Preparing Container Vessels for Conversion to Green Fuels

Published — September 28, 2022

This report provides a technical, environmental, and techno-economic analysis of the impacts of preparing container ships for conversion to green fuels. The following executive summary provides a summary of the report highlights.

Transitioning to alternative fuels will be critical for decarbonizing shipping by 2050. The average lifetime of a ship is around 25 years; as a result, shifting to alternative fuels via fleet replacement and retrofitting will take a long time, and we must start as soon as possible. This reality puts increasing pressure on ship owners who want to decarbonize but don’t know how to plan their transition in the face of a future fuel landscape that is still highly uncertain.

Shipowners are left with a series of critical questions: What does converting to alternative fuels entail on a technical level? Should I be building dual fuel ships now, or is retrofitting alternative fuel capabilities later a valid option? How should ships be prepared for later conversion? What are the costs associated with preparing for alternative fuels? Is retrofitting worthwhile from an emissions reduction perspective?

To help de-risk shipowners’ decision making and answer some of these questions, we initiated the recently concluded ‘Green Fuels Optionality Project.’ In the project, we leveraged insights from multiple project partners to determine the technical requirement and costs of converting from fuel oil to methanol or ammonia or LNG to ammonia for container, bulk carriers and tanker vessels. This report outlines the project results related to converting container ships to methanol or ammonia and is the first of three reports from this project.

Figure 1: Conversion pathways analyzed in this report.

Converting from fuel oil to methanol or ammonia

We proposed general design of methanol-fuel oil and ammonia-fuel oil dual fuel vessels based on a 15 000 TEU twin island reference container vessel. We found that under the accommodation was the most optimal location for the alternative fuel tanks (Figure 2), as this position has the smallest impact on cargo space. However, tanks cannot be retrofitted in this position due to the existing ship structure, so vessels must be prepared for conversion at newbuild. When ships aren’t prepared, methanol or ammonia tanks must be installed in the cargo space during conversion (Figure 3).

Figure 2: Designs for methanol-fuel oil (top) and ammonia-fuel oil (bottom) dual fuel vessels after preparation at newbuild.

Using our designs combined with cost estimations from suppliers and project partners, we determined that methanol and ammonia dual fuel newbuilds should cost approximately 11 and 16% of a standard newbuild cost, respectively. We also calculated that conversion from fuel oil to a full range methanol or ammonia dual fuel vessel costs 10-16 and 19-24% of a standard newbuild cost, respectively, depending on the level of preparation at newbuild. For dual fuel newbuilds and conversions, converting to methanol is less expensive than converting to ammonia. This is partly because fuel tanks can be sized for methanol, installed at newbuilding and used for fuel oil before conversion. However, this is not possible for ammonia tanks, which are already more expensive than methanol tanks.

Methanol and ammonia have a lower calorific density than fuel oil, so they require larger tanks to provide the same range as fuel oil vessels. In this study we used full range tank volumes of 16 000 m3 for methanol and 20 000 m3 for ammonia, compared with 8 000m3 for fuel oil. As a result, converting to full range dual fuel vessels using our designs reduces cargo space by 240-610 and 530-1100 TEU for methanol and ammonia, respectively, with conversion of unprepared ships sacrificing most space. These cargo losses can cause a significant reduction in the earning potential of the vessel, so they must be carefully considered before planning dual fuel or conversion-ready vessels. We modeled the impacts of lost cargo space on the total lifetime costs of converted vessels using our techno-economic model, which included add-on newbuild costs, conversion costs, and cargo loss costs depending on the number of years the ship is operated on fuel oil only before conversion.

Figure 3: Designs for methanol-fuel oil (top) and ammonia-fuel oil (bottom) dual fuel vessels after conversion from an unprepared or partly prepared vessel.

Our model showed that fully capable dual fuel newbuilds with full-sized tanks integrated from newbuilding are the most cost-effective option if you plan to convert vessels after a relatively short time operating on fuel oil only (5-8 years for full range conversion). For methanol conversions, a conversion-ready vessel is the best option from a total cost perspective if you are planning a medium-term conversion. For ammonia conversions, the cost difference between converting a prepared or unprepared vessel is minimal because the expensive tank system cannot be prepared at newbuild, so there is no medium-term option. The significant cargo costs associated with converting unprepared vessels to methanol or ammonia mean that this strategy only makes sense after 8-10 years of operation when the increased earning potential from using the full cargo space before the conversion can balance out the increased cost of conversion and larger cargo losses after conversion.

