In the shipping industry’s race to reduce greenhouse gas emissions, methanol has emerged as a promising alternative marine fuel to power vessels.
The relatively clean-burning liquid is among the top-five chemical commodities shipped globally, according to the Methanol Institute, making it readily available in major ports for refuelling. AP Moeller-Maersk and CMA CGM are among leading shipowners that have chosen methanol to fuel some of their newbuild vessels.
Director
Helmsman
Modern ships have typically used heavy fuel oil (HFO) because it is both energy-dense and cost-efficient. But it is also heavily polluting. In response, the International Maritime Organisation regulated sulphur and nitrogen emissions from ships in emission control areas (ECAs) in North America and the Caribbean, as well as in the Baltic and North Seas.
In July 2023, the IMO adopted a revised strategy aiming for net zero GHG emissions by 2050. Specific milestones include at least a 5-10% uptake of low or zero-carbon fuels by 2030. FuelEU Maritime mandates a 2% reduction in annual GHG intensity of energy used by a ship by 2025 (from 2020 levels), rising to 14.5% by 2035, and 80% by 2050.
The Methanol Institute says renewable methanol cuts CO2 emissions by up to 95%, nitrogen oxide by up to 80%, and eliminates sulphur oxides and particulate matter.
Methanol is not a new commodity, and is used in hundreds of everyday products. But it is a new alternative marine fuel. The International Organisation for Standardisation is developing a global standard for methanol as marine fuel (ISO/FDIS 6583), which is in the approval phase.
The Methanol Institute and Lloyd’s Register also jointly published a technical reference for methanol bunkering in July 2020, which seeks to lay down technical standards and requirements (including preparation, delivery and sampling) for supplying methanol as fuel for ships.
Last year, Singapore’s Maritime and Port Authority launched an expression of interest for the supply of methanol as a marine fuel – garnering 50 submissions in a sign of confidence in Singapore as a methanol shipping fuel hub.
The authority is also developing a technical reference for methanol bunkering in consultation with the Singapore Chemical Industry Council. It will be interesting to see whether the technical reference being developed in Singapore will model after the Methanol Institute’s technical reference for methanol bunkering, or will chart a new course for methanol bunkering.
Contractual issues
ISO/FDIS 6583 is likely to become the standard to determine when the methanol supplied as a marine fuel in bunker supply contracts is compliant or off-spec – providing much-needed clarity for shipowners and methanol bunker suppliers alike.
For time charter contracts, the use of methanol raises several issues.
Time charterers pay for and provide the fuel to the ship, and warrant its suitability for the ship’s engines. However, they may be less willing to provide that warranty, given methanol is less “tried and tested” as a marine fuel.
Would an initial testing/trial be needed to ascertain the compatibility of the different specifications of methanol with the ship’s engines? What if the methanol supplied is off-spec or incompatible with the engines? Who is responsible and to what extent? The charter will need to contain provisions on the allocation of risks of off-hire or damage due to methanol quality and incompatibility issues.
A time charter would also typically contain performance warranties as to the vessel’s speed and fuel consumption, and if these warranties are not met – the hire will be reduced. Different performance warranties and tolerances may apply when the vessel is operating on methanol, conventional bunkers or both. A trial phase will probably be needed before the performance warranties can be settled and fixed to apply for the rest of the charter.
Evolving regulations may make it necessary to make modifications for the continued operation of the vessel. This is a pertinent issue in the context of a long-term time charter. Parties should specify in the charter if/how the costs of the required modification are to be apportioned. Where ships are being retrofitted to use methanol, parties should consider if/how the time and costs are to be apportioned.
Conclusion
The regulatory landscape and contractual issues relating to the use of methanol as a marine fuel are dynamic and evolving. These matters will need to be carefully considered and scrutinised in order to ensure compliance with existing obligations and to navigate the changing legal landscape as the shipping industry gears up for a decarbonised future.
Jonathan Tan is a director at Helmsman
21A Duxton Hill, Singapore 089604
Contact details:
T: +65 6950 8660
E: jonathan.tan@helmsmanlaw.com
