appears that the higher tanker earnings environment for the past two years has accelerated the switch to newer, more expensive technologies to reduce carbon emissions and we expect trend to continue.
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