Annual CO2 shipping volumes seen at 100 mil mt/y by 2050: study

Shipping is poised to play an important role in Asia-Pacific cross-border Carbon Capture, Utilization and Sequestration, or CCUS, initiatives, with annual CO2 shipping volumes projected to reach 100 million mt/year by 2050, according to a study released Dec. 10.

CCUS involves capturing CO2 from stationary emitters and transporting it for permanent sequestration or utilization.

Several countries in Asia-Pacific such as Australia, Indonesia, Japan, Malaysia, Singapore, and South Korea, are pursuing cross-border partnerships and initiatives to support cross-border CO2 transportation and sequestration at a time when shipping CO2 becomes particularly important in the region due to the vast oceans and seas that separate emitters and sequestration sites, when compared to Europe.

Shipping also becomes economically advantageous compared with pipeline transport of the same amount of CO2 at longer distances.

A threshold distance of 500 km was identified to be economically viable for transporting 5 million mt/year of CO2 via shipping, the study jointly released by the Global Centre for Maritime Decarbonisation, or GCMD, and Boston Consulting Group showed.

Transporting this annual tonnage would require between 85 to 150 liquefied CO2 carriers of 50,000 mt capacity where the total investments needed for these vessels by 2050 could reach up to $25 billion, the report said.

The emerging cross-border CCUS hubs and routes that are aligned with this criterion for CO2 shipping include the Northern Lights project, which spans 500 to 1,000 km; intra-Southeast Asia routes ranging from 450 to 970 km; and the longest routes, Northeast Asia to Australia, which extends from 6,000 to 11,000 km, it said.

Creating a market of this scale will necessitate concerted efforts from both the public and the private sector, including economic incentives, long-term contracts for midstream players, and greater clarity on key standards.

"This effort entails constructing CO2 carriers, developing port-side infrastructure, establishing standards and guidelines for transporting and offloading CO2, and upskilling crew with requisite training," GCMD CEO Lynn Loo said.

Overcoming hurdles

The study identified three components that governments and private sector players must provide to activate the shipping industry for cross-border CCUS: Direct economic support, Long-term contracts and minimum volume guarantees, and Clarity on standards and specifications for shipping.

The investment required to scale up cross-border CCUS, including shipbuilding, port, and terminal infrastructure development, is significant, with the end-to-end levelized cost of cross-border CCUS with shipping ranging from $141-$174 per ton of CO2 for Southeast Asia routes to $167-$287 per ton of CO2 for Northeast Asia-Australia routes, as per the study.

Capture and shipping costs constitute 60%-80% of the estimated total expenses, it said.

In addition, a significant gap exists between levelized cross-border CCUS costs and domestic carbon pricing in Asia-Pacific, where current carbon taxes and emissions trading system prices range from $2-$18/ton of CO2, representing around a ten-fold gap with the range of levelized CCUS costs in this region, it noted.

To provide financial support, governments can extend economic assistance to midstream players, such as shipping and port providers, through financial incentives and new business models, it said, adding that these steps cut upfront capital expenditure and overall project costs, making cross-border CO2 shipping more viable.

Nascent regulations also hinder the development of cross-border CCUS in the region, it said.

Countries need to establish domestic regulations governing carbon accounting and verification methodologies for CCUS, as well as permitting procedures for cross-border CCUS projects, it said.

"Shipping providers need clear regulations and guidelines on the standards governing tolerance limits for impurities in CO2 cargo, operating pressures, and temperatures along the value chain," it said.

"Additionally, bilateral and multilateral frameworks are required to clarify jurisdictional authority for cross-border projects and allocate commercial and operational liabilities for CO2 leaks during transport across the value chain," it said.

Emitters need to provide long-term contracts to shipping and terminal providers – ideally 10 years or more - and commit to transporting a minimum volume of CO2, the study also shared, noting that this step will give value chain participants greater certainty for planning and obtaining necessary financing for investments in vessels and terminal capacity.

"By collaborating and addressing the challenges identified in this study, both public and private stakeholders can successfully develop the full CCUS value chain, unlocking the decarbonization opportunities offered by this solution," the study added.