MeOH conversion interest

MeOH CONVERSIONS POISED TO TAKEOFF: RASMUSSEN

Medium term CII compliance concerns are underpinning interest in methanol conversions from container and PCTC sectors

MAN Energy Solutions expects to see a rapid rise in the number of dual-fuel engine conversions concluded over the coming period, Klaus Rasmussen, Head of Projects and PVU Sales, MAN PrimeServ told The Motorship.

Enquiries for conversions were particularly intense in consumer facing segments, such as containers and pure car and truck carriers (PCTCs), Rasmussen said. The Motorship has previously written about the introduction of low carbon and zero carbon tariffs within the container segment.

While MAN ES was having conversations with owners, charterers and beneficial cargo owners in all the major segments, enquiries from the container segment were “particularly active”.

While the container segment was not unique in being affected by the upcoming introduction of EEXI and CII regulations, the competing demands of maintaining scheduled liner services and customer pressure for low emissions transportation were particularly acute.

Alternative solutions for liner operators, including engine power limitation solutions or reducing operational speeds would also require investments to optimise the propulsion system and potential off hire time. Some container operators are also conscious that speed reductions on routes might require additional capacity to maintain liner services at slower speeds, The Motorship has heard.

“Just within the container segment, we are developing solutions for more than 500 engines. We can basically cover all the engines that had been put into the market for container vessels from 7000 teu. We can retrofit [them] into methanol within the next couple of years.”

Methanol retrofi t economics

There was particular interest in methanol conversions for a number of reasons. First and foremost, retrofitting engines to operate on methanol was likely to be a medium-term solution for operators concerned about CII compliance over the coming decade.

While the economics of conversions were a secondary consideration, Rasmussen noted that the overall cost of converting container vessels did not vary considerably between 5,000 teu container feeders and 24,000 teu ultra large container vessels. “The engine conversion might only cost 25% more, while the overall project cost would only cost 50% more.”

Rasmussen noted that the relative cost of converting larger sized container vessels was proportionally lower for larger vessels (see Typical conversion costs table above).

However, those costs were based on engine conversions to operate on LNG. By comparison, engine conversions to operate on methanol have lower capex requirements, with economies in the fuel tank and fuel supply line. “Dual-fuel methanol conversions are likely to be 30% lower than the equivalent LNG conversions.”

However, Rasmussen was adamant that in general owners were taking a risk mitigation approach when considering conversions rather than a straightforward economic approach.

This was also the case in segments where the economics of using a cargo as a fuel for their own business were supportive, such as LPG.

While LPG-fuelled LPG carriers currently enjoy a fuel cost advantage of up to 30% compared with conventionally fuelled competitors, for owners operating in the US Gulf region, that is not the main driver behind the business case.

“For owners switching to dual-fuel operation using LPG as the secondary fuel, their vessels will be compliant with CII until the end of the decade,” Rasmussen said.

Ammonia retrofi t costs

MAN ES has previously publicly committed to concluding the first ammonia engine conversion in 2025, around 12 months after the first ammonia fuelled engine comes to market.

When asked about the potential for ammonia conversions, Rasmussen noted that the engine project itself was continuing. Rasmussen expected to be able to have a first cost perspective by the end of 2023 or early 2024, when he expected to be able to discuss the potential material cost requirements for conversions with interested shipyards and owners.

Rasmussen noted that initial discussions around ammonia conversions had begun with some shipyards, and that “ball park” estimates were that the overall cost of ammonia conversions would be similar to LNG conversions.

“We expect the shipyards to account for a greater proportion of the conversion costs than in LNG conversions, for example”.

Rasmussen said that he was also seeing a number of major ship owners engage directly with MAN ES around potential ammonia engine conversions. Technical teams within larger ship owners acting as main contractors represented a significant shift in conversions.

