One of the biggest questions facing the tanker industry in 2021 is how decarbonisation can be paid for – and how the investors can be satisfied.
Stena Bulk of Sweden appears to have a clearer idea of the answer than most – it has just (Nov 2020) added a 3rd vessel to its order of methanol tankers, in a joint venture project with Swiss methanol producer Proman.
Tanker Operator asked president and CEO Erik Hånell how he thinks the financial sums can add up - and how the investors can be kept satisfied.
Mr Hånell’s perspective, he told us, is that, “I don't think anyone has the answer”. But if you (or your investors) believe that decarbonisation will happen, the next step is to set up some commercial options. “You have to follow quite a few pathways here at this stage, to be able to prepare yourself for what might come.”
“It isn't just one pathway, it is a few, it depends what angles you are taking on it.”
The conventional pathway is not really an option any more, he believes. “Would you build a traditional ship today which is run on fossil fuel? I’m sure there's speculators out there who would do it. [But] the high risk is that those ships would not be worth the value in 10 years from now, because of the situation we are seeing.”
Investors see there may be new technical developments and regulations which change the landscape, “maybe not 100 per cent in line with how the world looks like today,” he says.
“We have to find alternative fuels, alternative energy sources for traditional propulsion.”
“If it’s going to be ammonia, hydrogen, fuel cells, if its going to be methanol, or something else, remains to be seen. All of those should be explored.
But also, “we all have to work with what we see today.”
“One of the pathways we have chosen to take is methanol. That, I think, has a very strong potential going forward.”
Mr Hånell believes cost issues will sort themselves out. “When the world is hugely going for something, they will make sure not only that they develop it, but the cost will come down, otherwise they will not be able to compete. I would be surprised if we don't see a solution to that.”
It would be useful if there were regulations creating a cost to carbon emissions, so that it would no longer be cheaper to use conventional (high carbon) fuels.
“To have a fair competition, it has to be a global situation, it doesn't stop you depending on where you live. That's what I think is most fair.
“The risk is you see all kinds of local regulations, in the US, other ports will come with their regulations. That's going to be very complicated for a ship operator to work around.”
To help move maritime decarbonisation faster, Mr Hånell would like to see some firm prospects of how this will look like, what kind of calculations, and mechanisms this will use.”
“We have a situation where people have hesitated to order ships - because they don't know what to build.”
The requirements to make sustainability reports are changing every year, in terms of what you report and how you report. There should be a “generalised calculation and rules that actually apply worldwide,” he said.
“I would rather like to see them tomorrow, but it is important that they are well thought through. We had a number of [regulatory] decisions in the last 10 years that had been not particularly thought through for shipping.”
“We spend millions of dollars on things that are obsolete [by the time] you install them. Question marks are coming, are they really needed. It is very costly.”
Methanol project
The first announcement about the methanol project was made in November 2019, when Stena Bulk said its joint venture company with Proman Shipping of Switzerland (“Proman Stena Bulk Ltd”) was building methanol tankers.
It had finalised an agreement with Guangzhou Shipyard in China to build two "IMOIIMeMAX" "methanol-ready" 49,900 dwt tankers, Stena ProPatria and the Stena ProMare, with the first due for delivery in the beginning of 2022.
Proman Shipping is part of Swiss integrated industrial group Proman, which is the world's second largest methanol producer.
These vessels are "amongst the most energy efficient mid-range tankers in existence", Stena said. They will be fitted with dual fuel engines and capable of running on methanol fuel. Stena said it offers a 95 per cent reduction in sulphur oxide (SOx) and particulate matter, and a 60 per cent reduction in nitrogen oxides (NOx) compared with regular marine fuel. It is able to comply with low sulphur fuel requirements under IMO’s 2020 regulations.
Each vessel will use 12,500 tonnes per annum of methanol as a marine fuel, significantly reducing emissions in their normal commercial operations compared to conventional marine fuels.
The two ships will be 50:50 owned by Stena Bulk and Proman Shipping, and on long term charter to Proman Shipping.
