LR: 27%-30% of newly built ships will require fuel conversion to meet zero targets

Despite pushing forward new initiatives by the shipping sector to achieve zero emissions, 27% to 30% of vessels newly built between 2022 and 2050 will still require conversion to a different fuel in order to meet zero targets, a new whitepaper published by classification society Lloyd’s Register shows.

The information was obtained through the assessment of a container ship route in Southeast Asia by the LR Maritime Decarbonisation Hub.

Zero-carbon shipping solutions are being developed but are not commercially widespread yet. As ships built today will still be in service in the 2040s, owners must plan for conversion to zero carbon fuel within the vessel’s lifetime. To ensure the sector remains on the right transition path, it is necessary for
ships to be ‘ready’ to use zero-carbon fuels, even if they run on fossil fuels today, according to LR.

That’s why the classification society developed a new framework for assessing the actual readiness of a vessel for the transition to zero carbon fuels, ‘Zero Ready Framework – helping to ensure shipping can deliver our zero-emissions future’.

The framework ranks vessel readiness for zero carbon fuel operations from 1 (highest level of readiness) to 5 (lowest level of readiness), and measures on a well-to-wake basis.

Specifically, the rankings were developed based on observations that some shipowners have had a design for conversion to zero carbon fuel done as a paper exercise, without a plan for how the conversion would be carried out.

Others have some or all the required equipment (for example engine, tank, pipework, fuel management system) already installed. Another group of vessels has a dual-fuel engine that could run on zero-carbon fuel but may require an engine retrofit to do so.

Now, LR created a framework to offer clarity around the term ‘readiness’ which is used in multiple ways across the shipping industry. 

“Until now, we have found that current regulations have focused on near-term improvements in vessel energy efficiency and GHG emissions, but have yet to address the longer-term goal of vessel readiness for zero carbon fuels,” said Andrew Keevil, Strategy Development Manager for LR Maritime Decarbonisation Hub and lead author of the framework.

Charles Haskell, Director, LR Maritime Decarbonisation Hub, noted that as ships built today will still be in service in the 2040s, it’s essential for shipowners to understand the full implications of actual vessel ‘readiness’ for zero carbon fuels.

“These differing standards and classifications of ‘readiness’ across the industry have made it difficult for owners to conduct a transparent assessment of their vessels’ commercial prospects in a zero-emissions future,” Haskell stressed.

Vessel conversion is technically complex and involves significant costs. It may involve changes in
layout, structural modifications to the vessel and replacement of pipework and systems. Very often
the costs of conversion have not been accounted for in statements of ‘readiness’.

A wide range of different vessels are being called ‘ready’. Over 400 vessels in the world fleet and order
book are termed alternative fuel ‘ready’. According to Clarksons, there are there are now over 320 “LNG ready” ships in the fleet and 99 on the orderbook, while there are 130 “ammonia ready” and 6 “hydrogen ready” vessels on order.

However, LR argues that very few LNG ‘ready’ vessels have so far been converted to operate on the fuel, in part due to the heavy costs and time out of service.

“Experience with LNG tells us this is significant. A 15,000 TEU LNG ready container ship retrofitted in 2020 is said to have cost around $30 million and taken an estimated 105 days,” according to LR.

The world’s first conversion of a large container ship to LNG happened on Hapag-Lloyd’s 15,000 TEU Sajir boxship. The Sajir is one of the 17 vessels in Hapag-Lloyd’s fleet that were originally designed to be LNG-ready. MAN Energy Solutions (MAN ES) was tasked with the conversion of the vessel’s HFO-burning MAN B&W 9S90ME-C engine to a dual-fuel MAN B&W ME-GI.

Haris Zografakis, partner at the law firm Stephenson Harwood LLP, who’s involved in various maritime decarbonisation projects and is an expert in the contractual aspects of decarbonisation, said: “Many aspects of decarbonisation suffer from an absence of accepted standards and precise definitions; for example, in relation to measurement of emissions, the specifications of new fuels, and their fitness for purpose. Another nebulous area is the commonly used term ‘zero-ready’ vessels (either newbuilds, or following retrofits), which has no classification or regulatory definition.”

The framework has been developed through cross-industry consultation through a series of workshops with industry stakeholders.

“A first in our industry where stakeholders have had an opportunity to voice their concerns and challenges via a focused and well driven forum/platform, with a set deliverable. The framework captures and summarises the critical factors in a concise way and sets out clearly defined discussion topics and roadmap for owners, investors, manufacturers and shipyards, that will support understanding, benchmarking and ultimately adoption within the industry,” Nikos Benetis, Technical Director, Greenheart Management, the in-house shipping desk for Hayfin Capital Management’s maritime funds concluded.