Alternative marine fuel demand in the key port of Singapore is likely to grow because of higher consumption of biofuels, and the rise of bio-methanol for bunkering.
New directives issued by both the EU Commission and the International Maritime Organization (IMO) have spurred ship owners, traders and refiners to look at alternative fuel options for the global marine sector.
Singapore is the largest bunkering hub in the world, with total bunker consumption in the country reaching 46.77mn t over January-November, according to statistics from the Maritime and Port Authority of Singapore (MPA). Consumption in 2023 is projected to increase by 6.5pc from 2022, according to Argus calculations based on MPA data. The city-state is also expected to be a regional hub for alternative fuels in the coming year because of its key position in the bunkering world.
A multi-fuel future
Biofuels began to be used as an alternative fuel in Singapore from 2022, in a 24pc blend with very low sulphur fuel oil (VLSFO), better known as B24. But the use of biofuels comes with a challenge — only types of biofuels that meet the life-cycle assessment values set by the EU can be used.
Used cooking oil methyl ester (Ucome) is currently the biofuel of choice, but the industry remains in search of alternatives as Ucome could be more heavily utilised by the sustainable aviation fuel (SAF) sector in coming years.
In addition, bunker barges carrying the biofuel blended bunker fuel in Singapore are still limited to oil tankers. These tankers allow only 25pc concentration of biofuels. Some market participants like Vitol have ordered IMO Type 2 chemical tanker ships to barge the B24 blended fuel from 2024. But there continues to be a limited number of barges carrying higher blends of biofuels with VLSFO in Singapore.
Bio-methanol is also being considered by a number of vessel owners and operators like Maersk, Mitsui O.S.K Lines (MOL) and Xpress Feeders as an option for bunkering. But the scarcity of bio-methanol supply has challenged the shipowners, while the order books to manufacture methanol-fuelled ships have surged globally in 2023.
The industry is also exploring the use of ammonia and LNG for bunkering in Singapore. But hurdles remain in terms of bunkering standards, operations and vessel availability.
B24 and bio-methanol consumption
"Biofuels will just continue to see organic growth, depending on UCO supplies," said a key Singapore-based conventional bunker trader, referring to the more than threefold growth in the consumption of B24 in Singapore in 2023 compared with 2022.
Demand for B24 in Singapore is expected to continue rising as shipowners are preparing to comply with Carbon Intensity Index (CII) targets and ratings set by the IMO from 2024. This requires all ships to calculate their Energy Efficiency Existing Ship Index (EEXI) to improve energy efficiency.
Consumption of B24 reached 460,100t between January-November 2023, or 41,800 t/month on average, according to MPA data. Based on this, the projected consumption of B24 for the whole of 2023 is likely to hit a record of 501,880t. This is 257pc higher compared with only 140,200t in 2022.
"We will probably see more demand for B24 appear as the CII values are calculated and owners need [lower] emissions to increase their vessel rating, and biofuels will be their only option [for now]," said a key trader.
It is unclear how much of an increase could be expected because of the impact of CII ratings on bunker consumption, but this is expected to be a key factor in 2024, added a global fleet owner.
There will likely also be a rise in the number of vessels bunkering bio-methanol in Singapore, although the use of bio-methanol in the country is still at a nascent stage, with bunkering standards not announced yet.
The MPA issued an expression of interest on 14 December and is aiming to gather proposals for the implementation of end-to-end bunkering solutions in Singapore from 2025.
In terms of actual bunkering, it is expected that there will be a few more trials of methanol fuelling in Singapore in 2024, said market participants. Ship-to-containership bunkering of bio-methanol took place in Singapore for the first time in 2023.
The regulatory landscape
The increased interest and use of these alternative marine fuels in 2023 came on the back of the fresh directives issued in July by the IMO that all ships sailing in international waters need to reduce their greenhouse gas emissions by at least 20-30pc by 2030 compared with 2008 base levels.
In addition to this, the EU Commission has also included the maritime sector under the EU Emissions Trading Scheme (ETS) from 2024. These rules were announced by the EU Commission in June 2023, and have accelerated decarbonisation plans in the entire global marine sector.
Consumption of high sulphur fuel oil (HSFO) is expected to increase. "As there are gradually more vessels being fitted with scrubbers, so demand for HSFO will continue to increase," said a trader.
A lower inflation rate in 2024 coupled with a revival in the Chinese economy could also boost overall shipping traffic and bunkering consumption, said a Singapore-based trader.
VLSFO made up 60pc of total bunker consumption volumes in 2023, while HSFO made up 32pc of the total bunker volumes sold in Singapore.
