by Lloyd's List
22 April 2025 (Lloyd's List) - BOTH International Maritime Organization and EU green regulations will see liquified natural gas remaining the cheapest ship fuel through to 2035, according to analysis by Rystad Energy.
The consultancy weighed the costs of using LNG, very low sulphur fuel oil and e-ammonia.
“The findings reveal that LNG maintains its cost competitiveness under various regulatory frameworks from the present through 2035,” wrote Rystad senior data analyst Junlin Yu and supply chain research vice-president Jo Friedmann.
They said the production cost of e-ammonia struggled to compete with fossil fuels even after considering regulatory penalties and production incentives.
The price gap may be narrowed by selling surplus compliance units in pooling and by rewards for zero and near-zero carbon (ZNZ) fuels, once these were determined.
The competitiveness of LNG for many years “underscores the importance of establishing appropriate financial incentives for ZNZ fuels and technologies to accelerate the transition”.
Carbon pricing under the IMO’s new Net Zero Framework will see VLSFO remain below $1,000 per tonne until 2035, when it will shoot above $1,100 per tonne.
The Tier1 remedial unit (RU) penalty will stay stable at about $49 per tonne because of the consistent gap between the IMO’s base and direct compliance targets.
Rystad Energy said the higher Tier 2 RU penalty would be around $90 per tonne before 2030; $150 per tonne in the years to 2034; then surge to $463 per tonne in 2035, representing more than 70% of the base fuel cost.
Yu and Friedmann said VLSFO was more economical under the IMO regulations than those of the EU, because of the latter’s substantial penalties.
The IMO has yet to set carbon intensity reduction targets past 2035, except for a base target of 65% by 2040.
Analysts are split on how the IMO rules will influence ordering of LNG-fuelled newbuildings, since these will need to use bio- or e-LNG to comply beyond 2033.
The future supply and cost of both is uncertain, but researchers expect e-ammonia to cost less than e-LNG to make.
