Ammonia bunkering focus to shift to price once regulatory barriers overcome

The cost of ammonia bunkering will be the key criterion determining the uptake of the fuel, once the International Maritime Organization finalizes proposals to introduce rules on greenhouse gas emissions from the sector, market participants have told S&P Global Commodity Insights.

A working group reporting to the IMO's Maritime Environmental Protection Committee (MEPC) is due to hold an interim meeting to discuss different proposals relating to the mid-term market-based measures (MBM) in London Feb. 13.

If agreement on the basket of candidate measures can be reached at the intersessional working group meetings scheduled for February and the end of March, the MBM could be approved before the end of 2025 and come into effect in 2027. The agreement of criteria is expected to act as a driver for the uptake of alternative fuels in the maritime sector, market sources told Commodity Insights, although the final shape of the MBM will influence the economics of alternative fuel uptake.

This will then turn the market's attention back to the question of fuel availability, and the cost of the molecule, according to a first source. "The cost of the fuel as well as demand will be a crucial factor going forward, in driving adoption," they said.

Lengthy process

The process of introducing new maritime fuels into the heavily regulated maritime market is lengthy and requires the agreement of separate rules governing the use of new fuels as maritime fuels, as well as rules governing bunkering operations.

In late 2024, the IMO issued interim guidelines on the use of ammonia as a fuel. The technical development of two-stroke engines capable of operating on ammonia as a maritime fuel has maintained momentum, with both WinGD and MAN Energy Solutions expected to complete the development of their first dual-fuel ammonia-fueled engines by the end of 2025.

In parallel, experience building in ammonia bunkering has accelerated over the course of 2024. During the year, mining giant Fortescue conducted the world's first ammonia marine bunker operation in the port of Singapore while China completed its first domestic ammonia bunkering operation for a vessel in Dalian.

At the same time, a first-of-a-kind ammonia transfer pilot, aimed to showcase breakbulk and mimic bunkering procedures in Australia's Pilbara region was conducted by the Global Centre for Maritime Decarbonisation (GCMD).

Sources indicated that while the cost of bunking ammonia is not known, it is expected to be more expensive than methanol or biobunker owning to the toxic and corrosive nature of the fuel, as well as the requirement for purpose-built specialized bunkering vessels designed to handle ammonia.

GCMD took five days to complete its Pilbara bunkering trial, though the ship-to-ship transfer of ammonia was completed in five hours, highlighting the need for specialized crew and equipment.

This experience building is supporting the establishment of ammonia bunkering guidelines by national authorities, such as the Norwegian Maritime Authority, the Maritime & Port Authority Of Singapore and Japan's Ministry of Land, Infrastructure, Transport and Tourism.

Ammonia bunkering guidelines are expected to be released by Japan's MLIT by the end of March 2025, while Singapore's MPA is expected to release its own rules by the end of 2025, a market participant said.

Easing cost

Nonetheless, the cost of bunkering is expected to ease over time as supply expands and economies of scale come into play.

Based on the number and type of ships with ammonia bunkering capability being ordered, there is the potential for 14 million mt/year of demand for ammonia used as a bunker fuel by the end of 2027, according to Ciaran Roe, Co-Founder and Chief Commercial Officer of market intelligence group HySights. In practice, the demand for ammonia is likely to be lower, reflecting ship-operator decisions around the proportion of time spent operating in diesel mode and ammonia mode operation, Roe added.

HySights' expectation is that ammonia bunkering will be one of the key future-use cases of low-emission ammonia, but this will only start to lift off in 2027.

GCMD Chief Projects Officer, Tan Wee Meng also sees a healthy demand for low-carbon ammonia in the near future.

"Globally, the growing demand for ammonia across various sectors, including for power generation, as a marine fuel, and as a hydrogen carrier, will drive the need for investments in ammonia production, handling and storage infrastructure. The increase in production capacity will improve the economies of scale and drive down costs, and further encourage adoption by the maritime sector."