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OPINION

Unlocking Biofuel’s Huge Value

Lars Liebig (Managing Director, Uniper Energy DMCC)

Untapped potential. That’s how best to describe today’s maritime biofuels in the Gulf. And that’s surprising. A dearth of this green fuel comes amid the global shipping industry’s bid to cut 50% of its greenhouse gas emissions by 2050 on 2008 levels, plus Gulf nations’ ambitious greening targets. Why?

Primarily due to a lack of market architecture, i.e. supportive policies, investors’ awareness and supply chain infrastructure. Then there’s the International Maritime Organization’s (IMOs) new 0.5% sulfur limit for bunker fuel, which came into play on January 1st this year, also known as IMO 2020. Complying to what many consider one of the biggest changes in shipping in a century has taken a lot of focus and balancing of the financial books. Add to that the impact of the Covid-19 pandemic and subsequent economic strain, it’s no surprise that this opportunity is largely unexplored in the Gulf. But that must change – and quickly.

Catching Up

Global output of all transport biofuels grew by 6% year-on-year in 2019, to 96mn tons of oil equivalent (Mtoe). And an average 3% in production growth is anticipated over the next five years. But this isn’t even in the ballpark of the sustained 10% annual global growth required to meet the Sustainable Development Scenario (SDS), according to the International Energy Agency (IEA). In the SDS, low-carbon fuels meet 7% of international shipping’s fuel demand by 2030. Yet, the market’s current biofuel consumption is minimal. How can the Gulf play its role and accelerate momentum? 

More supportive policies are urgently needed to facilitate advanced biofuel project deliveries for shipping, which in turn would support compliance to IMO 2020. And there needs to be eager players, those willing to help facilitate this market. Let’s remember that no company or market is an island. A group effort lies at the heart of a getting a biofuels ecosystem – that is both sustainable and commercially successfully – established in the Gulf. 

For our part, we can help strengthen the supply chain by collaborating with upstream players, policy makers, bunkering experts, port operators, shippers and more. Specifically, as the market grows, we can discuss biofuel supply and storage options at our facilities at the Port of Fujairah. If you want to be a forerunner in this increasingly relevant market, leveraging the world’s second largest bunkering hub is a good place to start.

Momentum is certainly building. The UAE’s state-owned ADNOC Logistics & Services said it will test biofuel as a bunkering fuel for ships.¹ And Dubai-based Neutral Fuels had the first licensed biorefinery in the UAE, which converts waste vegetable oils into EN14214 compliant biodiesel to power transportation fleets. Already, this has mitigated 10.5mn tons of carbon emissions from well-known corporations. Surely lessons and best practices can be learned from Neutral Fuels’ success in the road transport sector and applied to maritime?


Balancing act 

The good news is that biofuels are flexible, which should help accelerate market momentum. Biofuels are also considered the most ‘technologically ready’ of the various zero-carbon alternatives currently under consideration for deep-sea shipping, according to the Sustainable Shipping Initiative (SSI). Such fuels can be used as drop-in or blends with minor modifications to existing engines, machinery, and storage systems, which simplifies the transition from existing fossil-derived fuels. With the shipping industry getting to grips with IMO 2020 and Covid-19, the simpler the biofuels market, the better.

There are questions about how robust supply will be. But without a crystal ball, and this being an embryonic market, we can’t pin down numbers just yet. What we do know is that a transparent environment with clear price signals and security of feedstock are pivotal to reinforcing investors’ confidence. 

Another hurdle is the possibility of indirect and unintentional environmental damage. This is extremely hard to monitor, making it hard to change. But we do know that SSI’s research revealed a preference for biofuels to be sourced from municipal, agricultural and/or forestry waste streams, rather than purpose-grown crops, (i.e. palm and soy). This could be in the Gulf’s favor. Also, in this vein would be the benefit of a single certification methodology that addresses the questions and concerns around indirect and systemic impacts. 

Perhaps this is an area of expertise that Gulf countries, many also keen on becoming knowledge-based economies, could explore to reflect their commitment to the energy transition? This, and so many other areas – i.e. supportive policies, building a network of storage providers – are golden opportunities to spur a green fuels market that the region truly needs.

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