Op-Ed: Thriving in a multi-fuel market in an energy transition

Zero-carbon fuels like green methanol and ammonia will require new bunkering arrangements, training, and risk tolerances. (Credit: Shutterstock)

By Margaret Kaigh Doyle, Alternative Fuels Program Manager, Transparensea Fuels

The arrival of alternative fuels is transforming more than the energy sources powering ships—it is shaking up the fuel procurement process itself, putting a greater emphasis on transparency and traceability. This new era of energy transition will reward buyers who can ask the right questions, and suppliers who can provide expert knowledge.

For shipowners and operators, the energy transition means having to make careful decisions about multiple new fuels, which are likely to come from varied and often unfamiliar suppliers.

For an owner and operator to feel comfortable picking a fuel, they must ask themselves the following questions: Is there an abundance of this fuel? Is it available at the ports that we call?  What color is the fuel? Is there a real market for the fuel or are most of the buying and selling done via exclusive long-term contracts?

The current lack of availability of purely green marine fuels should be made more transparent. So many recent press releases announcing green bunkerings involve partial volumes and mass balancing and offsets. Understanding how offsets and now insets work will be another distinction to new fuel procurement.

While industry debate on alternative fuels is mostly focusing on considerations around price and availability, we must also consider the practical implications of supplying alternative fuels to ships. Owners will need significantly more detailed information and guarantees around fuels’ specifications, origin, and physical availability. It’s crucial to make sure a fuel buyer’s goals and risk tolerance are at the forefront during this energy transition. This will be even more important as we introduce alternative fuels.

Know your fuel

With any of these new fuels, owners and operators will need assurances that the fuel is verified and safe to handle. A unified approach to the development of these fuel specifications will be key to compliance with emissions reporting, be it as part of new regulations or the company’s own ESG commitments. There is a lot of work to be done before we have the necessary benchmarks. For example, regarding LNG as a marine fuel, the calculation of the methane number is still not codified or agreed upon.

A fuel broker will need to ensure that vessel operators don’t inadvertently compromise their sustainability credentials or this those of their customers. Traceability will take on a new level of significance and rigor will be essential.

As the industry fully embraces well-to-wake analyses of different fuels, buyers will need to make it a priority to understand the supply chain behind their fuel choice, especially as the certification of new fuels evolves. Organizations like the International Sustainability and Carbon Certification (ISCC) and the Roundtable on Sustainable biofuels (RSB) are working to create internationally recognized sustainability and traceability standards for biofuels and renewable diesel. Efforts like this show that it is possible to create frameworks for lifecycle analysis of alternative fuels.

Delivering on promises

Ensuring the feasibility of physical supply sounds apparent but assuming fuel availability without guarantees can be risky. Operators need to know if a fuel is solely available “on paper”, or if it will be there, at the right volume and specification, where and when they want to bunker.

Bunkering processes will change, too. There are minimal adaptions for drop-in biofuel. However, zero-carbon fuels like green methanol and ammonia will require new bunkering arrangements, training, and risk tolerances.

Buyers need to work with brokers and suppliers to re-evaluate how a fuel is handled, but customers should also query the overall impact of these changes on commercial agreements. The bunkering contracts that the industry has used for decades will need to change as well.

Trading versus trusted advice

Alternative fuels will add new layers of complexity to bunkering. Owners and operators need trusted advisors who understand the ‘new norms’ around quality, specs, volumes, pricing, availability, and fair contracts. Traders and brokers will see their role evolve and be placed in a real position of trust. Some could potentially look to exploit this, but those who try won’t survive in the long run. Traders and brokers who can operate transparently and demonstrate real value to customers and suppliers will succeed in the new fuel era.

This is an opportunity for the marine fuels industry to really do bunkering differently. The procurement and purchasing of fuel will become a much more strategic decision for ship owners and operators.

It is important that everyone involved, from crews to shore-based teams, are enabled with the right knowledge to research, purchase and handle new fuels. Any successful transition to alternative fuels, will require a full-on knowledge-based approach to fuel procurement.