One green shipping fuel contract can commit a buyer to $1 billion or more

Green shipping fuel is not bought on the spot market. A ship that runs on green methanol or ammonia needs a supply that is contracted years ahead, and the plants that make that fuel need buyers who will commit for a decade before they can be financed.

What a single offtake commits a buyer to

The Global Maritime Forum and the Getting to Zero Coalition have put numbers on that commitment in their report on aggregating demand for zero-emission shipping fuels. A 100,000-tonne green methanol offtake may cost around $100 million a year, and a 215,000-tonne ammonia offtake around $170 million a year. Over a 10-year contract, that is a commitment of $1 billion to $1.7 billion. The report's estimates assume prices of $1,000 a tonne for methanol and $800 a tonne for ammonia.

Fuel developers want 10- to 15-year, fixed-price deals that cover 65% or more of a plant's capacity, generally with investment-grade buyers. Few single companies in shipping can sign on those terms alone.

Ships are arriving faster than supply

The demand side is already moving. Nearly 300 methanol- and ammonia-capable ships are due by 2028, yet only a handful of shipping companies have secured green fuel supply for them. Without long-term offtakes, many of those vessels will run on conventional fuel, and the plants that could supply them will wait for a final investment decision.

Sharing the commitment across the value chain

For cargo owners, the emissions from the fuel burned on their voyages sit in their Scope 3, or value-chain, emissions. That gives them a reason to share the long-term commitment with carriers and fuel producers rather than leave it to the carrier alone. Aggregating demand from several buyers is one route to the contract sizes that developers need.

Sharing a contract raises a practical question: who owns which part of the resulting reduction. Credits are issued to the project developer after independent verification, and Carbon3 records them once in its registry as inset credits. Each buyer's share then has a single owner and a single claim. This is insetting, financing emissions reductions inside a company's own value chain, not offsetting, and the difference is explained at carbon3.net/insets-vs-offsets.

Claim treatment depends on the applicable reporting framework.

The open question is which cargo owners will step forward to share that decade-long commitment with their carriers.

Source: Global Maritime Forum / Getting to Zero Coalition, Aggregating demand for zero-emission shipping fuels (Part 1, August 2024).