Biomethanol price not conducive to bunkering

Market: Biofuels, Emissions, Oil products, Petrochemicals
12/11/21

Shipowners switching to biomethanol as a marine fuel to curb CO2 emissions would face higher bunker bills at today's prices, even after accounting for the added cost of CO2 life cycle emissions from very low-sulphur fuel oil (VLSFO).

Marine fuels sale and consumption are not subject to greenhouse gas restrictions or fees, but the EU has two proposals in the works that would change that. One plan is to add maritime emissions to the EU emissions trading scheme (ETS), starting in 2023 with auctions for 20pc of CO2 emissions and gradually increasing to 100pc of CO2 emissions in 2026. This proposal applies to emissions generated during fuel combustion. The second proposal is for vessels to reduce their GHG intensities, starting in 2025 with a 2pc reduction and gradually increasing to a 75pc reduction by 2050, from a 2020 baseline. The proposal would apply to emissions generated during a fuel's life cycle.

During its life cycle, one metric tonne (t) of VLSFO emits about 3.734t of CO2, according to a study by the nonprofit International Council on Clean Transportation. CO2 traded through the EU's ETS averaged $70/t and Amsterdam-Rotterdam-Antwerp (ARA) VLSFO averaged at $573/t from 1-12 November, according to Argus data. Adding life cycle CO2 emissions cost to VLSFO would have increased its price to $833/t. By comparison, biomethanol, excluding CO2 life cycle emission cost, was pegged at $3,336/t in ARA average for the week ending 5 November, Argus data showed, four times higher than VLSFO with the added CO2 cost.

Biomethanol is produced from biomass and so creates fewer CO2 emissions than traditional methanol, which is produced from natural gas or coal.

Danish shipping company Maersk earlier this year said it is considering biomethanol as a way to reduce its CO2 emissions, in addition to considering lignin fuels, e-methanol, biodiesel and green ammonia. Fossil fuel-generated methanol in Rotterdam was assessed at $958/t average for the week ending on 5 November, Argus data showed, less than one-third of the price of biomethanol. Unless biomethanol prices drop sharply in the 13-plus months until January 2023 when the ETS scheme could be implemented, it is unlikely that most ship owners will embrace burning biomethanol. Paying for CO2 emissions through EU's ETS would be more cost effective than switching to biomethanol or fossil fuel-generated methanol at today's prices.

By Stefka Wechsler

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