IMO 2020 opens opportunities for laggard methanol industry

10:30 AM | February 10, 2020 | Francinia Protti-Alvarez

The shipping industry’s quest for cost-efficient routes to IMO 2020 fuel compliance could be a bright spot for the methanol industry, which is struggling with slowing growth. Marine fuel applications—for deep sea traffic and inland navigation—could provide opportunity to grow and develop niche demand segments. The relatively stable prices of methanol, as well as existing port infrastructure, offer the shipping industry advantages vis-à-vis crude oil and LNG. With additional IMO regulations facing the shipping industry, converting to methanol could be a good investment.

Currently, energy (including fuel) applications represent close to 40% of global methanol demand of s about 83 million metric tons/year (MMt/y).

“The global shipping fleet consumes 300350 MMt/y of diesel bunker fuel. If methanol captured just 5% of the marine fuel market, methanol production capacity would need to double to meet the demand,” says Greg Dolan, CEO of the Methanol Institute (Alexandria, VA).

For the shipping industry, the cost of using natural gas-based methanol is an additional incentive. “Natural gas is the primary feedstock for methanol production, and its price is not as volatile as the price of oil. This reality could help the methanol industry expand its share of energy markets,” Dolan adds. 

Methanol and marine gas oil (MGO) have, over the last seven years, alternated at being the most cost-effective marine fuel choice, according to Dolan. Norway’s Waterfront Shipping runs its nine-vessel fleet of chemical tankers on methanol. 

These duel-fuel capable ships have accumulated 60,000 hours of operation and can run on methanol or any diesel bunker fuel. This type of vessel can include an additional load in its slop tank, and when loaded with methanol, use it as bunker fuel.

In addition to cost, methanol offers more predictable access to supply. The existing infrastructure makes methanol easy to access and bunker. In a recent survey, the Methanol Institute found that in 65% of the world’s top 150 ports have or are near methanol storage capacity. This infrastructure opens opportunities for new vessels in terms of IMO 2020 compliance, especially vis-à-vis LNG. 

 “We see a growing interest in methanol as a route towards IMO 2020 compliance. Methanol is, in this respect, a future-proof fuel. It can be used to meet the requirement for IMO 2030 and IMO 2050 greenhouse gas emissions reductions because, in addition to natural gas, methanol can be made from renewable resources,” Dolan notes.

Methanol’s credentials as a ‘greener fuel’ could benefit marine transport and shipping beyond deep sea voyages. Various projects underway in Europe, China, and Asia-Pacific, are testing methanol as a marine fuel for short-sea and inland waterways shipping. 

 “It is important to consider future requirements and plan because typically, a vessel is on the water for 2030 years. So, using methanol is more cost-effective down the line than installing a scrubber to continue using heavy bunker fuel oil,” Dolan says.

Find out more about the impact of IMO 2020 at the Transport & Logistics Summit during the World Petrochemical Conference in New Orleans, Louisiana, 24–27 March 2020.