Energy Transition Shipping

World Bank alternative marine fuels study advises: drop LNG, pay attention to developing countries

Energy transition seen as opportunity to leverage national comparative advantages

The World Bank has published yesterday (April 15) a comprehensive study on shipping decarbonization. It is comprised of two parts, with an additional summary for policymakers. The first part assesses the potential of zero-carbon bunker fuels in developing countries, while the second analyses the role of LNG in the shipping energy transition.

The study was performed with the expert support of University Maritime Advisory Services (UMAS), a research institute affiliated with UCL, the University College London.

The main takeaway from the study is that the authors, after performing an extensive literature review analysis, end up concluding that biofuels, synthetic carbon-based fuels and LNG are not viable low carbon marine fuels. Instead, the best candidate is green ammonia, closely followed by green hydrogen, because of “the fuels’ lifecycle GHG emissions, broader environmental factors, scalability, economic viability, and the technical and safety implications of using these fuels”.

UMAS research has been critical of LNG for many years now, a view that is supported by high profile industry players such as Maersk and Fortescue, among others. The fuel, however, finds strong support from CMA CGM, Hapag-Lloyd and Zim, not to mention – obviously – the long list of operators on the LNG shipping business.

Marine LNG lobby groups SGMF and SEA-LNG are also constantly active in the debate. They published a peer-reviewed study on the very same day as the World Bank publication in the support of the fuel, with the conclusion that “the use of LNG as a marine fuel shows GHG benefits of up to 23% on a Well-to-Wake (WtW) basis and up to 30% on a Tank-to-Wake (TtW) basis compared with current oil-based marine fuels”.

The World Bank report, however, advises: “countries should avoid new public policy supports LNG as a bunker fuel, reconsider existing policy support, and continue to regulate methane emissions to put shipping on a Paris-aligned GHG emissions trajectory.”

With no sign of consensus yet to be found on the LNG debate, the World Bank goes on to provide insightful analysis on the green fuel opportunities for developing countries, something we have stressed here before.

Four case studies were performed for Brazil, India, Mauritius and Malaysia. In Brazil’s case, the blue ammonia pathway was proposed, using natural gas with carbon capture. The researchers estimated the country could potentially cover 2-9% of global shipping demand for ammonia by 2050. Associated capital expenditure would be USD 24-107 billion.

The report goes on to stress that some developing countries are among the best positioned to benefit from the shipping energy transition, due to “their low-cost renewable energy sources combined with other advantages, such as a strategic geographic proximity to major shipping routes. This realignment of the global bunker fuel market gives policymakers from these developing countries the opportunity to leverage national comparative advantages during the expected period of growing demand for zero-carbon bunker fuels from 2030 onwards.”

A score-based ranking methodology was developed to assess the potential of developing countries to produce zero-carbon bunker fuels.

For blue ammonia / hydrogen production, the best positioned in Latin America were Brazil (22nd in the world), Colombia (29th), Chile (33rd), Mexico (41st) and Argentina (48th).

For green ammonia / hydrogen production, the best positioned in Latin America were Chile (3rd), Guatemala (16th), Argentina (18th), Brazil (31st) and Colombia (34h).

Follow the links below to read the full reports.

Volume 1: The Potential of Zero-Carbon Bunker Fuels in Developing Countries

Volume 2: The Role of LNG in the Transition Toward Low- and Zero-Carbon Shipping

Summary for Policymakers and Industry: Charting a Course for Decarbonizing Maritime Transport

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