LR: LNG retrofits surge amid shipowners’ forage for immediate carbon reductions

March 7, 2025, by Ajsa Habibic

The maritime industry has witnessed the resurgence of engine retrofits to LNG marine fuel in 2024 as shipowners’ short-term solution for immediate carbon reductions amid strengthening regulatory requirements, Lloyd’s Register (LR) found in its latest Engine Retrofit Report. However, the observed progress in the industry’s ability to deliver ship engine retrofits for alternative fuels is threatened by the lack of strong incentives for fuel producers, LR pointed out.

LR’s new report on ship engine retrofits highlights both progress and persistent challenges in equipping existing vessels to meet ambitious emissions reduction targets.

Since the initial report released in 2023, the industry has made advancements in its ability to execute ship engine retrofit projects and has seen the completion of the first methanol fuel conversion since 2015 and a continued expansion of shipyards with retrofit capabilities, LR said.

On the other hand, the incentives needed to accelerate the adoption of alternative fuels are slower to evolve, and despite regulatory drivers such as the EU’s FuelEU Maritime and Emissions Trading System (ETS), demand for alternative fuels remains low as producers lack stronger incentives, the report emphasized.

The report also highlighted a surge of LNG retrofits in 2024 as shipowners’ short-term choice for immediate carbon reductions to navigate regulatory requirements. As found, more than 305 LNG-fueled ships were ordered last year, accounting for approximately 14% of newbuilding orders, significantly outpacing methanol and ammonia alternatives.

While LNG offers a near-term compliance solution, the report warns that deeper emissions reductions will be necessary beyond the next decade. Methane emissions and the long-term availability of bio- and e-LNG remain challenges, but with zero-emission fuel supply chains still in their infancy, many operators see LNG as the most viable retrofit option today, LR explained.

The report further spotlights supply chain readiness as another important factor, warning that without improved coordination between engine manufacturers, fuel system suppliers, and shipyards, lead times for conversion projects could stretch beyond 18 months. On the regulatory front, recent amendments to the MARPOL Annex VI NOx Technical Code are expected to ease certification challenges for converted engines.

The limited capacity of shipyards capable of undertaking alternative fuel conversions was identified as a significant issue in the initial 2023 report. While the number of capable yards has increased (around 16 shipyards, mainly in China and the Middle East), the latest report identifies current retrofit capacity at approximately 465 vessel conversions annually—well below the projected peak requirement of over 1,000 conversions per year.

In response to this, LR has developed a methodology for evaluating potential shipyard candidates in the new report to provide shipowners with “confidence that chosen partners can fulfil retrofit project requirements”.

The report also observed that despite a slow evolution of new retrofit orders in 2024, engine designers are proactively preparing for future market demands. The relatively shorter lead time for retrofit projects than newbuilds means that more projects for completion in 2026 and 2027 could be announced in 2025, LR stated.

Claudene Sharp-Patel, LR’s Global Technical Director, commented: “LR’s new Engine Retrofit Report demonstrates that while technology and regulations are evolving, decisive action is needed to secure the future fuel landscape. The technology and shipyard capacity to retrofit vessels is improving, but without decisive action to scale up alternative fuel supply chains, shipowners will face increasing compliance costs and operational uncertainty. We need greater regulatory clarity and investment to bridge the gap between ambition and action.”