INTERVIEW: WinGD expects ammonia propulsion to take off in shipping industry

Swiss engineering company WinGD is seeing a rapid uptake of ammonia propulsion through this decade, having already secured engine orders for 10 ammonia-capable ships of various types, CEO Dominik Schneiter told S&P Global Commodity Insights as more shipowners bet on the emerging fuel's decarbonization potential.

With the world's first ammonia-capable ships -- two LPG carriers -- only ordered in 2023, classification society DNV's data shows such vessels account for less than 1% of the ships under construction, lagging behind LNG at 8.7% and methanol at 4.7%.

But Schneiter said his company, one of the largest suppliers of two-stroke engines for deepsea trades, expects "a rather quick uptake" of ammonia as a marine fuel through this decade and estimates newbuild orders could be made up of "one-third ammonia, one-third methanol and one-third LNG" by 2030.

His remarks come as WinGD is on track to provide engines for 10 ships with dual-fuel engines capable of running on ammonia and conventional, oil-based fuels, including AET's Aframax tankers, Exmar's 46,000 cu m LPG carriers, CMB.TECH's Newcastlemax bulk carriers, and a 1,600-twenty-foot equivalent unit containership.

"We have some pilot projects with known owners," Schneiter said in an interview. "We are quite active with ammonia."

The company will deliver the first ammonia-capable engine to an ammonia carrier in March 2025, which would allow the ship to hit the waters during the fourth quarter of the same year, according to Schneiter.

Ammonia is a zero-emission fuel when generated from sustainable means, and many analysts suggest the fuel could emerge as a top bunker fuel as its output could rise in line with the forecast expansion of renewable hydrogen production.

Based on Commodity Insights' latest forecast, ammonia bunker demand could increase from zero in 2023 to 60,500 b/d in 2030 before a further jump to 2.5 million b/d in 2050, becoming the most common type of marine fuel in volumetric terms.

Safety issues

But ammonia is highly toxic and corrosive, and industry participants said engine makers must address the safety issues before ammonia-fueled ships can be put into operation.

WinGD has been working with seafarers and classification societies like Lloyd's Register and American Bureau of Shipping to develop ammonia bunkering procedures, and it is "now very positive" that its concepts "will work in a good way," Schneiter said.

"We have set our training center, addressing exactly this ... to make sure the crew is trained on-board basically," Schneiter said.

But Schneiter also suggested that ammonia propulsion is unlikely to be suitable for the passenger ship sector, sharing a similar view to US-based cruise group Carnival.

"Cruise [ships] have a lot of people on board," Schneiter said. "That seems to be too big of a risk."

Regulations

While shipowners have started to contract for ammonia-capable vessels, the International Maritime Organization, a UN agency tasked with regulating global shipping, is only scheduled to finalize safety bunker guidelines for new fuels like ammonia by the end of 2024.

Thus the world's first ships running on ammonia in deepsea trades would likely be ammonia carriers, which can access the fuel from their cargo tanks without bunkering process, according to Schneiter.

Separately, IMO member states are set to conclude new technical and economic measures, which could include a global levy on marine energy's greenhouse gas emissions in 2025 for their implementation from 2027.

Such a levy would be crucial to bridge the price gap between sustainable and fossil fuels, according to many industry participants, with Commodity Insights data showing "green" ammonia could be at least two to three times more expensive.

Capex

But Schneiter said IMO talks have focused too much on operating expenses related to fuel cost rather capital expenditures for alternative fuel propulsion systems, and research and development expenses required to develop them.

"The technology is very expensive," said Schneiter, adding that his company's R&D spending has tripled over the past three to four years to reach 60% of its total expenses.

Compared with a conventional, single-fuel ship, a methanol-capable, dual-fuel ship would cost 15% more, while an ammonia-capable ship -- like an LNG-capable vessel -- would cost 20%-25% more, according to Schneiter.

Industry participants said the lower cost of methanol propulsion contributed to its popularity, with DNV data suggesting that methanol-capable ships have made up 10% of newbuild contracts in the past year -- exceeding all other alternative fuels. But Schneiter suggested the cost for ammonia propulsion could be lowered with further R&D.

So far, the EU has been providing fund for green shipping technologies, but discussions over similar initiatives at the IMO have been slow.

"If the R&D money is not available, assets owners will not invest because there is no reason to invest in a more expensive" ship for most players, Schneiter said.