The Sea-LNG coalition, which spans the entire LNG value chain, has completed its initial analysis of the IMO Net-Zero Framework following MEPC 83.
Using the independent Z-Joule cost of compliance calculator to assess the commercial implications of the new regulations, under the Net-Zero Framework, investments in LNG dual-fuel vessels offer shipowners a significantly shorter payback period than methanol, ammonia or VLSFO. LNG ships can also give shipowners a commercial advantage through fuel optionality and access to widespread established infrastructure.
Sea-LNG considers that the complex IMO Net-zero Framework now requires further detailed analysis and feedback from the industry, as well as coordination with EU initiatives and the specific concerns of other member states, prior to formal ratification later in 2025. There are critical details surrounding the IMO Net Zero Fund and the zero and near-zero-emission fuels (ZNZ) Reward Mechanism that will not be addressed before 2027.
Sea-LNG’s research examines the investment case for a 14,000 TEU container vessel operating a trans-Pacific route from Japan to the US West Coast. It compares LNG, ammonia and methanol dual fuel vessels against a vessel fuelled by VLSFO over a 15-year investment period.
The total cost of the different fuel pathways is driven by Capex, the carbon intensity of the fuels, and the fuel price. For both fuel price forecasts and carbon intensity values, Sea-LNG used assumptions from DNV’s analysis (MEPC 82/INF.8/Add.1) of the candidate mid-term measures discussed at MEPC 82.
Both high-pressure and low-pressure LNG dual fuel engines offer a relative payback period of between 4.5 and 5 years compared with VLSFO because of lower compliance costs due to LNG’s lower GHG fuel intensity (GFI). Methanol and ammonia fuelled vessels were found not to pay back over the 15-year investment horizon.
Sea-LNG also modelled the investment case for a 14,000 TEU containership operating on the Rotterdam-Singapore trade route using the same fuel price forecasts. In this case, the vessel is subject to both IMO and EU decarbonisation regulations – the latter for 50% of the voyage. Here the payback for LNG fuelled vessels was reduced to about 3.5 years mainly due to the effect of FuelEU Maritime in the early years of the analysis period.
Steve Esau, Sea-LNG COO, said: “While many details need to be decided, the IMO Net-zero Framework provides a clear basis for maritime decarbonisation and should, in principle, enable all fuel pathways – be they LNG, methanol or ammonia – to compete on a level playing field. For this to continue, it is imperative that the ZNZ Reward Mechanism is designed in a fuel agnostic and technology neutral way.”
Peter Keller, Chairman, Sea-LNG, added: “The industry continues to make major investments in the LNG pathway. These ships can use LNG, bio-methane and e-methane, and reduce greenhouse gas emissions and cut local pollution today. The IMO position, as well as the EU regulations, both affirm the pathway is heading in the right direction and offers a practical and realistic route to compliance, starting right now.”
This research is the first in a series of costs of compliance analyses Sea-LNG is developing using the sophisticated Z-Joule calculator. The report can be downloaded here.
Image: Steve Esau, Sea-LNG COO (source: Sea-LNG)
