Hapag-Lloyd CEO: Availability of carbon-neutral fuels will be a big problem

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Despite all the talk about the future of carbon-neutral fuels the industry is ‘bombarded with’ on a daily basis, deadlines for completion of certain projects are being pushed continuously further perpetuating the uncertainty surrounding their availability, Rolf Habben Jensen, CEO of Hapag-Lloyd, said on Tuesday while speaking at a panel hosted by DNV at SMM Hamburg.

The panel was part of DNV’s presentation of the Maritime Forecast to 2050 report, which examines production, distribution and bunkering infrastructures required to enable the maritime industry’s shift to carbon-neutral fuels.

“Availability of carbon-neutral fuels is going to be a big problem,” Jensen stressed.

Knut Ørbeck-Nilssen, the CEO of Maritime at DNV, supported the argument during an opening speech, noting that the development of shipboard technologies and the ship designs themselves will not be the issue in the transition story. Investments in onshore and offshore production of fuels such as ammonia, methanol, and hydrogen are at the heart of the problem.

Maritime Forecast to 2050 estimates that $30-$90 billion of investments would be needed per year to 2050 for the onshore fuel supply chains, whereas onboard technology investments are expected to range from $8 to $28 billion per year, depending on which fuel type has the largest uptake.

A multi-fuel future is in the cards; however, Hapag-Lloyd’s head believes that the industry needs to be realistic about its future and that certain technologies such as carbon capture are likely to play a much more important role than it was initially believed.

Specifically, capturing carbon on board ships by utilizing scrubbers or via cryogenic technologies that can be retrofitted on existing ships or fully integrated into new vessels has massive potential as it would not be dependent on the production and distribution of new fuels and could be implemented relatively quickly. The technology is at an early stage of development, but it is gaining importance as new projects emerge to study its potential.

“When you look at the future propulsion, we have invested in LNG-ready dual-fuel ships, and the first ones will be delivered next year. One can debate whether LNG was a good choice, and that kind of illustrates where the market is: nobody really knows. At the end of the day, there will not be a ‘one-solution-fits-all’. We will probably look at ammonia, methanol, and maybe at some point in time, also hydrogen,” Jensen said.

Hapag-Lloyd has twelve 23,500 TEU LNG dual-fuel ships on order at Daewoo Shipbuilding & Marine Engineering (DSME), which are expected to start delivery in April 2023. The company also has ten 13,000 TEU containerships being built at Hyundai Samho Heavy Industries, which are scheduled to start delivery in 2022.

The German liner has set out to cut the CO2 intensity of its entire fleet by 30% by 2030 when compared to 2019 levels, and to become net-zero by 2045 by switching its ships to burn alternative fuels.

Biofuels will play a key role in the company’s journey. Hapag-Lloyd started testing the waters with biofuel in 2020. As disclosed, emissions for pure biofuel are over 80 percent lower when compared with conventional fuels.

“We hope to burn 100,000 of biofuel this year, which immediately contributes to our emission reduction targets, which is good. We have also invested in anti-fouling technologies for pretty much every vessel in our fleet, for which we committed about $300 million dollars.,” Jensen said.

“At the end of the day, it will boil down to consuming less energy. I know that this is not a very popular opinion, because people believe that they have reached their efficiency targets, but I am convinced that there is a lot of mileage on that topic as well, especially as we come out of the pandemic, which hasn’t helped efficiency. Also, let’s not forget that in container shipping if you replace small ships with big ships you save a lot of fuel.”

German container shipping major is working on a massive modernisation program for its ships, which will see over 150 vessels upgraded within the next 3-5 years to lower fuel consumption and their CO2 emissions. Under this program, 85 ships will be equipped with new propellers and 36 ships will receive a new flow-optimized bulbous bow.

The development of the new shipboard technologies to accommodate the adoption of alternative fuels, if and once they become more widely available, faces a different challenge: making sure it is safe.

“If it cannot be done safely, it shouldn’t be done,” Ørbeck-Nilssen said, stressing that education and training of workers will be key as shipping moves into a more complex world dominated by different fuel options and energy efficiency devices.

“Safety should always come first,” but that doesn’t mean that you should exclude certain technologies, according to Jensen.

“If you look at the future propulsion, initially there was a lot of anxiety around looking at ammonia at all because of the safety concerns. We should take those very seriously. But, definitely, we shouldn’t exclude things upfront, like for example in the case of nuclear power,” he said.

“I would encourage the industry not to close off too many technological routes that might help us get to a decarbonized world before we have properly tested them.”

The future fuel mix will be highly dependent on fuel price and policy ambitions across the globe. According to DNV’s forecast, the development of sustainable fuel supply chains must be accelerated to achieve the transition, hence 5% of carbon neutral fuels are needed by 2030.

Given that shipping’s decarbonization depends upon the fuel production and distribution pace on land, the sector will have to up its game to establish collaboration across industry sectors and advocate for faster development of the new fuels to drive its energy transition.

Furthermore, a lot of effort will have to be invested to raise the profile of the industry. As the crew change crisis has shown, the shipping industry has had a rather limited impact on driving change beyond its jurisdiction and it was very difficult to influence global governments in recognizing seafarers as key workers.

“For a global industry, it is hard to make politicians prioritise global needs over their own constituencies and local communities. Climate change, being a global challenge, cannot be resolved locally. Therefore, shipping needs to reach out to all different levels of power and geographies to deliver this message and identify ways of how shipping can contribute to reducing emissions overall,” Ørbeck-Nilssen said.

In the meantime, shipowners can prepare for an uncertain future by adopting fuel-flexibile solutions to reduce the risk of stranded capital.