Inclusion of shipping emissions under the EU's emissions trading system (ETS) and mandatory reduction in the greenhouse gas (GHG) intensity of marine fuels excites OCI Global and Fertiglobe chief executive Ahmed El-Hoshy. The ETS, GHG fuel intensity cuts for EU maritime fuels and upwards revised renewables targets are building the market, he told Argus.
Does inclusion of shipping emissions in the ETS really boost sustainable marine fuels?
We're very excited. Shipping creates 3pc of global greenhouse gas (GHG) emissions. And the shipping industry will remain crucial for transportation because you won't be able to fly everything around the world on sustainable aviation fuel (SAF).
Shipping in the ETS from 2024 will be a big boost in tackling emissions from heavy fuel and diesel. Over 120 methanol-ready vessels have been ordered by companies like Maersk and bulk carriers.
OCI is the largest global green methanol producer using renewable feedstocks. We see a lot of potential in this area. By 2025-26, you could see a significant 3mn t/yr incremental demand for green methanol in a global market that's approximately 90mn t/yr. Methanol-ready ships are starting to come online within the next few months already, and these new vessels haven't yet bought their fuel yet.
How do you close the price differential with other shipping fuels?
Closing the differential requires taxing diesel and heavy fuel oil emissions.
Today, the grey methanol price is around $350/t. Green methanol's price is north of $1,200/t based on the forward curve for diesel and heavy fuel oil plus draft legislation, for instance on maritime fuels, CO2, and so on.
The renewables targets and GHG fuel intensity cuts in the EU maritime fuels regulation are crucial for building the market.
Are you happy with the EU's legal definition of green hydrogen?
Practicality is important for decarbonisation, think of the EU's requirements on additionality or the temporal nature of power.
But for a green hydrogen market to really exist, we need demand creation. There's a lot of noise with new hydrogen projects announced every day. But how many reach final investment decisions? Not many.
To create a market, it's all about demand activation. Why are we going to be able to sell sustainable marine fuels? Because there's an ETS for marine fuels from 2024 onwards and EU maritime legislation with clear mandates. These are regulatory sticks and carrots triggering demand to drive projects and generate offtakes. We need the same demand creation mechanism in other sectors, such as agriculture and chemical manufacturing too.
Where do we need these regulatory sticks and carrots?
We need the same demand creation mechanism in other sectors, such as agriculture and chemical manufacturing too.
For large chemical players, we might get only $500 and it costs a lot more to make. This is because it is only voluntary for the chemical market. You're not getting the movement in demand to trigger the reaction in supply and decarbonise our sector.
There's a regulatory value for our biomethanol via regulatory tickets. We sell green methanol to big fuel blenders to meet their renewables requirements for blending via biodiesel, ethanol and biomethanol as a second-generation biofuel. For green methanol in the UK, we're getting around $1,200/t or $1,300/t. When you see green hydrogen plants being built, they are in refineries, whether in the Netherlands, France, or Germany. The green hydrogen can be thrown back into fuel, whether jet fuel or whatever fuel qualifies, so there's regulatory value.
