Chemical Conversations: Methanol Market Puts-and-Takes

Cassidy: Welcome to the Methanol Market Puts-and-Takes podcast, part of Argus Chemical Conversations podcast series. Cassidy Staggers here and this month I'm excited to welcome a guest speaker from Dan-Bunkering, Kasper Christiansen. We're here to talk all things bunkering, infrastructure, and of course, how methanol and low-carbon methanol are starting to emerge as important aspects of this picture. 

First, Kasper, can you give us an introduction to yourself and Dan-Bunkering? 

Kasper: Thank you very much, Cassidy. Thank you for having me. I'm very excited to be here. I have been with Dan-Bunkering since 2010. Dan-Bunkering is a Danish company, and I am Danish, so I also started working in 2010 in Denmark. Since then, I have then been in Asia, Singapore, Vietnam. I've been to our office in Connecticut and now I'm based in Houston since 2021. The entire time has been with the conventional fuels, starting out with the good old high sales for fuel oil, four and a half percent. When I started, I had to focus on four different kinds of products. Now with the new regulations and new market and new world order, we are looking into a whole plate of many, many kinds of fuels. 

Dan-Bunkering has a long history prior to me. It was founded in 1981, also in Denmark. Since '81 and until this day it's still a family-owned company, owned by the Østegård Nilsson family. It started out as a small company. It ventured out of a ship agency company and then started then supplying fuel for these ships calling the small Danish ports. And then it just evolved offices worldwide and the global operations back-to-back trading physical supplies in the group and now also methanol and other related products. 

Cassidy: Let's talk about some of that. What are the highest priorities in the shipping and infrastructure realm right now globally that you guys are seeing? 

Kasper: So, the highest priority, you said it yourself, you just mentioned infrastructure, right? I mean, first, there is a reason why we are sitting here and even recording this. The whole reason is that the world is changing, and regulations are changing, right? Regulations are changing that we must move into a newer fuel or into newer fuels, low carbon fuels, right? That whole thing started out in the European Union when they introduced the EU ETS where you must buy an allowance and then you are allowed to burn fossil fuels in Europe, going to Europe or leaving Europe. 

Then beginning of this year, another set of rules came into place and that was the FuelEU maritime, which is completely different. Now they're forcing everyone to lower their emission, lower their greenhouse gas intensity, and to a level where you must consume some sort of biofuel, renewable fuel, and lower carbon fuel, methanol being one of them. And that whole issue or the biggest challenge that we have, that is the infrastructure. Since well way before my time, we have been supplying the conventional fuel, the fossil fuels, residual fuel and the distillate fuel. Now we must investigate starting out with FAME, right? A very well-known bio product or bio component that we are then supplying that must come from a feedstock and that must come from an approved feedstock. You must think that the business we're in, the whole bunkering business, that's a 300 million tonne a year industry. We cannot produce enough FAME to cover that whole thing, right? We also must investigate other products and then we're looking into methanol. 

Cassidy: So as far as progress for infrastructure globally, where would you put that right now as far as what it needs to be to be able to meet some of these policies and regulations that we're looking at in the next five or ten years, let alone out to 2050? 

Kasper: We are at the, it's still baby steps, right? We're in the baby stage now. And if we are looking into methanol, right, if we just take that as our product basis, that today's subject as well, where do we have, we need the methanol produced, right? We have a lot of methanol out there, but most of it is fossil methanol. We do need, it's grey or it's brown, but at least it's made from a fossil feed, right? We would need a green or an e-methanol, which is a very low carbon methanol, made from approved and certified feed stocks, like the sun being one of them. 

What comes first now, is that the chicken or is it the egg? We have major shipping companies out there that say, hey, we want to use methanol, right, so we can reduce our carbon footprint, and we can live up to the regulations that the EU has set in place. And then they will come to a company like us and say, hey guys, we need methanol. Yeah, that's fine. Well, first, we do not produce the methanol. We need to go out and find someone who produces the methanol, and we can find someone that is, they're producing, it's a tiny, tiny percentage, right? We're talking a few hundred thousand tons a year of low-carbon methanol that's being produced globally. That's worldwide, I mean. Then once that's produced, then we also need to find a way to have that delivered to a port, because it's not produced in a port. It's often, more than often, it's produced inland in the middle of the U.S. or in the middle of China, but not a very convenient location. We must move it from there to the port and then we must supply it. We need equipment that can supply it. Imagine the challenges that we have, maybe customers, let's say it's in Singapore, they want to burn methanol, but how much do they really want to burn, right? Or how much can they really consume? 

