Ammonia could emerge as a cost-effective alternative to conventional bunker fuels under the International Maritime Organization's proposed carbon levy and reward system, according to Australian mining firm Fortescue.
The IMO first drafted its net-zero Framework in April 2025 aiming to achieve net zero by 2050 — by penalising vessels that emit above a set emission threshold and rewarding those below the threshold for adopting low-carbon fuels.
Details on the rewards and penalties have yet to be finalised after a meeting to adopt the draft amendments was stalled last month due to pressure from some member states, including the US. A new meeting has been scheduled for October next year.
The industry is hopeful the IMO's net-zero framework will be adopted, as it could help offset high costs for low-carbon fuels such as green ammonia, Fortescue project manager Matthew Garland said at the Low Carbon Fuels and CCUS Summit on 5 November in Perth.
Fortescue currently uses very-low sulphur fuel oil (VLSFO) in its bulk carriers transporting iron ore to China. But the use of VLSFO for marine bunkering could become more expensive if the IMO introduces penalties for its usage. These penalties are projected to raise around $11-12bn annually by 2030, which the IMO plans to redistribute as incentives for lower-emission fuels.
Green ammonia, a lower-emission alternative to VLSFO, remains costly due to its lower energy density, which means ships require about 2.2 times more ammonia than VLSFO, plus a small amount of pilot fuel, Garland said. Under the IMO's proposed carbon rewards, green ammonia could receive up to A$1,000/t ($656/t) in incentives, potentially bringing it close to cost parity with VLSFO under Fortescue's cost modelling.
An ammonia vessel could achieve a maximum emissions reduction of 70pc if it uses the lowest-emission green ammonia continuously, Fortescue said. The company is already testing ammonia as a marine fuel with its Green Pioneer dual-fuel vessel, which completed a voyage from the Netherlands to southern France using ammonia bunkered at Rotterdam earlier this year.
Australian miner BHP and China's largest shipping company Cosco have signed a deal to charter two ammonia-dual-fuelled bulk carriers, BHP announced in July. The vessels are expected to be delivered in 2028. But these are not necessarily using the lowest-emission ammonia.
Australia's current green ammonia production is negligible, as the vast majority is produced from fossil fuels. But the Australian federal Labor government awarded A$814mn in production credits under its Hydrogen Headstart programme to Murchison Green Hydrogen for its planned 900,000 t/yr green ammonia plant in Western Australia (WA) earlier this year.
