CCS is adapting to ‘go to sea’. 80% of some ships’ CO2 emissions could be captured for a cost of c$100/ton and an energy penalty of just 5%, albeit this is the best case within a broad range. This 15-page note explores the opportunity, challenges, progress and who might benefit.
Different options to decarbonize the shipping industry are compared and contrasted on pages 2-4, including the abatement costs of different blue and green fuels.
But what about CCS? The technology is mature. However, CCS on a ship would have different parameters from onshore. We discuss three key considerations on pages 5-7.
Will it actually work? The question is whether you can put an amine plant on a floating structure, store the CO2 as a liquid, and expect the entire system to function. We believe the answer is yes, based on reviewing technical papers, as summarized on 8-10.
$100/ton economics are possible. We use our models to outline what you need to believe to reach these numbers, including sensitivities, and applicability to different shipping types and routes (pages 11-12).
Which companies benefit? We explore implications for leading capital goods companies, chemicals companies and small-scale LNG on page 13.
A new infrastructure industry would also be required, to handle CO2 in ports, move it to disposal sites, or integrate with CO2-EOR. We discuss this theme on pages 14-15.
Methanol is becoming more exciting than hydrogen as a clean fuel to help decarbonize transport. Specifically, blue methanol and bio-methanol are 65-75% less CO2-intensive than oil products, while they can already earn 10% IRRs at c$3/gallon-equivalent prices. Unlike hydrogen, it is simple to transport and integrate methanol with pre-existing vehicles. Hence this 21-page note outlines the opportunity.
The objectives and challenges of hydrogen are summarized on pages 2-3. We show that clean methanol can satisfy the objectives without incurring the challenges.
An overview of the methanol market is given on pages 4-5, to frame the opportunity, particularly in transportation fuels and cleaner chemicals.
Conventional methanol production is described on 6-8. We focus upon the chemistry, the costs, the economics and the CO2 intensity.
Bio-methanol is modelled on pages 9-10. We also focus upon the costs, economics and CO2 intensity, including an opportunity for carbon-negative fuels.
Blue methanol is outlined on pages 11-15. Converting CO2 and hydrogen into methanol is fully commercial, based on recent case studies, which we also use to model the economics and CO2 credentials.
Green methanol is more expensive for little incremental CO2 reduction, and indeed some routes to green methanol production are actually higher-CO2 (pages 16-18).
Companies in the methanol value chain are profiled on pages 19-20. We focus upon leading incumbents, technology providers and private companies commercializing clean methanol.
Our conclusion is that methanol could excite decision-makers in 2021, the way that hydrogen excited in 2020. This thesis is spelled out on page 21.
Gas demand could treble by 2050, gaining traction not just as the world’s cleanest fossil fuel, but also the most economical. The ascent would be driven by technology. Hence this note outlines 200MTpa of potential upside to consensus LNG demand, via de-carbonised power and shipping fuels. LNG demand could thus compound at 8% pa to 800MTpa by 2030, justifying greater investment in unsanctioned LNG projects.
Shell is the leading Major in driving new LNG demand, based on patent filings (chart above). As an example, we highlight a leading new technology to promote LNG demand in transportation, by mitigating the problem of boil-off.
Multiple records have just been broken for an LNG-powered ship, as construction completed at Heerema’s “Sleipnir” heavy-lift vessel (charted above). It substantiates our recent deep-dive note, which sees 40-60MTpa upside to LT LNG demand, from large, fuel-intensive ships, after IMO 2020.
Sleipnir is a record-setting crane-lift vessel, with capacity to pick up 20,000T. This eclipses the prior records in offshore oil and gas, which were around 12,000T, set by the Heerema Thialf and the Saipem 7000. Hence Sleipnir has already lined up 18 contracts, starting with the 15,800T topsides for Israel’s Leviathan gas field, and progressing on to Johan Sverdrup Phase II.
Sleipnir is a record-setting LNG vessel, burning gas as its primary fuel (although it can also burn diesel). With a displacement of 273,700T, we estimate it is the heaviest LNG-powered vessel ever built (eclipsing the largest such container ships, at 220,000T). With a cost of $1.5bn, we estimate it is also the most expensive LNG-powered ship ever built (eclipsing Carnival’s $1.1bn AidaNova cruise ship). It has the world’s first Type-C LNG tank in an enclosed column. Numbers are updated in our data-file here.
There is upside to LNG demandin large, fuel-intensive ships, especially cruise- and container ships, after IMO 2020. Small-scale LNG may offer an economic “bridge”, while bunkering becomes increasingly attractive as volumes per port scale past c80kTpa. Forward-thinking Majors are already investing to capture the future market.
Finally, for a video of the construction vessel being constructed…
The downstream industry is currently debating whether IMO 2020 sulphur regulations will be resolved quickly or slowly. We think the market-distortions may be prolonged by under-appreciated technology challenges.
Opportunities amidst the Challenge?
So if the market-distortions of IMO 2020 have longevity, who will stand to benefit? We are maintaining a data-file of the ‘Top Technologies for IMO 2020’ around the industry, which give specific companies an edge. The data file now contains over 25 technologies across 7 Majors.
Al-Shahrani, F., Koseoglu, O. R. & Bourane, A. (2018). Integrated System and Process for In-Situ Organic Peroxide Production and Oxidative HeteroAtom Conversion. Saudi Aramco Patent.
Koseoglu, O. R., (2018). Integrated Isomerisation and Hydrotreating Process. Saudi Aramco Patent CN107529542
Hanks, P. (2018). Trim Alkali Metal Desulfurisation of Refinery Fractiions. ExxonMobil Patent US2018171238
Next-generation technology in small-scale LNG has potential to reshape the global shipping-fuels industry. Especially after IMO 2020 sulphur regulations, LNG should compete with diesel. Opportunities in trucking and shale are less clear-cut.
This note outlines the technologies, economics and opportunities for LNG as a transport fuel, following a three-month investigation.
Why technology matters. Pages 2-4 of the note describe incumbent technologies in small-scale LNG, and the need for superior solutions.
The cutting edge . Pages 5-7 draw on patents and technical papers to describe next-generation technologies, at the cutting edge of small-scale LNG. We model that they are economic. They can can provide LNG to the market at $10/mcf.
Potential to transform shipping-fuels. Pages 9-13 find strong economic upside for novel LNG technologies in the shipping industry, with potential to create 40-60MTpa of incremental LNG demand, looking across the global shipping fleet.
Less positive on LNG as a trucking fuel. Pages 14-15 explain why the economics are more challenging for LNG use in land-transportation, i.e., trucking.
Less positive on LNG use in shale. Page 16 explains, similarly, why LNG is less advantageous in the shale patch than converting rigs and frac spreads to piped gas.
Other technologies. Page 17 notes other companies with interesting offerings in small-scale LNG liquefaction, including advances by Exxon and Shell.
Have further questions? Please contact us and we’ll be happy to help: [email protected]
So far we have reviewed 400 patents in the downstream oil and gas industry (ex-chemicals). A rare few prompted an excited thought — “that could be really useful when IMO 2020 comes around”.
Specifically, from January 2020, marine fuel standards will tighten, cutting the maximum sulphur content from 3.5% to 0.5%. It will reduce the value of high-sulphur fuel oil, and increase the value of low-sulphur diesel.
This note summarises the top dozen proprietary technologies we have seen to capitalise on the shift, summarised by company (chart below).
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