Maybe we can supply it. But is it enough if we must take on a time-shutter tanker? Can we use that only for methanol and then make up for it? Or will we just put money into a big black hole, right? You must find ways to also be able to use your equipment for other things, because someone must pay for all of this in the end, right? Methanol is already expensive. This low-carbon methanol, it's very expensive. The energy density, right? So that's a major problem. You need twice as much and it's already way more expensive. So luckily for everyone, the major shipping companies, they have said, we are willing to pay. They mentioned some numbers. I'm not going to say them here, let them do it themselves, right? But they mentioned some numbers that sounds, okay, this is positive. That's at least a positive start. But the whole infrastructure must be built for every single project. We can't just go and say, we're going to build the infrastructure everywhere now. It's project based. 

Cassidy: What would you say are kind of the key, like, ports or locations where you see the infrastructure growing the quickest or maybe, you know, the first stages out of the baby steps? What ports would you say that those are? 

Kasper: Singapore, obviously, right? I mean, the MPA, so the Maritime Port Authority of Singapore, they're very progressive, right? They are, even though Singapore is very far from the EU, of course, there's a lot of shipments going into the EU, but they're really on the forefront of this one. They do say, they also want to, they're inviting people to lead these projects, right? They want low-carbon methanol to be supplied out of Singapore, for example. 

Singapore is, as far as I know, of course, I would say in EU, right, there are other supply methods that can be done where you're talking maybe a little bit lower quantity, where you can use other supply methods and just a big tank, right? So that's possible. My initial thought here, that's Singapore. 

Cassidy: I know we talked a little bit about EU ETS and FuelEU. How would the impending IMO regulations that are hopefully going to be released later this year, how would that kind of fit into that? Is it just going to enhance it? Is it just going to maybe modify the strategy of the infrastructure? Or how do you think that will look? 

Kasper: If we are looking at the concept of FuelEU maritime being adapted by the IMO to be a global concept and a global regulation, then it will, of course, be a big push to, first, shipping companies, right? Because now it means that now you must live up to that greenhouse gas intensity wherever you are. That means wherever you are, at some point doing your trade, you will need to burn a bio or renewable fuel, which could be methanol. It will speed up the whole process. That is absolute guarantee. 

There was one of the CEOs for a major container line was just out saying that he sees it as being basically the only thing that will really move this process of us going from fossil fuels into a low-carbon fuel. At least it will speed it up, right? And it will put some pressure on many of the producers out there. There are many, many major companies that are producing gray methanol, fossil methanol at the moment, but they are not in a stage where they are willing to change and then start producing green or e-methanol because maybe they don't believe the demand is there yet or they don't really... that's also a challenge, right? We don't really know when the demand is really going to pick up. When are you going to put your money into those projects to do it? Right? I mean, it's very, very difficult. 

Cassidy: I know you mentioned kind of there's some leading shipping companies. We talked about Singapore. Any other, like, companies or locations kind of stand out to you as, like, doing anything particularly interesting or innovative for their ports or producing of the methanol? 

Kasper: I don't know if I'm going to mention any specific ports or locations. I mean, without this being one big advertising, I do think that a company like ourselves, we have really invested heavily on training staff that are in the group, also hiring a big team of external experts who is now full-time employees at the company to build this up from inside and out, to make the partnerships with the already existing producers. But me for a few years, I've been involved in all of this. I've seen a lot of smaller kind of startups coming into play when you're talking e-methanol, right? They see an opportunity or it's, you know, I'm not an entrepreneur myself. I haven't started anything as such, but some of the people I spoke to, they said, well, it's a coincidence, right? We started something and then we just suddenly ended up by having the capability of producing methanol. 

Cassidy: Right. They call them boutique, methanol producers. 

Kasper: But they're kind of all over the place, right? I met some in U.S. 

Cassidy: A lot in Europe. 

Kasper: A lot in Europe. Me, myself, I'm based in Houston, right? I'm not that involved with the projects in Europe. Don't have as much knowledge on those as I do of many of the ones in the U.S. But I do know that U.S., the country U.S. and China will be going forward will be big and important players in this because of the biomass and everything that is available here and over there. 

