The report assumes a retrofit cost of $22 million to convert one of Grieg Star's L-class dry bulk carriers. File Image / Pixabay
The cost of converting an existing ship to run on ammonia may represent more than half of a vessel's value, according to new research highlighting the challenges involved in the shift to alternative fuels.
Shipping company Grieg Star has published a report this week examining the challenges of taking on ammonia bunkering, using a bulker as a case study.
The report assumes a retrofit cost of $22 million to convert one of Grieg Star's L-class dry bulk carriers, versus a market value for the vessel itself of about $35 million as of the end of 2021.
"With a conversion cost of more than 50% of the vessel's fair market value the financial burden of such an investment is significant," the company said in the report.
"At the time of writing, there is still uncertainty on green ammonia availability, no clear sight of international mechanisms to influence alternative fuel pricing relative to conventional fuels, and no firm indication of market willingness to pay a sufficient premium for vessels operating on low carbon fuels.
"The main barrier to move forward with the pilot is this combination of high conversion investment costs and the uncertain availability of competitively priced green ammonia."
Ammonia is widely expected to take up a significant share of the marine energy mix in future decades as the shipping industry works to eliminate its GHG emissions. But for now shipowners remain wary of its toxicity and the potential impact on shipping crews' health and the marine environment in the event of spills, and further research and development work will be needed into its safe handling as a bunker fuel.
To view the report in full, click here.