Maersk is keen on retrofitting existing fleet to methanol

A.P. Moller – Maersk, one of the world’s leading shipping companies with a fleet of over 700 vessels, is looking at retrofitting its existing fleet to run on green methanol as part of its sustainability agenda.

The company has emerged as an early adopter of methanol as marine fuel for its newbuilds and it is about to welcome into the fleet its first containership operating on green methanol.

The feeder will be followed by 18 large ocean-going vessels of 16,000-17,200 TEU capacity which are scheduled for delivery in 2024 and 2025.

Maersk aims to achieve net zero greenhouse gas emissions in 2040 across the entire business. To get there in time, the company aims to transport a minimum 25% of Ocean cargo using green fuels by 2030 compared to a 2020 baseline.

Crucially, Maersk has adopted a principle of only ordering newbuild vessels that can operate on these environmentally friendly fuels, with methanol at the forefront of the company’s choice selection seeing that ammonia and potentially hydrogen have a long way to go before becoming commercially available at scale.

While it seemed that the company was staying clear of new orders for the time being, recent broker reports have linked Maersk with a construction contract with China’s Yangzijiang Shipbuilding for eight 8,000 TEU containerships powered by methanol, with options for four more.

A Maersk spokesperson declined to comment on the market rumors when approached by Offshore Energy.

“Maersk is continuously reviewing the fleet composition to ensure it matches current and future operational requirements. This includes reviews and evaluation of the opportunities to charter from 3rd parties, purchase or sell vessels, as well as ordering of newbuildings. Continued Capex discipline remains a key focus area for Maersk,” a statement from Maersk said.

The company has an impressive orderbook and has been very cautious with the ordering of new vessels in line with its disciplined Capex approach.

The most recent order was placed in October 2022, when Maersk ordered an additional six large ocean-going vessels from South Korea’s Hyundai Heavy Industries (HHI) that can sail on green methanol, pushing the overall tally to 19.

A disciplined Capex approach might be a very prudent strategy seeing that the container shipping market is experiencing a downfall in terms of earnings and demand which skyrocketed back in 2022.

Maersk reported a massive drop in its ocean revenue for the first quarter of this year, plunging by $5.7 billion to $9.9 billion year-on-year amid lower freight rates and softened demand.

This has also been the case with other industry peers as they report lower earnings as a result of market normalization.

Furthermore, the newbuilding market has been characterized by high newbuild prices and limited yard capacity with slots reserved up to 2025.

Hence, retrofitting existing fleets looks like an interesting option, especially when it comes to methanol.

Maersk already revealed that retrofitting is expected to play a major role in the company’s efficiency improvement efforts. These are likely to involve bow and propulsion modifications. A great deal of these retrofits will involve its chartered fleet, and Maersk has over 400 ships on charter.

The shipowner has seen encouraging interest from charter vessel owners to retrofit their vessels as part of their own sustainability efforts. As informed, there are currently 40 undergoing retrofits.

When it comes to methanol, most recently Maersk’s towage arm Svitzer announced plans to retrofit existing vessels to methanol in cooperation with Caterpillar.

Under the partnership, the duo plans to work on the installation of dual-fuel methanol engines on new tugs as well as conversions of existing Cat^® powered tugs, which comprise the majority of Svitzer’s fleet.

The deal comes in the wake of Caterpillar’s recent announcement regarding Cat 3500-E series methanol-readiness announcement which was made in September 2022.

From an engineering perspective retrofitting an engine to methanol is ‘quite easy’, as explained recently by Toni Stojcevski, General Manager Large Projects from Wartsila.

Wärtsilä’s 32 methanol engine series, which is being distributed also as a new engine, can be easily converted to methanol. The engine has been used for the conversion of Stena Germanica, delivered in 2015, extending its life cycle for additional 15-20 years.

A similar perspective is offered by engine manufacturer MAN Energy Solutions which sees methanol as a rather straightforward solution taking into account that methanol requires a simple fuel supply system and there is no need for heating and pressurized tanks. The company has around 110 engines running on methanol in service and on order, with talks for a wave of new orders both for new builds and retrofits forthcoming.

The majority of complexity for methanol retrofit projects comes from the bunker side: finding space on board for methanol storage and the methanol tanks, the cofferdams, the fuel preparation, space for the safety systems, etc.

From a commercial perspective, MAN Energy Solutions estimates that retrofitting from conventional fuel to methanol will result in 30 pct lower Capex when compared to retrofitting conventional fuel to LNG due to the fact that methanol storage and service tanks have significantly lower Capex when compared to the cryogenic ones needed for LNG.

Activity in the retrofitting space seems to be picking up with companies like Pacific Carriers Limited (PCL), PaxOcean Holdings Pte (PaxOcean), and Berge Bulk exploring the use of methanol for their fleets.

Pacific Carriers Limited and compatriot PaxOcean have teamed up with classification society ABS in a joint development project to study methanol as an alternative fuel for the PCL fleet. Under the project, ABS will evaluate the means and impact of retrofitting a PCL vessel with a propulsion system powered by methanol as an alternative low-carbon fuel option.

ABS is also working with Singapore-based shipping company Berge Bulk to explore the possibility of retrofitting the 300-meter-long heavy fuel oil-propelled bulk carrier Berge Mauna Kea to operate on methanol fuel.

The bulker is a 210,000t dwt bulk carrier, currently under construction at the Nihon Shipyard in Japan. Delivery is expected in mid-2024.

In conclusion, while methanol gains popularity as a promising solution in the container shipping sector, Maersk is yet to reveal the details of concrete retrofitting projects involving methanol.