IMO 2028 Deal May Unlock Synthetic LNG Investment: SEA-LNG

The gas lobby group thinks that e-methane and bio-LNG are more scalable than other alternative fuels. Image Credit: IMO

Gas lobby group Sea-LNG has welcomed last week's agreement by IMO member states on mid-term measures to cut GHG emissions from shipping.

The group believes shipowners will remain confident in ordering LNG-fuelled newbuilds, given the potential to transition to cleaner alternatives such as bio-LNG and e-methane (synthetic methane).

"The [IMO] framework, assuming it is adopted in October, means that ship owners can confidently continue to invest in LNG-dual fuel engine technologies, secure in the knowledge that the LNG, or more accurately, methane pathway to decarbonisation is recognised by the IMO," it said in an emailed statement on Tuesday.

Sea-LNG argues that the proposed regulations will incentivise the growth of bio-LNG bunkering and ramp up investments in e-methane.

It maintains that these fuels are more practical, realistic, scalable and low-cost compared to other alternative marine fuels such as methanol and ammonia.

Meanwhile, Tristan Smith of the UCL Energy Institute offered a contrasting view, asserting that the IMO agreement sets a clear limit on the viability of LNG as a marine fuel.

"This pathway now faces basic penalty fees within the next few years, and will face rapidly growing penalty fees from 2033.

"It is not looking like a competitive choice for newbuilding," he said in a LinkedIn post.

Last week, the IMO agreed on a policy framework, which takes a tiered approach to counting and charging of shipping's emissions.

The policy, set to take effect in 2028 pending formal adoption by the IMO in October, introduces a 'base target' and a 'direct compliance target' for well-to-wake carbon intensity reductions, with progressively stricter thresholds each year and tiered penalties for non-compliance.

Under the 2028 framework, for every megajoule (MJ) of fuel used, the first 77.44 grams of CO₂ equivalent emissions will be exempt from charges. Emissions between 77.44 and 89.57 gCO2/MJ will incur a levy of $100/mtCO2e, while any emissions above 89.57 gCO2/MJ will be charged at a steeper rate of $380/mtCO2e.

These pricing tiers will apply from 2028 through 2030, after which they are scheduled for review and potential revision.