Figure 4: Recommended preparation levels for methanol and ammonia conversions based on conversion timelines.

Conversion costs and cargo losses can be reduced by converting to a reduced alternative fuel range. Our reduced range designs (Figure 5) have a tank capacity of 10 000 m3 for methanol and 7 800 m3 for ammonia, resulting in a slot loss of around 400 TEU. Although the range is significantly reduced, it should be sufficient for traveling between Singapore and Southern Europe on ammonia. The reduced range conversion reduces conversion CapEx to 9-12 and 14-19% of a standard newbuild cost, for methanol and ammonia, respectively. Reduced range conversions also significantly reduce cargo loss and total costs. As a result, converting to reduced range methanol-fuel oil vessels becomes cost effective compared with building a full range dual fuel newbuild after just 4 years. Furthermore, converting to a reduced range ammonia-fuel oil vessel is cost-effective from year zero.

Our emissions analysis showed that the CO2 emissions from conversion are minimal, at around 0.3% of the lifetime emissions of a fuel oil vessel, and as converting to methanol or ammonia significantly reduces operational emissions after conversion, conversion is worthwhile from an emissions perspective.

Figure 5: Designs for reduced range methanol-fuel oil (left) and ammonia-fuel oil (right) dual fuel ships.

Converting from LNG to ammonia

Converting from LNG to ammonia is less complex than converting from fuel oil to ammonia, as many of the gas related systems required for ammonia are already in place. In cases where the existing LNG tanks cannot be prepared for ammonia, we do not expect that it will be practically possible to replace the LNG tanks located under the accommodation, and as a result, conversion to ammonia would not be feasible. As a result, LNG vessels must be compatible with liquid ammonia storage from newbuild for a conversion to take place. We proposed designs for conversion to full range on ammonia (20 000 m3 LNG/ammonia tank) and reduced range (12 000 m3 LNG/ammonia) (Figure 6). After conversion, these ships become ammonia-fuel oil dual fuel vessels and can no longer operate on LNG.

These designs, which prepare the vessels for vessel for later conversion, increase the cost of a newbuild by 7% and 2% for full range and reduced range, respectively, compared to a standard LNG-fuel oil newbuild. Conversion costs were 8% of an LNG newbuild, resulting in total additional costs for newbuild and conversion of 15 and 10% for full and reduced range, respectively. This is 33 and 28%, respectively, of a standard fuel oil newbuild cost.

The additional costs of preparing a vessel for LNG, a larger tank for ammonia operation, and then converting to ammonia make this strategy relatively expensive. However, based on a normalized fuel market situation, operating on LNG rather than fuel oil before conversion offers fuel cost savings. We included fuel savings in our techno-economic model of this option, along with newbuild, conversion, and cargo loss costs. We found that LNG-ammonia conversions are cost-effective if conversion takes place after eight years of LNG operation for full range vessels and one year for reduced range vessels. Again, the emissions associated with conversion were minimal and operational emissions were significantly reduced post-conversion.

Figure 6: Design for full (top) and reduced (bottom) range ships converted from LNG-fuel oil to ammonia-fuel oil.

Preparing for alternative fuels is feasible and cost-effective

To decarbonize the shipping industry, we must transition our fleets to alternative fuels. Our analysis shows that converting vessels is technically and economically feasible, and can play a role in transitioning your fleet to alternative fuels. What’s more, conversion has a favorable impact on lifetime emissions. However, intelligent vessel design and careful conversion and operational planning are essential to ensure conversion remains cost-effective.

In the full project report, you will find the full details of our technical, economical, and environmental analysis of preparing container vessels for conversion to alternative fuels. Read on to learn the technical requirements for ammonia and methanol conversions, how to prepare vessels for later conversions, the total costs of conversion, and how conversion timelines influence total costs. We hope this information will help you plan your fleet decarbonization, so you can play your part in reaching zero by 2050.

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