January 10, 2024 [Argus]- The Japanese marine sector will face problems in using biofuels as a marine fuel in 2024 and beyond, because of a lack of delivery infrastructure, despite strong market interest.
Marine biofuel can be more easily used to reduce CO2 emissions compared to other alternatives, making it more attractive.
Japan’s marine fuel consumption has gradually increased over the years, with demand totalling around 6.6mn kilolitre (42mn bl) in 2022, comprising 4.2mn kl for ocean-going vessels and 2.4mn kl for coastal ships, up by 9pc from 2017. The shipping sector is mulling a switch to alternative fuels such as biofuels, LNG and ammonia, encouraged by Japan’s and the International Maritime Organisation’s 2050 net zero goals.
Bunker biofuel is one of the most realistic options to achieve the 2050 pledge compared with other alternative marine fuels, as huge investments are not required to replace or modify existing ships. But bunker biofuel availability in Japan is extremely limited, although shipowners are eager to use the fuel to cut emissions.
The challenge is lack of infrastructure that can deliver biofuels to bunker barges. Most bunker deliveries are arranged directly from refineries, but refiners currently do not supply biofuels, while biofuel infrastructure, including tanks, pipelines and berths away from refineries does not exist at bunkering ports. Tank trucks and steel drums are the only ways to supply marine biofuel to barges for now, but are unsuitable for commercial operations.
The country’s biofuel production capacity is not high. Demand has been slow, even after the trade and industry ministry (Meti) implemented biofuel targets in 2007. Meti required domestic refiners to use bioethanol and ETBE as gasoline blendstock to reduce CO2 emissions from the automobile sector following the Kyoto Protocol. The target was raised three times, but the latest target — 500,000 kl/yr (8,616 b/d) of crude equivalent — has not been revised since 2017.
The required quantity is small enough to be met by imports, which let refiners focus on fossil fuels until negotiations for sustainable aviation fuel started picking up over the last couple of years. This also discouraged independent biofuel producers from building commercial-scale plants in the country.
Domestic oil tank terminals could serve as marine biofuel bunkering points as they have delivery infrastructure. Some are currently supplying conventional bunker fuel purchased in the domestic and international markets. But the number of terminals is not enough to cover the main bunkering points in the country.
Paving the way for fuel ammonia
Negotiations around ammonia as an alternative marine fuel are more proactive than for biofuels in Japan.
This differs from Europe and the US where market participants are skeptical about the fuel because of its toxicity and corrosive nature. The unique trend in Japan is strongly driven by planned ammonia co-firing at coal-fired power plants, while the government also supports the move with subsidies.
Japan is exploring initially establishing fuel ammonia supply chains for ammonia co-firing that could reduce CO2 emissions from the power sector. Major domestic shipowners are involved in these projects, carrying the fuel to power plants. Some supply chains are likely to become ammonia bunkering points in the future, and shipowners will utilise this infrastructure for bunker use.
But a majority of domestic shipping companies in Japan are hesitant to make major investments in alternative fuels, with a variety of marine fuel options available during the transition period. Biofuels could still be an option especially for small scale coastal and short-haul ships, although the environment is not conducive yet for alternatives, market participants said. This is because alternatives such as LNG, ammonia and hydrogen need more tank space to store, making their use inefficient for shipowners.
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