Cassidy: More to look out for, I guess, as we're all kind of seeing how this starts to play out with EU, ETS, and now FuelEU and, you know, working our way towards the production and the logistics side. Great to hear about Dan-Bunkering being able to, you know, bring these theoretical thoughts, these ideas or these partnerships between the shippers and the producers, and then kind of being like the final leg to the execution to making that happen. 

Kasper: I mean, we realized early on that many of the companies that are energy companies also that are going to produce e-methanol, they know how to produce it, but they don't know how to get it from that point of production to anywhere else. So that's where they reach out to us, right? And we do together with our parental company, we do engage in many of these partnerships where we do take off agreements. We help them build that supply chain. We also do that for other products such as FAME, for example, right? Where that is being produced inland U.S. and then we help having that transported and stored and everything into the U.S. Gulf. There are some ongoing projects there. So, we really do enter those partnerships. 

Cassidy: I think that's great. I think the methanol world is really starting to blossom of, we need to understand marine fuel and the marine market now and we need to understand a lot of the hydrogen pieces and the biofuel pieces. It's not, I think if methanol was ever siloed, I feel like it's really, the walls are coming down and I think having cross collaboration with other companies that are experts in that area, right? If you want to know about shipping, you need to connect with a shipper. If you want to know about logistics or methanol, you need to connect with the appropriate, I think just experts in those areas. So, it's really cool to see all of that starting to really come together. 

Kasper: That's a good thing. Coming together. Many more companies coming together, right? You can say you have a few of the big container lines. 

Cassidy: So, we have to. 

Kasper: There's a few of the big container lines for the box carriers. They can handle some of that supply chain if they team up with a good producer, right? But 99% of the companies, they need someone to help build that. 

Cassidy: Kind of like taking a step back, we're obviously talking a lot about methanol, which has been great, but looking at it through a different lens, there's a lot of other low-carbon fuel alternatives, a lot coming up. A lot of them get traction and there's pros and cons of kind of every different option. How do you see methanol, low-carbon methanol, working alongside of LNG, bio-LNG, ammonia, B24, Yukome, things like that? Where do you see the methanol in that picture? 

Kasper: It's a part of the picture, and it will remain a part of the picture. As I said before, we are the conventional bunker fuel industry. That's almost 300 million ton a year industry. I said this when I've been speaking at the other methanol conference. I said, do you want to supply methanol instead of the bunker fuel? I said yes. Then go out and produce 600 million tons of e-methanol annually, right? Then you'll be able to do it. There's no other thing. When you mentioned B24 and Yukome, that's the FAME part, right? There's not 300 million tons of that out there that we can use. That also potentially must be certified, right? The LNG, well, you have two types of LNG mainly. You have the normal fossil LNG, but then you also have the renewable energy. And for the future, it is the renewable energy that we will need. Then the question is, how much can it bring down the greenhouse gas intensity, right? Can it really bring it down to the level that we will need? For now, it can. But going forward, that's a question. 

Then we have methanol being next in line. FAME, the supply chain is the same. It's a drop in fuel, right? We can use the same equipment and everything supplied right now. LNG, obviously, that's a gas. It's a completely different, but it is a bigger market right now than the methanol is. Methanol, I see as the next thing, which we are building right now, and it's coming. It's a lot more focused on it. Then I know there's a lot of talks about what about ammonia when is that coming in, right? Was it 11 or 13 new ammonia built that was ordered in 2024 or something like that, right? Very low number. The engines are not yet that advanced, right? I think we're still looking at a first generation, maybe where you have the other engines out, but a third generation. It's highly toxic and everything. But it will probably be a part of the mix, right? And then you have hydrogen in somewhere and all of this as well, right? You have these four kinds of products that will be there. 

Remember, for many years still, the conventional fuel will still be a part of it. Because every time you have FAME, it's not a lot of 100% FAME, which is renewable diesel that we are supplying. You mentioned yourself B24, where you have a 24% gas oil or VLSFO or high sulfur fuel that is in the mix with the.. 

Cassidy: The whole blending aspect. 

Kasper: I mean, 24% of FAME in the mix with high sulfur, VLSFO and gas oil, right? We will still see VLSFO. We will still see high sulfur fuel. We will still see gas oil for a long period yet. But we will just see many more products coming into the mix. 

Cassidy: It sounds like methanol is maybe kind of like, you know, middle of the pack or something like that as far as an option. But there's a lot of positives as far as the ability to produce and the global network and, you know, the safety aspect and things like that. Is that correct in what I'm hearing? 

