Op-Ed: Marine fuels and the future of a multi-dynamic marketWritten by Heather Ervin
Maria Tierney, Senior Key Account Manager, Global Accounts at KPI OceanConnect in Houston, presents her views on the current marine fuels market, including counterparty risk assessment in this multi-dynamic market and the importance of attracting talent.
As the industry navigates towards its 2030 and 2050 decarbonization targets, it is well known that success will ultimately be delivered by zero-carbon, clean fuels. However, while we wait on these new sources of energy to mature and materialize, it is still critical that the transition to this new, future fuel decarbonized shipping industry starts now.
As pressure mounts from regulators, charterers, institutions and consumers, it is essential to embrace more immediate low-carbon solutions to ensure the industry meets the International Maritime Organization’s (IMO) goals.
A viable and proven option for ship owners and operators today is biofuel. Indeed, many first movers of decarbonization have been bunkering biofuels due to their “drop-in” characteristics and no requirement for engine modification.
On a global scale, there is concern for the lifecycle emissions of biofuels that derive from non-first-generation feedstock. However, the global availability of biofuel is currently reported to be around four million tonnes per year, which further demonstrates the commercial viability of the product. Working with the right marine fuel provider that has the knowledge of costs, availability , quality and ceritification in all major maritime regions will help to increase the uptake of biofuels.
LNG is another valuable alternative fuel for the global shipping market. Demand and interest in LNG might increase once prices become more competitive, and as the potential to reduce emissions further becomes more recognized with bio-LNG and synthetic-LNG. The global availability of liquefied bio-methane will also play a role in the development of a sustainable shipping industry with its ability to be used by LNG-fueled vessels without any engine modifications and reduce GHG emissions by 90% on a lifecycle basis.
In addition, with the flexibility dual-fuel engines provide ship owners, current orderbooks show that there is firm interest in this engine; Clarksons Research reported that one-third of all newbuilding orders in tonnage terms will be classed as “alternative-fuel capable.” Ultimately, as we look to the future of the marine energy mix, there is no single pathway to decarbonization. Instead, there will multiple pathways, and multiple fuels, including methanol and ammonia, the latter of which the International Energy Agency (IEA) has stated that it expects to account for 45% of energy demand from shipping if the world reaches net zero in 2050.
The critical question surrounding marine energy and the future fuels market is infrastructure. Building the infrastructure at scale for alternative fuels will take time and require collaboration across the entire supply chain.
The main driving force behind most decarbonization strategies is price, but regulatory incentives can also play a major part in enabling change and advancing sustainability in shipping. To support owners and operators navigate through the green transition, marine fuel providers have an important role to play in ensuring owners and operators have a portfolio of products to choose from, while guiding them on the right pathway for their fleets by applying financial and technical analysis.
The importance of counterparty risk assessment
Working with the right partner every step of the way on shipping’s decarbonization trajectory is crucial, no matter whether they decide to bunker biofuels, LNG, methanol, ammonia, or another viable product.
At its core this means ensuring that the right due diligence is conducted and the right questions are asked of counterparts. For some, this analysis will consider capital access or claims and invoice handling, while others will place more onus on transparency requirements that enable access to credit and insurance.
Every business will require its own unique strategy, but risk assessments should consider the following questions: Who are you dealing with? What are terms and conditions of your partnership? Does the counterparty pledge its invoices? Does the counterparty have credit insurance? Is the counterparty covered for product liability and have professional indemnity? Does the counterparty have a compliance program? What is your counterparts financial strength?
Increasing collaboration and transparency within the marine fuels supply chain is critical in order to minimize risk and exposure. Working with the right partner will enable owners and operators to reap the benefits of more efficient operations, a healthier bottom line, and significantly reduce risk so they can focus on the important tasks of running the day-to-day business.
As a trusted, financially strong organization with a reputation for quality and agility, we combine strict compliance with our technical expertise and global coverage to ensure we do business in the right way and with the right people.
Tapping into talent
In an industry and regulatory environment that will continue to evolve and change, providing partners with knowledge of the future fuels pathways and helping them to shape fuel procurement strategies will be essential. In turn, this highlights the importance of having the right people with the right knowledge within your business that have the capabilities to provide the added value that customers need. In this way, we all have a role to play in attracting more talent into shipping.
There is great enthusiasm and passion from young professionals who are further pushing the green agenda. It therefore helps to provide both young and experienced talent with training programs and attractive roles—in which the former can be seen with our “get fueled” in New York and other locations that aims to attract young men and women into the shipping industry. An inclusive organization that provides equal opportunities for all and empowers its people will ultimately help contribute towards the industry’s growth and success.
As shipping experiences increased volatility, tighter regulation, high fuel prices and transactional challenges at the same time as transitionary towards a low-carbon future, building an agile workforce and trusted partnerships should be at the forefront of all businesses. Our global teams will navigate partners through the next era of market transformations by providing innovative solutions in a changing industry.