OCI N.V. In Agreements with MAN Energy Solutions, Hartmann Group and Eastern Pacific Shipping to Start Commercialization by 2023/24 of Ammonia and Methanol as Shipping Fuels
OCI N.V. (Euronext: OCI) today announced that it has signed two separate agreements:
1. Memorandum of Understanding with MAN Energy Solutions (MAN) and Hartmann Gas Carriers Germany GmbH & Co (Hartmann), under which OCI intends to charter ammonia vessels built, owned and operated by Hartmann and its commercial arm, GasChem Services, that are operated using ammonia engines designed by MAN. The partnership aims to propel the commercialization of ammonia-fueled vessels and accelerate the energy transition and decarbonization of the shipping industry.
2. Memorandum of Understanding with MAN Energy Solutions and Eastern Pacific Shipping (EPS). The partnership will target retrofitting existing vessels from EPS’ tanker fleet to methanol and ammonia, new-build methanol and ammonia-fueled vessels to drive the commercialization of these fuels and provide a path for the current conventional fuel vessel fleet to decarbonize. The technology to retrofit a vessel to accept methanol as a fuel is available today and the intention is for OCI to charter the first retrofitted methanol fueled vessel operated by EPS using already in-service MAN engines and technology in the next two years.
Brian Østergaard Sørensen, Vice President and Head of R&D, Two-Stroke Business at MAN Energy Solutions, said: “We view these initiatives as closely aligned with our own strategy of cooperating with external partners to develop sustainable technologies. Methanol and ammonia are very interesting candidates as zero-carbon fuels. In fact, we have already introduced a methanol-burning two-stroke engine, while we expect to deliver the first ammonia-fueled engine in 2024. MAN Energy Solutions is fully committed to the maritime energy transition and the development of technology that exploits alternative, clean fuels.”
Jens Seeberg, Head of Retrofit & Upgrade at MAN PrimeServ Denmark, said: “For us, the path to decarbonizing the maritime industry starts with fuel decarbonization. Happily, the flexibility of the ME-C engine enables us to retrofit the existing fleet into methanol-fueled vessels that have a significantly reduced environmental impact. We look forward to moving with our industry partners towards these sustainable goals.”
Shipping currently accounts for almost 3% of global CO2 emissions, but is one of the hardest sectors to decarbonize due to the cost effectiveness of heavy fuel oil and dispersed refueling. The International Maritime Organization (IMO) has set emissions targets for 2030 and 2050 that can only be achieved through the adoption of low-carbon fuels on new and existing vessels.
Ammonia and methanol, OCI’s core products, are the only practical alternatives for long-distance shipping. With global infrastructure in place, these products can bridge the transition from “grey” to “green” until the industry has fully scaled up to products based solely on renewable energy sources.
In addition to newly built ships, it will be essential to convert engines from conventional fuel to methanol and ammonia to meet these targets. These two partnerships focus on the full spectrum of retrofits and new-builds to ensure that as many vessels as possible can reach compliance on time.
Compared to hydrogen and LNG, ammonia is widely used and easier to store with extensive global distribution and storage infrastructure in place. Converting all long-distance shipping fuel to ammonia would require approximately 750-900 million tonnes of ammonia annually by 2050, which is 4-5 times the current total global ammonia production.
Methanol is a liquid and is interchangeable with most refined products in tanks and pipelines, making its adoption seamless with existing bunkering infrastructure. Converting all long-distance shipping to methanol would require about 650 to 720 million tonnes annually by 2050, which is 6-7 times the current total global methanol production.
The emergence of ammonia and methanol as the most logical alternative to conventional fuels presents a large opportunity for OCI. The company has therefore made it a top priority to make these established low carbon fuels for shipping and is accelerating the transition to produce additional blue and green ammonia and methanol at its plants.
OCI is well-positioned to capture this huge potential demand as one of the largest producers of ammonia and methanol globally with production assets in North America, Europe and the Middle East & North Africa. In addition, OCI is the largest methanol producer in Europe, the second largest in the US and the largest producer of bio-methanol globally. OCI has a unique global distribution network in place with plants and storage tanks located directly on major global shipping routes, at or near 3 out of the 4 global bunkering hubs (Rotterdam, Fujeirah and Houston).
Fertiglobe particularly benefits from proximity to ample underutilized wind and solar generation capacity across the Middle East & North Africa enabling stable production of green ammonia at a low cost. By 2030, Europe will likely not produce sufficient green hydrogen to meet their needs and is expected to depend on imports with the MENA region the most competitive alternative.
Capt. Alfred Hartmann, Chairman of the Supervisory Board of the Hartmann Group and President of German Shipowners’ Association, said, “Hartmann Gas Carriers Germany together with their commercial arm, GasChem Services in Hamburg, are convinced of the opportunities that ammonia-fueled vessels will offer to the environment. At a time when the maritime industry is at the dawn of a new era and looks for options to decarbonize shipping, we are proud and excited to be part of this highly innovative, future-looking project. The new vessel type will enable us to reduce carbon emissions significantly and set new standards for environmentally-friendly shipping.”
Eastern Pacific Shipping CEO Cyril Ducau said, “EPS is proud to partner with industry-leaders OCI and MAN with a shared vision to push our industry towards decarbonization and environmental preservation. As a leading tonnage provider, EPS has taken a firm stance that sustainability begins with accountability. This means we have a responsibility to implement emission lowering solutions available today while simultaneously developing solutions for tomorrow. Converting our existing conventional fleet to burn methanol creates a unique opportunity to continue lowering our carbon footprint significantly and rapidly. In the meantime, developing ammonia-fueled conversion and newbuilding projects will help develop more mature zero-carbon solutions in the longer-term. We are excited about the next steps and to share our findings with the industry.”
Ahmed El-Hoshy, Chief Executive Officer of OCI N.V., commented: “Ammonia and methanol are the fuels of the future and we are excited to continue to play a part in the transition to zero carbon in a cost-effective way through these partnerships. Our products are perfectly positioned to fuel the transition and we believe the push towards low carbon fuels in the coming years will be met with the adoption of both methanol and ammonia as industry standard. We see this as starting with the adoption of grey/blue methanol and ammonia and then shifting to green as production costs come down, customer appetites move towards green and regulations continue to develop. We are confident that, in addition to the exciting developments on new-builds, existing vessels can economically convert their engines to use our low-carbon products and help the industry meet its goals. We are therefore pleased that we have signed these agreements with two of the world’s leading ship owners and the leading engine manufacturer, bringing together a comprehensive representation of the maritime value chain.”
Any subsequent commercial agreements are subject to agreement on commercial terms and definitive documentation.
We intend to discuss the marine fuel opportunities for OCI further at our upcoming ESG Investor Day scheduled to take place March 8, 2021.