Shipping Decarbonization Through Carbon?

Could carbon capture and storage offer a viable solution towards shipping’s decarbonization? That seems to be the “million dollar question” these days. In its latest weekly report, shipbroker Gibson said that “recently we wrote about the potential of onboard carbon capture and storage systems (CCS) as a means to decarbonise shipping. Whilst CCS technology could allow shipping to carry on burning cheaper fuels, and meet emerging environmental legislation, it also offers a new source of cargo demand for the industry, which could over time help offset lost demand from a declining trade for conventional hydrocarbon cargoes”.

According to Gibson, “unsurprisingly, there is significant interest in the sector, with some new projects under construction and significant design and feasibility work underway for potential future projects. Currently, North America leads the way, accounting for approximately half of the installed, under construction or planned CCS capacity. Europe then accounts for around 35% of planned projects, which is unsurprising given the region’s stricter environmental targets. Although Asia has significant potential, currently planned projects amount to just 19.2 mtCo2/year, less than 10% of the global project pipeline”.

“Whilst the US and Canada lead in terms of CCS projects, much of the activity will be onshore, reducing demand for shipping; however, in Europe with most projects offshore under the North Sea, shipping will be in much greater demand, either for direct injection via floating infrastructure, or shipping to dedicated onshore injection facilities from across Europe where subsea pipelines will transport captured CO2 into depleted oil and gas fields”, the shipbroker said.

Gibson added that “perhaps one potential issue however is that, if many of the projects currently undergoing feasibility studies are to get approved, there could be a shortage of shipping capacity available for when the projects are commissioned. Currently, just two CO2 carriers are on order and will be dedicated to the Northern Lights project, which commences in 2024. Given current newbuilding lead times and uncertainty over designs, projects coming onstream, which require shipping capacity in the 2026 period, could find themselves short of specialised tonnage, if orders are not placed soon. For shipowners, this could create an opportunity for a speculative order, however, with most projects still in their infancy, the risk of ordering the wrong size/design cannot be ignored. Yet, with yards researching designs which can carry ammonia and LPG, as well as CO2, it may not be long until shipowners can mitigate the risk through cargo flexibility, giving some owners the confidence to take the plunge into this burgeoning market, whilst also (potentially) improving their ESG credentials”.

“From the perspective of CO2 project developers, it is not inconceivable that projects and infrastructure could be designed around the specifications of any vessels that are ordered, particularly if yard availability remains tight. Markets such as the US and Europe, where significant CO2 storage is being developed, could also import CO2 for storage from outside the region, boosting longer haul demand and requiring larger vessels to facilitate economies of scale. Undoubtedly there is a future for CO2 shipping, and whilst technical and regulatory hurdles need to be addressed, there is a clear will at government and corporate level to develop CCS as a solution to combat climate change. If projects are to be developed by the late 2020s, then time is running out to secure dedicated vessels, which could create an opportunity for those brave enough to order ahead of the crowd”, Gibson concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide