Vessel conversions to new fuels face credit hurdles

Shipowners opting to convert vessels to run on lower-carbon fuels will find it harder to obtain bank credit than those building new ships, according to Dagfinn Lunde, the former head of Germany's DVB Bank, a specialist in transportation finance.

"There are 15 different bodies who give green ratings to vessel projects. It is easier to get funding if the project is deemed 'greener' and more sustainable," Lunde told participants of the Methanol as Marine Fuel seminar in Dubai. "Export credit agencies will prefer to finance newbuild ships than conversion projects, making it more difficult to meet GHG [reduction targets]," he said.

Despite this challenge, Lunde says vessel conversions will be a key component if the shipping industry is to meet goals to reduce greenhouse gas (GHG) emissions. "We cannot replace the whole global fleet with zero-emission [vessels] that use carbon-neutral fuels within the time limits and therefore conversions and retro-fittings will be important," he said.

The International Maritime Organisation (IMO) has set a target for shipowners to reduce CO2 emissions in international waters by 40pc by 2030 and by 70pc by 2050, from 2008 base levels. To achieve these targets, the shipping industry will need to replace traditional bunker fuels with alternatives such as methanol, ammonia and hydrogen.

Elshan Aliyev