Kasper: When you say middle of the pack, I just want to say they are in the middle of the pack right now. And that is because of, first, the demand and then also the ability to supply now. Later, they're going to be... I don't know what you're trying to be, but they're going to move up in the pack, right? If you have an e-methanol, you can really reduce the greenhouse gases by a lot, right? So we will be able to use that for many, many more years to come. 

I'm going to say they're middle of the pack basis, the timeline, right? That's maybe where they are in the middle of the pack. That is an opinion, right? I see them to be in front of the pack as we move forward. Especially if we can get IMO to adapt the same regulations as the EU have done with the FuelEU, it will produce some of those major, major companies that are doing many more things than just methanol, right? To go and produce e-methanol as well. 

Cassidy: We've talked a lot about policies, options, the landscape of the marine fuels and decarbonisation. At the end of the day, what do you feel like are truly the biggest hurdles? We talked a lot about infrastructure, so if you want to circle back to that, what are the biggest hurdles right now in 2025, 2026 that we've really got to jump over to start making larger strides? 

Kasper: First, we need the ships who can burn it, right? Because I know there are methanol ships. 

Cassidy: There are hundreds of methanol ones coming, yeah. 

Kasper: Yeah, exactly, right? They're coming. They're coming. Obviously, they're all dual-fuelled. First, because you need a pilot fuel, right? Methanol. But you also... If I had a ship, I also want to make sure that if I send it from port A to port B, I want to make sure I can get a fuel that I can burn. There will still be dual fuelled. A lot of the dual-fuelled ship that has been ordered, they don't. My understanding is that a lot of them, they just made-up space, so they are ready to put in the whole methanol part of it, right? But with the number we are seeing that are being built now, with the numbers that are on orders, in five years' time, we will need between 9 and 10 million tons of methanol if they were all to burn methanol, right? We are nowhere near to have that kind of capacity from any of the low-carbon methanol. I'm only talking low-carbon methanol, right? Because we have 100 million tons of fossil methanol out there. 

Cassidy: Yeah, the reproducers get us more than 10 million tons. 

Kasper: A lot of that is being used in the production facilities, in the industry we know today, right? But when I'm talking, it's only low-carbon methanol, because that's really the only thing that is relevant. 

Cassidy: So, you said, nine, 10 million tons in the next five-plus years. What do you see that we're going to talk about biggest hurdles, near-term, but curious what your thoughts are. Like, what could that number possibly look like in 2045, right? I think we want investment for the future in this type of complexities of the logistics in the carbon intensity policies. They need to guarantee into the future, so what would you say 2045 might look like?  

Kasper: But it's going to be higher. It's going to be a lot higher, right? As I said, right, you want someone to replace a 300 million tons a year industry, you can't do it with FAME alone, you can't do it with ammonia, you can't do it with renewable gas alone. You need something else. So, it will just go up, right? It seems like it's easy to handle. So, I see it as a much more popular alternative to what we have right now. 

Cassidy: Do you think we're on pace to meet that 10 million? 

Kasper: No, we're not at all. 

Cassidy: We've got a lot of work to do to get that happening. 

Kasper: Some of the producers, they have got a lot of work to do, right? I mean, the positive side of this. The people who have, as I just said before, right, who has a methanol ship, it's always a dual fuel ship. They will be able to get their fuel if it not being methanol. They will still be able to get that no matter what. But no, we are not there at all to get 10 million tons. And that is where the hurdle come in, right? You said it many times before, what is the big hurdle? Well, the hurdle is that if you don't have to burn a low-carbon fuel, then why would you do it? Then you can sit there and say, oh, well, I want to show everyone that I'm lowering my carbon footprint, we are doing everything we can for the environment. And that is very, very good. And we... Everyone as an individual, as a company, we must investigate lowering our carbon footprint. But at the end of the day, a company must make money, right?  

Cassidy: I didn't want to bring up the pricing dynamic aspect, but it is an important hurdle. 

Kasper: But it's very important, right? If I'm sitting here, Cassidy, and I said, my company, I will burn only e-methanol. And I'm competing with your company. You do the same as me, but you're saying, I'm just going to continue burning high sulfur fuel, right? 