This is a way of working Stena is comfortable with, where each party has “skin in the game,” he says. “It helps companies to move ahead and bring everything forward. Especially today, the cooperation and collaborations in this world are more important than ever.”
In November 2020, Proman Stena Bulk finalised an agreement to build an additional vessel, Stena Prosperous. The Stena Prosperous will initially be utilised by Stena Bulk within their traded pool of ships for a period of two to three years.
The vessel will therefore be the first methanol dual-fuel powered ship traded on the chemicals / Clean Petroleum Products (CPP) market by a conventional shipowner without an active contract to a methanol producer.
After this initial period, the Stena Prosperous will then enter into a long-term time charter with Proman Shipping.
Availability and cost
Stena said in April 2020 that methanol fuel was available in “more than 88 of the world’s top 100 ports.”
The ships are “dual fuel”, so they can be run on low sulphur fuel oil if they have to, or some other new type of energy. But the company anticipates that methanol availability will increase.
“I would say it is like LNG propulsion, 10 years ago. The bunker stations were simply not there.” Today, “you feel pretty confident you can find places.”
There are a number of “e-methanol” projects going on around the world, which use CO2 reclaimed from being emitted into the atmosphere to make the methanol (perhaps from hydrogen from renewables). So the methanol becomes a net zero fuel.
Another interesting factor of methanol fuel is that you can get more power from the engine by adding water to it. By adding water, you reduce the charging air temperature. The water absorbs heat as it turns from liquid to a gas. This means you have a higher air charge density, so more oxygen is available for combustion. And when the water turns into a gas, it expands, giving extra torque on the piston.
The last step of process of manufacturing methanol can often be removing water, so if this does not need to be done, this can “save quite a lot of energy,” he said.
So far, there have not been any suppliers providing methanol specifically for ship bunkers, so we don’t know how much this would reduce the costs by.
“On our ships we can test different things going forward,” he says.
InfinityMAX
In March 2021, Stena Bulk unveiled a concept design for a ship called InfinityMAX. With this ship design, large containers, which can carry either liquid or dry cargoes, are attached to the deck of the ship. For movement over smaller distances, these containers can float, and so be towed, by themselves.
A tank could be left in the port, depending on the best logistics arrangement. So it would only need a crane to lift it onto a ship, no pumping would be required.
Stena has been working on the project for 2 years. It builds on the IMOIIMAX parcel tanker design, which has 18 cargo tanks of 3,000 m3 capacity.
“I put Stena Teknik on it (Stena’s department of maritime technical experts) and all the young guys in the company. The oldest is 32 years old. They put their heads together, this is the concept they came out with.”
“It is a definitely a prototype, [to] a little bit push the boundaries and make people think.”
“The major reason we put it out there is to push ourselves [to see] what can be done with ships today.”
“With this concept you have specialised tanks that you are then using again and again.”
The company is working out the best way to make all the compartments connect to each other and to the ship, in any weather.
The moveable tank idea might be “something we can already install on our existing ships,” he said.
It would probably require more shipping companies to take interest before this could become something which is in general use. “We can easily see that it is very difficult to build up that logistic chain with only one company, this has to be a global development,” he said.
As a design for a ship which can carry both dry and liquid cargoes, it continues the idea of the “OBO” or “oil bulk ore” vessel, a common design in 1955 to 1980, as a ship which could carry any bulk cargo, if the tanks were cleaned in between.
“You can pick up the slack from that type of ship. You cannot really say that the OBO ship was a success at the time,” he said.
Culture
So why is Stena Bulk able to do things which no other company can do?
“That is the culture we are having,” he says. “We want to be in the forefront for the development.
We are not succeeding every time. We are learning a lot every time we fail as well. That is definitely the approach we like to have. That is how we like people to look at us as well.”
Mr Hånell’s advice is “don't be shy, think about what is out there, use what kind of input you can get not just from our industry but from the rest of the world as well.”