INDUSTRY INSIGHTThought Leadership

Navigating maritime decarbonization in the GCC: Charting a course toward sustainability

By Noora Mukhtar, Research Specialist, GPCA

With the growth of global seaborne trade, estimated to reach 12 billion tons in 2023, the shipping industry faces increasing concerns about Greenhouse Gas (GHG) emissions. Confronting this challenge is important, especially as the International Maritime Organization (IMO) sets ambitious targets for GHG emission reductions: at least 20% by 2030, 70% by 2040, and net-zero by 2050. Against this backdrop, GPCA developed a recent paper which delves into a comparative analysis of low-emission maritime fuels in the GCC region, assessing the viability of LNG, hydrogen, ammonia, and methanol.

Maritime industry growth

Maritime trade, vital for global commerce, has witnessed a dramatic rise, doubling in volume between 1990 and 2021 reaching 11 billion tons. The demand for marine fuels has significantly increased, with projections indicating it will double by 2030, driven by expanding global trade, fuelled by globalization and economic growth. Charting this growth alongside world GDP reveals a correlated relationship. Historically reliant on coal and oil-based fuels, the sector now faces the imperative to transition toward cleaner alternatives amid escalating concerns over emissions. About 86% of GCC petrochemical products are transported by ships consuming sulfur fuel oil, LNG, or MGO, as the main maritime fuel. However, there are ongoing efforts and emerging trends toward exploring and adopting new low-carbon fuels in the region, such as hydrogen, ammonia and methanol.

Maritime carbon emissions

However, this will come at a cost. The maritime industry contributes to approximately 3% of global emissions. GHG emissions from bunker fuels are on the rise globally, indicating a pressing need for concerted action. Amid this, the GCC region stands out as a significant player, being among the top territories in vessel ownership and carrying capacity. However, trends indicate a declining share of GHG emissions from bunker fuels within the GCC, though contrasting with their share in global emissions (Figure 1). This decline reflects the efforts to limit emissions within the maritime sector through different strategies and initiatives. These strategies include reducing total energy demand by optimizing energy efficiency technologies and speed reduction, as well as adopting cleaner fuels such as LNG and low-sulfur oil to minimize pollutants, such as sulfur oxides and nitrogen oxides. Additionally, some ships have installed exhaust gas cleaning systems, known as scrubbers, to further reduce sulfur emissions. Energy efficiency measures, such as optimizing ship design and propulsion systems, alongside the integration of renewable energy sources like solar and wind power, are also being pursued.

Figure 1: Shares of GHG emissions from bunker fuels in the GCC

Source: GPCA analysis and climate watch data, 2023

Figure 2: The impact of the new/ updated IMO regulations on the shipping and chemical sectors

Source: GPCA research, Bansard, 2024

However, it is crucial to note that the increasing share of GCC maritime emissions globally suggests that the region may be lagging behind in comprehensive decarbonization efforts. There is a pressing need for the GCC to intensify initiatives to reduce emissions and align with global sustainability goals.

Regulation and policies

Navigating the labyrinth of regulatory frameworks is critical and represents a key driver for the decarbonization efforts in the shipping industry. International mandates from the IMO, such as the Energy Efficiency Design Index (EEDI) and sulfur caps, drive the adoption of low-emission fuels. Recently added regulations, like the Energy Efficiency Existing Ship Index (EEXI) and Carbon Intensity Indicator (CII), further urge the decarbonization efforts, as illustrated in Figure 2. The new IMO strategy also includes considering the lifecycle GHG emissions of marine fuels in accordance with the well-to-wake approach outlined in the updated Life Cycle Assessment (LCA) guidelines.

Role of the chemical industry in maritime decarbonization

The intersection of maritime decarbonization and the chemical industry is profound. Petrochemical producers in the GCC, central to global trade, find themselves at the nexus of these transitions. Collaboration and innovation are imperative to harmonize sustainability goals with operational imperatives. There are different approaches for reducing emission from ships such as electrification, reducing energy demand on board and taking on new low-carbon alternative fuels. Direct electrification of shipping presents a promising but long-term solution with greater technical complexities while alternative fuel options can have a more short- to mid-term impact in reducing emissions. The GCC region has already embraced energy efficiency optimization practices, and alternative low emission fuels can complement these efforts by providing a greener source of energy.

Figure 3: GCC’s potential in low-carbon maritime fuel adoption

Source: GPCA research, 2023

Given their expertise and position in the region, GPCA members, who are major petrochemical producers, are uniquely positioned to lead the adoption of these alternative fuels. By aligning with their interests and expertise, exploring new fuel technologies, leveraging existing infrastructure, and potentially supplying these alternative marine fuels, GCC producers can create new business opportunities, reduce scope 3 emissions, and enhance ESG performance.

Key challenges and indicators for the assessment of low-carbon maritime fuels

One of the common challenges in the transition to alternative fuels for the shipping industry is the diversity of alternative fuel options, making it more difficult to find common ground and consensus among stakeholders on the most viable alternative fuel pathway, given the multitude of options available. In evaluating alternative fuels, we dissect LNG, hydrogen, ammonia, and methanol through different indicators under each factor. Each presents unique advantages and challenges, from supply chain dynamics to technical feasibility and environmental impact (Figure 4). Our paper analysis unveils the promise of these fuels in mitigating emissions, while catering to regional needs and priorities. While LNG has gained some traction, the exploration and promotion of hydrogen, ammonia, and methanol are still in the nascent phase. Competition from other sectors such as road transport, aviation, agriculture, and agri-nutrient industries, may constrain the supply of such fuels to the shipping industry. Continued research, development of infrastructure, and supportive policies will be crucial for the growth of low-emission maritime fuels in the GCC region and their eventual widespread adoption in the shipping industry.

Figure 4: Factors influencing the selection of potential low-emission fuels

Source: GPCA research, 2023

Conclusion and recommendations for accelerating the transition

A multi-stakeholder approach is indispensable for coordinating and aligning the efforts of all relevant parties involved in the maritime industry’s shift towards adopting low-carbon fuels. Collaboration among government agencies, maritime authorities, and industry players is essential to drive infrastructure development and policy formulation. Strategies such as establishing regional coalitions or task forces, securing access to renewable energy sources, repurposing existing infrastructure, fostering co-investment partnerships, establishing voluntary offtake agreements, involving petrochemical players, and providing government support and incentives aim to address regulatory, infrastructural, technological, and economic challenges and pave the way for the widespread adoption of alternative fuels in the maritime sector.

With strategic foresight and innovative solutions, the GCC can lead the charge toward a sustainable maritime future, ensuring the vitality of both commerce and the environment. As we navigate these uncharted waters, let us steer toward a greener horizon, where sustainability and prosperity sail hand in hand.

References:

[1] “A pathway to decarbonise the shipping sector by 2050,” IRENA (2021).

[2] “Decarbonising the global maritime transport sector,” MUFG (2021).

[3] “Fueling the Transition in the Maritime Sector: What Are the Current Status and Path Ahead?” KAPSARC (2024).

[4] “Techno-economic analysis and life cycle assessment of greenhouse gas and criteria air pollutant emissions for biobased marine fuels,” United States Department of Transportation (2020).

[5] World Bank Database and UNComtrade (2024)