Because not even fines, because now we're talking in a location where you don't have to, right? Let's say it's just over here. There's not even fines or allowances or anything. But you're just burning a product that is costing a fraction of what I'm burning. Of course, I can't compete with that then, right? It doesn't sound good to say in these days, right?  

Cassidy: But it's a reality. It's something we must address. 

Kasper: Yeah, of course we must. So that's why regulations, like in EU, all the ships trading intra-EU, they know that they are competing on the same terms, right? Then of course, EU, they've also put pressure on themselves and on the companies in the EU by saying, hey, we are putting up these EU ETS. We are putting up the FuelEU maritime regulations, meaning that maybe for some European companies. It will be a little bit more difficult for them to compete with companies that are outside of the EU, right?  

Cassidy: We've got to be able to pass the cost on too, to whatever they're making, they'll pass to go on a ship. 

Kasper: Of course, right? But then again, the one is being passed on to, will then maybe go and say, hmm, do I have other options out here in my supply chain? You can say it's a necessary gamble that the EU have done, because I don't think there's many people that will argue that we don't have to change our behavior. That goes for you and me as a person. It goes for companies. It goes for everything out there. That is why, if we could get the IMO to adapt the same kind of regulations, so it will be the U.S., the North and South America will compete. 

Cassidy: Well, there'd be that global push for sure. 

Kasper: It will be the global push, but everyone, no matter where you were, must live up to the same requirements. That would be perfect. So, I mean, let's see what the EU, what the IMO is coming up with, right? I mean, there's a lot of talks of that, so I guess we will know. 

Cassidy: We'll see what they decide. 

Kasper: Shortly. 

Cassidy: A couple of years, I think, before that's implemented.  

Kasper: I mean, we had, I wouldn't say similar regulations before. It was the European Union that started with SECA, so the Sulfur Emission Control Area, right, where you had to lower your sulfur in the product you had when you were in EU waters. Later, it was then adapted on this side of the pond. It could also be that the government here or Canada, in North and South America, will adapt it on their own free will, so to say, right? Or maybe it will be pushed down on them by the IMO. 

Cassidy: So, if anybody wants any more information, or how do they get in contact with you, or learn about more of what you and Dan-Bunkering are doing globally? 

Kasper: Any time of day, right, they reach out, and let's have a talk about it. I think, and even if you're not reaching out to me, I think if I'm a ship owner out there, if I was a ship owner out there, I would definitely reach out to the fuel supplier that we are currently using, or maybe that the time shutters are using, have a proper talk about, no matter where you are in the world, because your ship, at some point, they're going to go into EU, right? Most of them. Many of them, at least. That means, have a talk with your fuel supplier. How can we live up to the FuelEU maritime? When we're just talking about it, it sounds like it's very, very harsh. But it's not that bad. The difficult part is all the calculations of how do I reach it, but I don't want to overreach it as well, I guess, right? But I must reach it. 

You also must consider that, because you mentioned before fines, right? In the EU ETS, you are still allowed to burn fossil fuels in the European Union, but then you just must buy an allowance equal to your emissions. That is not the same with the EU ETS. You can pay a fine, but the word itself, it says it, right? It's a fine, so it's not okay. You've done something you're not allowed to. If you do not live up to the greenhouse gas intensity that the EU has set on the FuelEU, then you will be fined. It's a heavy fine. But then you're non-compliant. If you're non-compliant for two years in a row, you also risk being sanctioned, so to say, from the EU, right? I have read some charter parties that I received from time charters, where the owner wrote that the time charter is liable for paying the fines under FuelEU. And nowhere in that CP did it say, you must lower it by using alternative fuels such as FAME or anything, right? I'm kind of worried if there are people sitting out there thinking, hey, we can just pay the fine and then move on. Well, you can't, because... 

Cassidy: It will catch up with them. 

Kasper: It will catch up with them, and it's going to catch up with them in 2027. Then they will know. I really urge all time charters, everyone that is buying fuel or owns a ship, contact us or contact your preferred bunker fuel supplier, and we will help you manuever, guide you through these waters, right? 

Cassidy: Thank you so much for joining and letting us just ask you all the questions about bunkering and marine fuels. It's been very interesting for me. When I leave conversations with you, I'm just like, wait, what did he say? Feel free to reach out to Kasper or Argus Methanol Services if you have any questions. 

This series is a presentation of Argus Media, a leader in market reporting and commodity pricing information. For more details on all things methanol, visit argusmedia.com/methanol.