More buyers in the shipping sector will consider biofuel blends of up to B100 now a greenhouse gas (GHG) pricing mechanism has laid out by the International Maritime Organization (IMO), according to panellists at the Argus Biofuels & Feedstocks Asia Conference.
Global biodiesel demand is likely to strengthen in the near-term following the emergence of clearer international pricing standards for GHG emissions, they said.
"B100 seems to have great momentum based on the [83rd Marine Environment Protection Committee] MEPC meeting," said French certification society Bureau Veritas' VeriFuel global business development director Bill Stamatopoulos. MEPC 83 is "a clear indication that we have to work together and work fast" because there is a cost penalty for not switching away from conventional marine fuels, said Danish tanker owner Hafnia's general manager of project and fleet sustainability, Pankaj Porwal.
Most maritime participants welcomed the two-tier GHG pricing framework approved by the IMO at MEPC 83 from 7-11 April, which is a key milestone as the maritime sector pushes for decarbonisation.
Biofuels like B24, B30, and B100 will gain more interest because of cost-savings for buyers when switching to cleaner fuels, said Singapore bunker supplier Equatorial Marine Fuel's (EMF) chief operating officer Choong Sheen Mao. B24 is 24pc of used cooking oil methyl ester (Ucome) blended with 76pc of conventional fuel, such as very-low sulphur fuel oil (VLSFO), while B100 is pure biodiesel not blended with fossil fuels.
Panellists said bunkering B100 would provide significant advantages for ships with voyages in EU waters, where firms can "pool" multiple vessels within the EU Emissions Trading System (ETS) and FuelEU Maritime Regulation to balance compliance surpluses and deficits. But vessel shipowners would need to be "absolutely sure" of the amount of fuel required for the voyage, to avoid any unknown consequences if excess biofuels were mixed with other fuel types, said Hafnia's Porwal.
The GHG pricing mechanism gives bunker buyers a "strong indication" of the cost of not switching to alternative marine fuels and this will drive biodiesel demand as buyers realise "they need to get involved in some way", said EMF's Choong, adding that suppliers can consider selling biodiesel if it is "commercially viable".
There will be a minimum cost of compliance in adhering with IMO decarbonisation targets, but smaller shipowners should start running trials and "building quality control systems for your marine fuels so you're prepared to take on greener fuels", said International Bunker Industry Association (IBIA) Asia chair Rahul Choudhuri.
"At the moment hedging is very much focused on VLSFO and gasoil… but as exposures change and regulations change, we'll see more instruments being used to counter [trading risks]," said shipbroker Braemar oil derivatives broker Rebecca Reed-Sperrin. As the decarbonisation mandates grow, "hopefully liquidity increases tremendously" for marine biofuels, she said.
Challenges
Panellists cited several barriers in the widespread uptake of biofuels in the shipping sector, such as availability of Ucome feedstock, controversies regarding feedstock origin, and limited biodiesel shelf life compared to conventional marine fuels.
Fuel pricing and costs associated with bunkering biofuels surfaced as key concerns. International regulations are complex and buyers have to assess "what is [the] real price" taking into account IMO regulations, said Bureau Veritas' Stamatopoulos.
Charterers and tanker operators face difficulties in securing a price without hidden costs involved, Italian ship owner Fratelli Cosulich biofuel trading advisor Sebastiaan Bruins. B100 is available but suppliers are not actively selling it as buying interest has been limited, Bruins said.
China will be a "dominant force" for B100 supplies because of a larger Ucome volume, and market developments would depend on how China portions domestic and export volumes of Uco, said Choong.
Long-term uptake agreements for biofuel with major shipowners would be important in scaling up biofuel bunker supplies, said Indonesian state-owned refiner PT Pertamina's marine fuels trading manager Justin Tan. Bunker buyers need to signal their interest regarding biofuels "so we know where to start too", he said.
The maritime sector is still looking at a multifuel future since the supply of "Ucome alone cannot meet shipping's needs", said Danish tanker owner Maersk senior green fuel originator Felicia Ng.
