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April 07, 2025Charting a sustainable course: Methanol as a bunker fuel
Methanol has long been on the radar of the shipping industry, as a safe, low-emission and cost-effective alternative to traditional marine fuels. However, interest had fluctuated over the years, leading to slow progress and uptake. In 2020, the introduction of a new set of rules by the International Maritime Organisation (IMO), referred to as IMO 2020, propelled methanol demand in this application (Figure 1).
Why methanol?
IMO 2020 set a new precedent for the sulphur content of bunker fuels, targeting conventional marine fuels such as heavy fuel oil (HFO) and marine gas oil (MGO). Table 1 shows that methanol is a viable alternative, as it dramatically lowers the production of harmful emissions, given that its combustion generates no sulphur oxides (SOx) or particulate matter (PM). Ships powered by methanol comply with the strictest emissions regulations, eliminating the need for exhaust gas after-treatment, and meeting IMO Tier III nitrogen oxides (NOx) emissions standards. Moreover, the use of methanol can reduce in-sector CO2 emissions by up to 72% compared to high sulphur fuel oil (HSFO).
Figure 2 shows that compared to other alternative fuels such as ammonia and hydrogen, methanol has a higher energy density, meaning that storage and fuel tanks require less space. Although methanol’s energy density is lower than that of traditional fuels and LNG, this can be mitigated by frequent bunkering and on-board storage. Moreover, methanol is a liquid under ambient conditions, eliminating the cost of pressurisation or cryogenics, and is considered the lowest-risk fuel. Methanol bunkering is similar to that of HFO and MGO, which means that existing port infrastructure can be repurposed with minor and inexpensive modifications. It therefore provides an economical option, with simple and safe handling, as the necessary safety guidelines have already been developed for methanol use on ships. In the event of a spill, methanol is significantly less toxic to marine life than other fuels, and its effects are likely to be reversible due to its biodegradability and miscibility with water.
In the diverse landscape of alternative fuels, shipowners are often hesitant to adopt new fuels that are not yet widely used, due to concerns about limited availability, high costs, and trading limitations. Methanol, however, is widely traded globally and already proven as a fuel in other sectors. It is suitable for a wide range of shipping applications, including cruise ships, container ships, bulk carriers, tankers, and ferries.
Investments and innovations
The regulations put in place by the IMO support the organisations’ overall strategy to reduce carbon intensity by at least 40% by 2030 and reach net zero greenhouse gas (GHG) emissions by 2050. These aggressive targets have prompted many shipping companies to start investing voluntarily in zero/low-carbon fuels. Other regional initiatives, such as the EU’s RefuelEU, are likely to further open the market for methanol as an alternative shipping fuel.
Many vessel owners and companies have opted to invest in dual-fuel ships, which can run on both diesel and alternative fuels such as methanol, ammonia or LNG, enabling fast development of new shipping fleets. New methanol-powered ship orders are being dominated by the containership sector, with over 100 vessels currently on order, scheduled for delivery in 2025 and onwards. There are also plans to retrofit a number of existing ships, enabling them to run on methanol.
To power the new methanol-enabled fleets, several shipping companies have announced partnerships with methanol suppliers. Notably, Maersk have signed offtake agreements for green methanol which total more than half of their projected methanol fleet demand in 2027. However, it remains unclear if enough market players across methanol and shipping can coordinate.
Future opportunities
Methanol is not a zero-carbon emissions fuel, unlike hydrogen and ammonia. However, it can be produced via green sources, including biomass, bio-methane, renewable electricity, and captured CO2. The rise of green methanol and its potential applications, particularly in the marine fuel sector, presents an exciting prospect for industries aiming to reduce their carbon footprint. As the number of methanol-capable ships increases, so too does the potential for methanol to become a major player in the global push for decarbonisation.
Find out more…
Market Analytics: Methanol - 2025 provides analysis and forecasts to 2050 of supply and demand of the global methanol markets. Methanol demand is segmented by acetic acid, DME, formaldehyde, olefins, MTBE, biodiesel, gasoline blending, marine fuel and others. This analysis identifies the issues shaping the industry as well as provide demand, supply and net trade data for 40 countries. The Executive Summary is available to subscribers as a separate document.
The Author...
Polina Abrosimova, Analyst
About Us - NexantECA, the Energy and Chemicals Advisory company is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms. Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies, and economics, NexantECA provides solutions that our clients have relied upon for over 50 years.