Class, dwt Engine DF conversion, US$ Engine conversion, US$

Supramax, 65kt 5S60ME-C8.5 13-16 3.5 Kamsarmax, 81kt 6S60ME-C8.2-10.5 13-16 3.7 Newcastlemax, 210kt 6G70ME-C9.5 16-19 3.9 VLOC, 325kt 7G80ME-C9.5 16-21 4.2 MR tanker, 50kt 6G50ME-C9.5 13-15 3.5 LR2, 110kt 6G60ME-C9.5 16-18 3.7 VLCC, 300kt 7G80ME-C9.5 19-21 4.2 Feeder, 5,000 teu 6G80ME-C9.5 19-23 4.1

10,000 teu 11S90ME-C9.2 26-32 5.2

15,000 teu 11G90ME-C10.5 26-32 5.2

24,000 teu 11G95ME-C10.5 30-35 5.3

8 Typical LNG

conversion costs

For owners switching to dual-fuel operation using LPG as the secondary fuel, their ‘‘ vessels will be compliant with CII until the end of the decade

Consultancy services

Rasmussen added that the MAN ES was engaging with clients at an earlier stage in the conversion process, as customers considered issues, such as regional fuel availability and pricing, as well as route specific issues.

He cited the case of US owner Matson, which had recently decided to convert the Daniel K. Inouye to dual fuel LNGpowered operation.

The cost of LNG in North America, where it is anchored to the Henry Hub gas benchmark price, means that LNG conversions are still attractive from a cost comparison perspective in the region. Interest outside North America has slowed in line with the recent rise in international gas prices, The Motorship notes.

In addition, the Daniel K. Inouye is an extremely fast container vessel operating the fastest commercial transPacific route between Long Beach in California and China, via Hawaii. Conversion to dual-fuel operation represented an attractive alternative to alternative CII compliance strategies relying on reduced speed, Rasmussen said.

This was in addition to the complex range of engineering tasks required during the preparatory stages of a dual-fuel engine conversion. “We can spend thousands of hours on calculations and modelling during the pre-quote phase,” Rasmussen noted.

This was leading MAN ES to engage with shipowners at a variety of different levels, ranging from individual assets up to fleet level discussions around phasing the conversion of vessels to remain within fleet wide CII thresholds.

MAN ES feels a particular responsibility to help to deliver solutions to help the industry achieve decarbonisation, given that around half of all global freight is propelled by an MAN engine.

“Our engines are responsible for over 1.5 % of the global CO2 emissions, so we have a significant impact on the global maritime sustainability agenda,” Rasmussen concluded.

8 Klaus Rasmussen,

Head of Projects and PVU Sales, MAN PrimeServ

Large modern ME-C engines key to retrofi t market

While MAN ES has over 22,000 2-stroke engines in service, a number of considerations apply, which limit the potential number of engines that are suitable for conversion.

Only modern ME-C engines installed since 2015 are suitable for conversion, while a minimum bore size of 50 applies. This lowers the number of potential vessels suitable for conversion to 4,800.

He added that conversions of vessels costing less than USD50m (when new) were not typically considered. This winnowed the addressable market down to 3,800 vessels.

However, Rasmussen noted that the cost of the conversion could not exceed 25% of the newbuilding value in order to be commercially viable. One way of maintaining cost discipline was to ensure that the engines have 100% matching Parent Engine tests conducted in an alternative fuel version.

This further reduced the addressable market to just over 11% of the number of MAN engines in service, or 2,500 vessels. The proportion measured by total installed power would be significantly higher, owing to the larger average size of the vessels’ engines.

“These 2500 engines are actually consuming more that 11 % of the world’s entire bunker fuel consumption. MAN is actually already now in a position to provide conversion solutions to secure that a significant volume of the whole maritime energy consumption can be converted to utilize sustainable produced bunker fuels synthetic natural gas, e-methanol and e-ammonia.”

Rasmussen noted that while the tanker and bulker segments accounted for around 70% of vessels within this narrow pool of vessels that could potentially retrofit to operate on alternative fuels rapidly, the container and Ro-Ro segments accounted for just over 20% of potential vessels. A relatively small number of LNG tankers and larger number of LPG tankers completed the range of vessels.

Size

Tankers 50,000 dwt+ Bulkers 160,000 dwt+

Containers 7,000 teu

PCTC 6,000 CEU

8 Typical qualifi ed vessel types