Feature: New US producers plan 4.4 million mt/year green methanol for shipping

Emerging fuel producers are looking to rapidly ramp up "green methanol" output from later this decade, with demand from the shipping sector set to rise due to decarbonization requirements.

Current and future executives at SunGas Renewables, Carbon Sink and WasteFuel told S&P Global Commodity Insights that their targeted production capacity together reaches nearly 4.4 million mt/year, mainly at sites in the US where the Inflation Reduction Act is expected to offer large subsidies to low-carbon transitions projects.

David LaMont, a senior vice-president at Houston-based SunGas, said the company targets to build six plants each with a capability of around 400,000 mt/year that can convert residues from the forestry and wood products industries into methanol, with a total capital investment of nearly $9 billion.

The GTI Energy spin-out plans to commission the first such biomethanol plant near Beaver Lake, Louisiana, in 2027, depending on a final investment decision in the fourth quarter of next year.

For the other five, "the full development timing isn't set...but fundamentally we want to go as fast as we can to build all six projects," LaMont said.

SunGas has aimed to build its plants with carbon capture technology to achieve a negative carbon intensity for its green methanol, and the facilities will be in the US aided by government subsidies, according to company executives.

The IRA has raised the 45Q tax credit to $60/mt for carbon dioxide used in enhanced oil recovery or other industrial operations and to $85/mt for permanently stored CO2, from $35/mt and $50/mt, respectively.

"We do get the benefits from 45Q, and those packages are helpful," CEO Robert Rigdon said, as the carbon from SunGas' Beaver Lake facility will be stored permanently.

According to a letter of intent signed last year, all of SunGas' production is committed to A.P. Moller-Maersk, the Danish container line set to be the world's largest operator of methanol-capable ships.

"Our resources right now...are really primarily focused on Maersk, but we make our technology available to everybody," said Rigdon, adding that SunGas is also seeking to license its fuel production technology to other energy and shipping firms.

Shipping demand

Maersk has invested in 36 containerships that can burn methanol, all of them are to be delivered by the end of 2027, as an initial step to reach net-zero emissions by 2040.

To achieve its interim goal of halving emissions per transported container from 2020 levels by 2030, Maersk estimated it would need at least 5 million mt/year of green fuels.

"I don't think you can build things fast enough to meet that demand," said Peter Jorgensen, who will serve as WasteFuel's chief financial officer from Oct. 1.

The California-based venture, whose shareholders include BP and Maersk as potential offtakers, is aiming to have 10-12 biomethanol plants at various development stages in the US, South America and other regions three to four years from now, each with a production capacity of 40,000-80,000 mt/year, Jorgensen said.

WasteFuel earlier announced it planned to supply 30,000 mt/year of biomethanol to Maersk from 2024, but Jorgensen said the timeline was overly ambitious and the company hopes to begin initial production towards to the end of 2025.

Globally, the number of methanol-capable ships across all shipping sectors is expected to grow from 30 this year to at least 204 in 2028, according to classification society DNV's estimates based on the existing order book.

In its reference case, S&P Global Commodity Insights expects methanol demand from the shipping sector to jump from 94,700 mt in 2022 to nearly 2.5 million mt in 2030.

Maritime transportation accounts for 2%-3% of global greenhouse gas emissions, and a growing number of shipowners, faced with tightening emissions regulations and pressure form eco-conscious customers, have bet on methanol's decarbonization potential due to low capital investments and well-established supply infrastructure.

"Shipping is a big emitter, and it doesn't really have that many options" as most of other alternative fuels are not less financially or technically feasible, Jorgensen said.

Renewable resources

Carbon Sink, a Virginia-based e-methanol project developer, has aimed to bring its first 100,000 mt/year plant online in South Dakota in 2028.

Following its first project, the company plans to commission another nine plants with a similar capacity within eight years, said Jim McVaney, head of business development.

"We believe that we're going to be able to do multiple projects each year," said McVaney, adding that Carbon Sink projects will seek to take advantage of renewable hydrogen produced by abundant wind power and biogenic carbon captured by bioethanol plants in the US.

The IRA provides a tax credit for clean hydrogen producers worth up to $3/kg, depending on the overall carbon footprint of the product, and the policy is expected by some to trigger large production of the low-, zero-carbon fuel that can be used as feedstock for e-methanol plants in the long run.

"Because of incentives created by the US government and the relatively low cost of wind energy in the US, we think that we're going to be able to be a very attractive option in the market for green methanol," McVaney said.

Carbon Sink has signed a preliminary deal to supply Maersk 100,000 mt/year, and McVaney said the company will likely buy another 400,000 mt/year. Some of the remain volume from Carbon Sink's planning 1 million mt/year production will be routed to Rose Cay Maritime, a Jones Act shipping firm, he added.