- Sustainable biofuels are one of the few options in the world today that can really play a significant role in reducing the carbon footprint of shipping.
- Market players are increasingly eyeing hydrogen and ammonia as long-term fuels to meet the goals of 2050 and beyond.
- The fallout from the virus has depressed oil prices and so made conventional oil-based fuels cheaper, making bio-marine fuel still less competitive.
Dutch biofuels provider GoodFuels CEO Dirk Kronemijer commented biofuels are well-placed to meet short-term international emissions goals to slash greenhouse gas emissions and examine alternative power options, reads a Platts Insight.
Sustainable fuels on the lead
Kronemeijer told S&P Global Platts in an interview, “Sustainable biofuels are one of the few options in the world today that can really play a significant role in reducing the carbon footprint of shipping.”
The IMO is targeting a reduction in the carbon intensity of international shipping of at least 40% by 2030 compared with 2008 emissions and 70% by 2050. It is targeting cuts of annual greenhouse gas emissions from international shipping of 50% by 2050 compared with 2008 levels.
Market players are increasingly eyeing hydrogen and ammonia, which have zero-emissions potential if produced by green energy, as long-term fuels to meet the goals of 2050 and beyond. However, these fuels currently face limited infrastructure and new engines have to be developed and manufactured to burn these fuels.
Biofuels can be burnt in existing internal combustion engines and so require no major overhaul on the part of the existing fleet, making current investment plans for newbuilds easier.
GoodFuels biofuel
GoodFuels manufactures marine fuel and road fuel that is produced from certified feedstock labelled as waste or residue. The fuel is fully compatible with current engine and tank infrastructure, according to the company’s website.
GoodFuels’ biofuel eliminates between 80%-90% (well-to-propeller) carbon emissions compared to fossil equivalents, and is virtually sulfur free, while also substantially reducing nitrogen oxides.
“If you look at the next 10 years — we believe a large and disproportionate amount of [shipping] emissions reductions will come from sustainable biofuels, maybe even 70%-80%,” Kronemijer said. Over a longer timeframe, say until 2050 it will go down to 25%, he said.
“Our key advantage is that we have no infrastructural requirements and no upfront Capex, while biofuel can be blended with existing fossil fuels — a vessel can take on [biofuel] in Rotterdam, sail to the US, and come back on fossil again, so it is totally interchangeable,” Kronemijer said.
For now, biofuels occupy only a small part of the bunker market. Through 2019 2% of sales of fuel oil and 0.5% of distillates at the European bunkering hub of Rotterdam “concern biofuel bunkers” the Rotterdam Port Authority said on its website.
“The admixture percentages of these bunkers vary between 5% and 50%. The most common is 20%-30%,” the port authority said.
Sales of fuel oil as bunker fuel were 7.174 million mt in 2019, according to Rotterdam port authority data, implying bio-fuel oil sales of a still meagre 143,482 mt, according to calculations by Platts.
Cost of coronavirus
Cost-wise, bio-marine fuel is up to three times less than sustainable aviation fuel, Kronemijer said, adding that this is impacted by variables such as region. Platts assessed ex-refinery Northwest European sustainable aviation fuel at $1,443.737/mt on Nov 4.
A minimum cost of at least one third of SAF implies bio-marine fuel would cost at least $481/mt. By comparison, Platts assessed 0.5% sulfur fuel oil at Rotterdam at $310/mt delivered on November 4, 3.5%S FO at $265/mt, marine gasoil at $330/mt delivered and LNG bunker fuel at the port at $277.780/mt.
Owing to the absence of sulfur in its fuels, the IMO’s 0.5%S limit in marine fuel has been beneficial for GoodFuels. The limit came into effect on Jan. 1, 2020 and has supported the price of fuel that complies with the new sulfur cap.
By contrast, the coronavirus pandemic has not. The fallout from the virus has depressed oil prices and so made conventional oil-based fuels cheaper, making bio-marine fuel still less competitive.
A competitive market
Another source of potential pressure to the market place is competition from big players. For example,
- ExxonMobil’s first marine biofuel oil has been successfully trialed by global shipping company Stena Bulk on the sea, paving the way for further development and commercial usage of such low-carbon fuels, Stena Bulk said in a statement in September.
- Also, Finnish refiner Neste offers 0.1%S and 0.5%S marine biofuel.
The appearance of majors in the market does not threaten Goodfuels’ current niche. The larger oil traders occupy a different market segment from GoodFuels, Kronemeijer said. They aim for lower prices while Goodfuels targets sustainability, 80% its product is not blended with fossil fuel-based oil.
“I still think oil majors find that very hard to do we are a little ahead in terms of our product engineering,” Kronemeijer said.
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Source: Platts
