CO₂ Vessel Supply and the Global Shipbuilding Picture – By CO₂ Gases team, Clarksons
Clarksons’ CO₂ Gases team hosted a Member Discussion Forum in partnership with the CCSA, focused on ‘CO₂ Vessel Supply and the Global Shipbuilding Picture’. The event included a presentation from Stephen Gordon (Managing Director, Clarksons Research), followed by a panel discussion, moderated by Olivia Powis (UK Director, CCSA) and featuring:
- Bruce Moore – Director Strategy and New Energy, Mitsui O.S.K. Lines, Ltd (MOL) (Europe Africa)
- Tommy Baggio – Consultant, CO₂ & Green Ammonia, Clarksons
- Matt Neale – Director, Newbuilding and Sale & Purchase, Gases, Clarksons
- Stephen Gordon – Managing Director, Clarksons Research
The panel explored the full shipbuilding mix – from design to delivery – and covered a range of topics, such as the benefits of synchronising Carbon Capture and Storage (CCS) project timelines with shipbuilding and chartering, and the need to protect key stakeholders in shipping projects via thorough due diligence, clear processes and intelligent decision making.
Several themes emerged during the session, reflecting topics and trends that are being more widely observed across Clarksons. These included:
1. Why CCS needs shipping
Shipping is critical for CCS projects which do not have nearby access to CO₂ storage facilities, allowing CO₂ to be transported to storage sites and enabling the widespread deployment of CCS technology. Not only is shipping important for individual project success, it also helps meet global decarbonisation goals. Speaking at the Member Discussion Forum, Oliva Powis said:
“We estimate over 90 projects are looking to potentially deploy carbon capture to enable us to reach net zero and the targets for capturing and storing 50 to 60 million tonnes by 2035. Shipping will be absolutely critical to getting a lot of those projects underway.”
2. Shipbuilding’s challenges
While the CCS industry is rapidly expanding (we’ve seen a 100% increase in projects globally over the past year), the shipbuilding sector faces constraints, including a reduction in global shipbuilding capacity. Panellist Stephen Gordon said:
“We think shipbuilding capacity is about 35-40% lower today than it was in 2010. We believe there will be some incremental increases in shipbuilding capacity, but we may only get halfway back to where we were previously, by the end of the decade. At the moment, shipbuilding capacity is very tight.”
There are also other challenges such as high demand (due to an ageing world fleet), high costs (pricing has gone up 40% in the last four years), and long lead times for building new vessels (these have increased to three to four years), Combined, these are impacting how long it will take and how much it will cost to roll out CO₂ shipping. As Matt Neale put it:
“The shipbuilding business is extremely firm at the moment. Whereas before, the buyers had all the power, that has now completely gone. The power is very much in the hands of the shipyards, and I don’t think anyone would debate that.”
This mismatch between demand and the pace of supply could create bottlenecks and delays in getting the necessary shipping infrastructure in place to support CCS projects.
3. Collaboration is essential
Collaboration, coordination, and information sharing between the CCS and shipping industries is crucial. Aligning project timelines, streamlining commercial models, exploring innovative financing models, and developing technical standardisation specifications will be key to unlocking the full potential of CO₂ transportation in the CCS value chain. If we are going to scale up global CCS capabilities, maintaining cross-industry open dialogue and finding creative solutions will be essential. As Bruce Moore said during the panel discussion:
“We need to find a way to actually commercially structure it to incentivize everybody to take their place in the supply chain.”
Involving the full value chain (shippers, technology providers, CCS experts etc.) will also help to develop much-needed industry codes and standards. This will make it easier for the shipping technical authorities to understand what is being loaded, what is being discharged, its composition, the required temperatures etc., and help establish a liquified CO₂ spec.
Challenges and opportunities
When it comes to CO₂ vessel supply and the global shipbuilding picture, how can we overcome challenges and capitalise on opportunities?
Challenge: CO₂ vessel supply and CCS projects are both dynamic spaces
Opportunities and solutions: Market players must constantly adapt and respond to new technology and fast-paced regulatory change around decarbonisation. While speaking on the event panel, Matt Neale highlighted there is still a lot of uncertainty in CO₂ newbuilding, saying:
“Even the shipyards themselves don’t yet know exactly what the market is going to ultimately demand. We’ve seen a lot of discussion around different vessel sizes, different propulsions, and whether to go for low or medium pressure. There are a lot of decisions still to be made.”
Given this, engaging shipping experts to validate projects, understand the scale of the undertaking, and provide guidance on project development and contracting processes can be hugely beneficial. Having been involved in liquefied gases since the early 1960s, here at Clarksons we consider ourselves well placed to advise clients operating in this space. Speaking during the Member Discussion Forum, Tommy Baggio encouraged CCS projects to:
“Speak to the experts when it comes to shipping. Clarksons has extensive experience in running competitive processes and has contracted over 100 gas carriers in the last ten years. We have the information and the know-how which a successful shipping strategy will need to draw on.”
Tommy also highlighted the strength of the ship owning community, pointing out that:
“This industry is blessed with a group of shipowners who are really innovative and actively looking to find solutions to complex problems. These are great guys to work with.”
Challenge: Finding creative solutions to shipbuilding challenges
Opportunities and solutions: To overcome limited shipbuilding capacity, we recommend broadening the industry’s understanding of timescales and the stages of CCS projects so that shipping timeline requirements can be integrated into CCS project planning as early as possible. Similarly, the CCSA’s continued work to reduce costs across the CCS value chain, including contracting strategies, will help tackle high costs.
Challenge: How to capitalise on the huge potential for UK-based CO₂ storage
Opportunities and solutions: The UK coastline is home to ⅓ of Europe’s potential CO₂ storage, representing a significant opportunity for importing CO₂ storage from EU emitters. But the UK must move quickly to capitalise on this, which may require governments to provide targeted support to kickstart this emerging market and ensure the UK’s participation.
Challenge: Identifying any viable alternatives to Asia in order to meet global shipbuilding requirements
Opportunities and solutions: Speaking during the Member Discussion Forum, Elwin Taylor pointed to the remaining installed shipbuilding capacity in Europe and government objectives to sustain a level of shipbuilding activity for strategic reasons. Whether this could translate into competitive pricing of CO₂ carriers is questionable, and a level of subsidy would almost certainly be required. Additionally, Stephen Gordon suggested that local content requirements could be met by gas plant and equipment suppliers, as these are fields in which European designers and manufacturers maintain a strong position.
For more information you can speak to Clarksons’ CO₂ Gases team.
