Methanol Makes Inroads as Alternative Fuel for Shipping in 2022, DNV Says

A total of 275 ships powered by alternative fuels were ordered in 2022, led by LNG and methanol in a distant second, according to a DNV analysis.

LNG newbuilds represented 82% of the total alternative-fueled ship orders, with 222 ships ordered. The majority of them—74%—were containerships and Pure Car and Truck Carriers, with product tankers coming in third with 9% of orders.

DNV said 2022 turned out “against the odds” to be almost on par with 2021’s record year for LNG-fueled ship orders, when 240 ships were ordered with the fuel. The total count of LNG-fueled ships in operation and on order now stands at 876, including 104 new LNG-fueled ships that entered operation during 2022, representing a 41 % growth within the sailing fleet, according to DNV.

Methanol ranked as the second most popular alternative fuel for newbuilding ship orders last year, with 35 ships—primarily large containerships—were ordered with the fuel, bringing the total methanol-fueled count to 82 ships.

Meanwhile, DNV said it was somewhat “surprising” that a total of 18 ships capable of running on hydrogen fuel were ordered in 2022, ranging from small crew transfer vessels for the offshore wind industry, which are built to operate fully on hydrogen, to large cruise vessels installing hydrogen powered fuel cells that cover a smaller portion of the energy demand onboard.

“A diverse portfolio of LNG fueled ships was delivered in 2022, with large crude oil tankers in the lead and container ships in second place,” said Martin Wold, Principal Consultant in DNV’s Maritime Advisory business. “Far from all are currently operating fully on LNG fuel but there are geographical pockets where LNG is still competitively priced and being bunkered regularly. The underlying growth for LNG fuel is nevertheless very strong and the market will likely return with a boom at some point, with bunkered volumes expected to triple within a very short time span.”

Looking ahead, DNV expects 2023 to turn out similarly to 2022 in terms of newbuild orders for alternative fuels. “The orders will likely materialize across somewhat different ship types and sizes compared to last year, moving with the newbuild market in general,” Wold added.

Similar to last year, the vast majority of ships ordered with alternative fuels in 2023 is expected to be LNG dual fuel, although the higher prices for natural gas is likely to continue to delay the widespread adoption LNG as fuel in the marine industry. From a “big picture” perspective, however, delivery times for newbuilds “aligns well” with when global gas and LNG prices are expected to cool down, according to DNV.

Wold believes orders for methanol dual fuel is also likely to continue, and possibly grow in terms of the number of ships ordered. Compared to LNG, methanol fuel systems are less costly and easier both for the yard to fit – in particular on smaller vessels – and for owners to operate.

If there is one takeaway from 2022, it’s that it was the year in which methanol really established itself as an alternative to LNG, with engine makers reporting about record high interest for methanol capable engines.

“Concerns around sourcing and the scalability of green methanol in the short to medium term will remain the main slowing factor here,” Wold said. “Whereas the main competition will be between conventional fuels, LNG and methanol in 2023, we expect to see a further positive trend for the ordering of hydrogen fueled ships. We also expect to add the first officially confirmed ammonia fueled ship to our [Alternative Fuels Insight] database this year.”

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