Exploring Maersk's Green Methanol Ventures and Their Implications
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Chapter 1: Maersk's Pursuit of Green Methanol
A.P. Moller — Maersk, a significant player in the shipping industry, continues to channel investments into green methanol and the dual-fuel vessels designed to utilize it. The company's decision to adopt green methanol as a cornerstone of its decarbonization strategy is notable. While I believe green methanol is not the most viable option compared to alternatives like batteries and biofuels, I acknowledge the rationale behind their choice.
Nonetheless, several intricacies in their strategy warrant discussion. The recent news highlights Maersk's acquisition of half of an Egyptian wind farm, intended to support green methanol production near the Suez Canal.
In early 2022, I first reported on these Egyptian initiatives while evaluating European hydrogen projects in North Africa. Egypt is offering substantial tax incentives for green hydrogen, ammonia, and methanol projects, along with available space in the Ain Sokhna economic zone adjacent to the canal.
Recently, Maersk's inaugural dual-fuel vessel was launched in South Korea, embarking on a journey to Denmark. Although Maersk has emphasized its commitment to green methanol sourced from biomethane at a U.S. landfill, the logistics of transporting this fuel over 10,000 km to Ulsan raises questions about its environmental footprint. Moreover, the vessel required refueling multiple times during its journey in Singapore and Egypt, leading to uncertainty about the fuel type used. There are concerns regarding whether the Singaporean tanker transporting the green methanol may actually be using higher-emission methanol or even standard diesel.
Indeed, it has come to light that Maersk's dual-fuel ships are unlikely to use green methanol directly in the immediate future. Due to the logistical challenges of obtaining small quantities of green methanol across various ports, Maersk appears to be following a strategy similar to that of Microsoft, which purchases wind power from distant sources. Instead, they are utilizing locally available methanol while funding the production of green methanol for other consumers.
While this approach mirrors Microsoft's acquisition of green energy, there are significant differences to consider. To begin with, standard methanol used in shipping, known as wood alcohol, burns cleanly; however, non-green methanol poses a more severe carbon challenge compared to marine diesel.
Section 1.1: Understanding Methanol's Carbon Footprint
Based on data from the Methanol Institute, I've compiled a table illustrating the carbon emissions associated with different fuels. Methanol, on average, generates 2.9 times more greenhouse gases than marine diesel, which clearly indicates it's not a favorable option for climate goals.
Currently, global methanol production from natural gas, coal gas, and other sources contributes between 500 to 700 million tons of CO2 equivalent emissions annually, accounting for approximately 1-2% of total global greenhouse gas emissions. This represents a significant climate issue.
The Methanol Institute, which advocates for the industry, often avoids addressing this reality in its communications, despite its efforts to position methanol as the future "low-carbon" fuel for shipping.
The shipping industry has been marketed high-carbon methanol as a "clean-burning" alternative for years, while falsely assuring that green methanol would match the current prices of marine fuels. This tactic has been effective, with many stakeholders, including Maersk, falling into this misconception.
At present, methanol is already more expensive than marine fuels, averaging 1.6 times the cost of marine diesel across several jurisdictions. In the future, its price is expected to rise significantly, potentially becoming two to five times the cost of current maritime fuels. This reality is something the Methanol Institute seems keen to keep under wraps, and Maersk is likely just beginning to grasp the implications as it finalizes contracts for biomethanol and synthetic methanol.
The possibility exists that methanol suppliers are currently offering it at or below cost to secure long-term contracts with companies like Maersk, only to reveal higher prices later. While this may be legal, the ethical implications are questionable, and it certainly does not contribute to a viable climate solution.
Section 1.2: Future Projections for Methanol in Shipping
If methanol becomes the predominant fuel for marine shipping, my projections indicate that demand could triple, reaching around 500 million tons. In scenarios that ignore electrification and assume significant increases in shipping, demand could surpass a billion tons annually. This explains why the methanol industry is aggressively advocating for its widespread adoption.
However, it's essential to recognize that Maersk's initiatives are still more commendable than Methanex's Atlantic crossing, which involved a ship powered by methanol derived from 96% fossil natural gas—a clear example of misleading green claims. But how meaningful is it for Maersk to ensure some methanol in circulation is green?
One positive aspect of Maersk's commitment to green methanol is that it fosters market development and promotes efficiencies within production sites. Currently, the lack of green methanol production stems from the low cost of natural gas and coal, which has hindered industrial-scale synthesis and manufacturing from biomethane. Maersk's investment in this area is beneficial since the global methanol industry must decarbonize to meet climate objectives.
Moreover, the green methanol acquired for the long journey was derived from landfill biomethane in the U.S. Since methane is a far more potent greenhouse gas than carbon dioxide, converting this waste into methanol can be an effective means of creating a carbon-negative industrial product. Nevertheless, it is worth noting that landfills in developed nations have been required for years to capture or eliminate methane emissions, suggesting that the chances of the green methanol being made from biomethane that would have otherwise escaped into the atmosphere are low.
However, the significant drawback is that Maersk is not reducing existing methanol emissions; instead, it is increasing demand for a fuel that is already produced at a rate of approximately 170 million tons annually.
In addressing major climate challenges, the focus should be on mitigating emissions from current products or reducing their usage—not increasing their demand.
Multiplying demand for methanol is fundamentally different from boosting electricity consumption. The latter is a widespread commodity essential for various sectors, while methanol is a specialized industrial feedstock that isn't typically combusted. Increasing demand for methanol, which explicitly generates carbon dioxide, stands in stark contrast to other energy sources.
Section 1.3: The Air Quality Advantage of Methanol
There is another potential benefit of methanol that merits attention: it generates considerably less air pollution in port areas compared to traditional fuels when ships are arriving or departing, or while idling at docks. This is a positive aspect; however, it can also be achieved through hybrid battery-electric systems and auxiliary power provisions, which are already gaining traction.
Looking ahead, my expectations regarding Maersk's dual-fuel vessels remain unchanged. As the implications of methanol's pricing and environmental impact become clearer, and as the EU implements carbon pricing mechanisms, these ships are likely to rely more on biodiesel and seldom utilize methanol. Biodiesel will likely be cheaper, more accessible in ports, and more environmentally friendly. The real path forward for shipping that does not fully electrify appears to be a dual-fuel strategy, combining electrical power with biofuels.
Chapter 2: The Role of Methanol in Sustainable Shipping
In the video titled "Why cargo giant Maersk is investing millions in methanol-fuelled ships | Transforming Business," the discussion revolves around Maersk’s strategic investments in methanol fuel and its potential impact on the shipping industry.
Additionally, the video "Methanol as a Marine Fuel With Maersk" delves into the specifics of how methanol is being integrated into Maersk's operations and the implications for marine fuel strategies moving forward.