High Cost of Ammonia May Keep It Out of Reach for Most Shipowners: DNV

Navigator Global and Green Pioneer during the world’s
first ship-to-ship ammonia transfer at anchorage. Image Credit: Yara

The high cost of ammonia is the most significant barrier to its uptake as a marine fuel, according to a new whitepaper published by DNV on Wednesday.

Despite technical progress made around engine development and pilot bunkering planned, the economics remain heavily skewed towards oil-based marine fuels.

Green ammonia wholesale prices have held steady at about $2,900 per tonne MGO equivalent (tMGOe) in Northwest Europe since 2021 -- almost five times from current MGO prices.

These costs exclude bunkering and distribution costs, indicating the delivered price of green ammonia may move even higher.

Blue ammonia only entered limited production this year, but it is not yet available for shipping at scale.

DNV notes that small-scale production and distribution further inflate unit costs, while large-scale projects demand investments that are difficult to justify without firm offtake commitments.

It argues that the cost of ammonia is not inflated only by production challenges but also by high feedstock and infrastructure expenses.

A bunker barge capable of supplying ocean-going vessels with ammonia can cost around $30 million, depending on size. That figure highlights the scale of investment required before even considering fuel production and distribution costs.

Moreover, input factors such as electricity and other costs also weigh heavily on economics.

"Clearly, the cost of low-GHG ammonia still has a way to go before it becomes directly competitive with that of MGO," the report states.

"While advances in production technology and benefits of scale may drive prices down, increasing GHG-related costs will be necessary to achieve price parity."

Looking ahead, the consultancy projects that green and blue ammonia costs could fall to $1,000-1,900/tMGOe by 2050, aided by scaling and technology learning curves.

More importantly, new carbon regulations - including the EU ETS, FuelEU Maritime, and the IMO's GHG pricing mechanism due in 2028  - are expected to shift the economics by making conventional marine fuels more expensive.

Until then, DNV sees ammonia may remain viable only for first movers with cargo owners willing to pay a premium for low-GHG transport.