Op-Ed: Shipping must innovate for a seamless fuel transition

Shipping is currently at a critical juncture, as it continues its transition to sustainable fuel.

By Johannes Schurmann, commercial director, FincoEnergies (GoodFuels)

Shipping is currently at a critical juncture, as it continues its transition to sustainable fuel. Decarbonization by 2050 is now the target, set by the IMO, but the path forward is uncertain. Factors including the costs of decarbonization on shipowners and uncertainty from other stakeholders within the global trade and fuel supply chains are combining to pile pressure on an industry that nevertheless needs to change.

One of the most pressing challenges of this transition to sustainable fuels is timing. Factors such as physical supply bottlenecks and knowledge gaps hinder the widespread adoption of sustainable fuels like methanol, ammonia, and biofuels. This uncertainty complicates decision-making for both fuel producers and shipping companies, making it difficult to allocate resources effectively.

Take, for example, the recent notable shift towards LNG as a fuel. While often promoted as the preferred alternative fuel for ‘green shipping’, it is crucial to recognize that LNG is not inherently green. Although it offers some emissions reductions compared to conventional fossil fuels, LNG still produces carbon dioxide and methane—a particularly potent greenhouse gas—during its production, transport, and combustion. Its appeal lies in its current availability and the well-established infrastructure that supports its rapid adoption, unlike more sustainable alternatives like hydrogen and ammonia. In other words, LNG has less of the uncertainty that muddies decision-making than competing future fuel options.

Despite these challenges, there are opportunities for innovation. Sustainable marine biofuels, for instance, offer a near-term solution to decarbonization, with the potential to meet around 5-10% of the market’s fuel demand by 2030. Among the currently available zero-emissions fuel options, biofuels are generally considered the most technologically mature and readily deployable; largely because they can be integrated into existing transportation systems with minimal modifications—offering an immediate and practical solution for reducing greenhouse gas emissions. While other alternative fuels, such as, ammonia and methanol are promising, they will require significant investments in new infrastructure and technology, both on land and at sea. 

However, there are more structural barriers to alternative fuel uptake that still remain. One of these is in the mindset of fuel purchasing which, if not altered, may impact the industry’s ability to rapidly decarbonize. The truth is that spot purchasing—which is effective in a fossil-based commodity fuel market—is ill-suited to the complexities of new energy sources.

These newer fuels require significant investments in infrastructure, production facilities, and supply chains – all of which need certainty in terms of demand that spot purchasing cannot deliver.

To put it in perspective, meeting the IMO’s 2030 decarbonization targets—let alone its 2050 ones – will require the shipping industry on its own to find up to 48 million tonnes of carbon-neutral fuels, according to the International Renewable Energy Agency.

However, global production of these fuels across all sectors is anticipated to reach only 44 to 63 million tonnes by 2030 at their current production rate. This shortfall will pose a significant challenge for shipping to secure its necessary supply – and will see the industry competing with other sectors for its fuel in a way that it is not used to doing at the moment.

As a result, shipping companies need to change their procurement strategies. Fuel suppliers and producers require assurance of demand, while shipowners need assurance of supply.

By engaging in long-term contracts, shipowners can give fuel suppliers the demand signals that they need. This not only encourages investment in sustainable fuel production but also allows suppliers to streamline their operations and precisely target their investments in new production capability, which could potentially lead to lower costs for shipping companies in the long term.

By changing their bunkering strategies to focus more on the long-term, shipping companies can help to dismantle a significant, but less understood, barrier to decarbonization. This approach will also enhance operational efficiency and, crucially, unlock a strategic advantage for an industry that is becoming more complex and competitive than ever.