The CO2 shipping industry is poised for significant growth – if it can overcome deficits in shipbuilding capacity, regulatory frameworks and operational knowledge
Addressing shipbuilding capacity shortages, defining optimal pressure parameters, closing operational knowledge gaps and streamlining regulatory frameworks are essential for sustainable growth in CO2 shipping. What is not in doubt is the sector’s vast potential, spearheaded by projects like Northern Lights, and underlined by a market expectation that the first mid-size, low-pressure carrier orders will materialise in the coming months. The pressure at which the gas is stored inside the carriers will play a crucial role in determining future market dynamics. Lower pressure, particularly around 8-9 bar, will become the main factor influencing the industry, says Lloyd’s Register global gas segment director Panos Mitrou. "Initially, a mid-pressure approach at 18-19 bar was adopted due to its compatibility with shore terminals and storage facilities. However, this choice poses constraints on ship design, resulting in smaller cargo tank volumes and increased ship weight, ultimately compromising cargo-carrying capacity." The adoption of lower pressure has opened opportunities for building bigger ships. "These larger vessels, with a capacity of around 20,000 to 30,000 cubic units, have been developed and received preliminary approval. This means in the future, we can expect even larger CO2 shipping is at a critical juncture carriers to be built and put into operation,” adds Mr Mitrou. The ability to scale up ship sizes is significant because it allows for more efficient transport of CO2. With larger vessels, more CO2 can be transported in a single trip, reducing the number of journeys needed and increasing overall efficiency. This is important considering the scale of CO2 transport required to address climate change and implement carbon capture technologies effectively. Mr Mitrou is equally clear that to realise this potential, the industry must confront various operational issues that have yet to be tested in real-life scenarios, including ship-to-shore transfer. To mitigate investment risks, shipowners and investors are seeking vessels with dual functionality, capable of transporting not only CO2 but also LPG, ammonia and other products. Building ships that are operationally flexible, compatible with multiple cargoes, and competitive in the CO2 market requires a comprehensive understanding of cargo composition, loading and unloading operations and containment systems. These aspects are still being explored and developed as the industry strives to unlock the full potential of CO2 shipping. A related concern is finding the right balance between the size of the tanks, the ship’s overall cubic capacity, and its propulsive power. This balance is essential, because every tonne of CO2 emitted during transport has a direct impact on the cargo being carried. The more CO2 emissions produced during transport, the more it offsets the amount of CO2 that can be effectively delivered to its destination. While no turnkey solution currently exists, Mr Mitrou believes the focus should be on ensuring the availability of ships capable of carrying CO2 when the sector begins to flourish. The timeline for the transition from LPG to CO2 carriers remains uncertain. While ordering CO2 ships within 2023 seems probable, the definitive shift may take up to five years. These challenges are compounded by the lack of suitable shipbuilding slots at suitable shipyards. The upshot is, the fleet struggles to keep pace with liquefaction capacity projections, resulting in gaps between shipping supply and demand which can be something of a red flag for potential investors. “For vessel owners and their financiers, devaluation of ships and the fear of stranded assets are probably the main factors likely to keep them up at night,” says Mr Mitrou. To meet these concerns, the industry is exploring solutions aimed at prolonging the usefulness of ships and providing investors with confidence in their long-term viability. Key among these are onboard carbon capture systems and methane abatement programmes. Methane abatement initiatives are gaining traction globally. Mr Mitrou is in the forefront of these as chairman of the Methane Abatement in Maritime Innovation Initiative. This is a cross-sectoral initiative formed in September 2022 that aims to reduce methane emissions across the maritime industry. Its membership has more than doubled since launch. Amid the ambitious vision for the sector, regulatory frameworks pose significant hurdles. The London Convention and Protocol, which entered into force in 2006, aims to prevent marine pollution through the dumping of waste. There is an amendment in place to allow cross-border movement of CO2 which is agreed, but not ratified, so not in force. The risk is countries will enter into side agreements (bi-laterally) to circumvent the fact the amendment is not ratified. In a similar vein, the EU Emissions Trading System does not allow the free movement of CO2 in common with any other commodity. There are grounds for optimism. Last year saw the first cross-border CO2 shipping and storage deal. The agreement between Equinor, Shell, TotalEnergies and Yara foresees the transport of CO2 captured from Yara’s ammonia production in Norway to a storage site in the North Sea. The deal is touted as a vital template for future cross-border ventures.
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