Hydrogen in the maritime sector

By Jan Gerrit Köchling, Vatche Kourkejian and Uwe Weichenhain

The maritime sector is a cornerstone of global trade and transportation, transporting an estimated 90 percent of the world’s goods. It is also a significant contributor to climate change, accounting for around three percent of global emissions in 2023, primarily through the combustion of fossil fuels to power vessels. Shipping emissions directly contribute to the Scope 3 (supply chain) emissions of many companies, so effectively reducing emissions from this sector is imperative for companies aiming for net zero. In this study, we look at the role of hydrogen as a possible solution and the opportunity for the Middle East to serve as both a production and a clean bunker hub, helping the maritime sector along its path to decarbonization.

Under the leadership of the International Maritime Organization (IMO) – the United Nations agency responsible for regulating maritime transportation – the maritime sector has made significant strides in reducing its greenhouse gas (GHG) emissions in recent years. The reductions achieved in pollutants such as sulfur and nitrogen oxides have resulted in enhanced air quality in coastal regions and ports. At the same time, energy efficiency measures such as the Energy Efficiency Design Index (EEDI) and the Ship Energy Efficiency Management Plan (SEEMP) have spurred the development and operation of more fuel-efficient vessels.

Now, the IMO has stepped up its efforts to reduce emissions. The 2023 IMO GHG Strategy has set the sector the ambitious target of achieving net zero GHG emissions from international shipping by 2050. Closely related to this ambition, it also sets out to achieve a five to ten percent uptake of zero-emission fuels such as methanol and ammonia by the industry by 2030, and a 40 percent reduction in CO2 intensity by 2030 compared to 2008.

The IMO’s strategy is ambitious but feasible. Indeed, the organization’s track record of successfully implementing ambitious initiatives and fostering coordination between stakeholders indicates that the sector is able to decarbonize more quickly than other industries – opening up a major opportunity for the adoption of hydrogen and derived fuels in the future.

The road to net zero

Electrification, energy efficiency and zero-emission fuels are key pathways to achieving net zero in the maritime sector. While each of these pathways has potential, zero-emission fuels represent the most promising solution for international shipping companies striving to meet IMO targets.

Currently, conventional fuel oil dominates as the shipping fuel of choice, but alternatives such as LNG, biofuels, hydrogen (and its derivatives) are growing in popularity. Electrification is better suited to smaller, recreational vessels that operate over short distances and dock frequently – although in certain jurisdictions, hydrogen is also likely to remain an option due to a greater willingness to pay and the fact that it carries a certain prestige. For larger vessels, electrification poses challenges due to the low energy density of batteries, necessitating larger battery sizes. Consequently, high-frequency ferries that transport cargo and passengers along fixed routes will lean more toward zero-emission fuels. Similarly, deep-sea vessels with complex routes will increasingly rely on zero-emission fuels to meet their sustainability objectives.

In the short to medium term, fuels such as LNG (including bio-LNG and e-methane) are expected to dominate the market. However, limited feedstock availability poses a challenge, driving the continued search for more viable clean alternatives.

In the long term, green ammonia and methanol will be important solutions. Today, the production cost of these green fuels remains high due to the lack of economies of scale. The cost of ships equipped to run on these innovative fuels is similarly elevated, reflecting the nascent state of the technology. As a result, the International Energy Agency estimates that the total cost of ownership (TCO) for a bulk carrier operating on green ammonia or methanol is 60-100 percent higher than for a conventional fuel oil-driven bulk carrier. This difference should shrink over time, as carbon taxes rise, economies of scale appear and new engine technology is widely adopted, paving the way for greater adoption of sustainable fuels in the maritime sector.

Currently, many shipping companies are betting big on methanol and ammonia. For example, as of 2024, Maersk has ordered 24 container vessels equipped with dual fuel engines capable of burning methanol, biodiesel and conventional fuel. Evergreen has also ordered 16 methanol-enabled vessels for delivery in 2027. Vessel engine manufacturers are fueling this trend, with significant ongoing research into developing engines compatible with ammonia and methanol. For instance, MAN Energy Solutions has introduced an ammonia engine suitable for a wide range of vessels and is engaged in a three-year research project to create a viable methanol retrofit for medium-speed engines. Additionally, Wartsila is set to deliver its inaugural four-stroke ammonia engine on a vessel in early 2025.

As infrastructure providers, ports are also readying themselves for the transition. The Port of Ijmuiden in the Netherlands has been awarded the first hydrogen bunkering license, for instance. Similarly, the Maritime and Port Authority of Singapore is preparing for ammonia bunkering to take place in its waters from 2026.

Opportunities and challenges in the Middle East

By 2050, approximately 46 mtpa (million tons per annum) of green hydrogen, 55 mtpa of captured (or biogenic) carbon dioxide and 150 mtpa of nitrogen will be needed to decarbonize the maritime industry. As of September 2024, more than a 100 clean hydrogen production projects had been announced in the Middle East, with Egypt, Oman, UAE and KSA leading the way. This surge is driven by the region’s abundant renewable resources, availability of land and political commitment to the energy transition.

In addition to becoming a hydrogen production hub, the Middle East – positioned along the vital east-west shipping corridor linking Asia and Europe – is fast establishing itself as a clean bunkering hub. Notably, several ports in the region, such as Fujairah, already rank among the world’s top bunkering hubs by volume. Leveraging their advantageous geographical positioning and well-established infrastructure, many of these ports have ambitious plans to strengthen their presence in the growing clean bunker market.

By establishing itself as a clean bunkering hub, the Middle East can not only reduce carbon emissions but also unlock tremendous economic potential – capturing just ten percent of the global clean bunkering market, for example, could generate an estimated USD 6 billion in revenue from green ammonia sales alone by 2050, with an additional USD 7 billion from green methanol sales. Achieving this market share would require the production of approximately 4.6 mtpa of green hydrogen for the maritime sector by 2050, driving the need for around 50 GW of electrolyzer capacity. Realizing such a vision would involve investments of USD 160 billion by 2050 and create 190,000 jobs across the entire clean fuels value chain.

The Middle East faces three major challenges when it comes to establishing a clean bunker ecosystem:

• Lack of clean bunkering infrastructure at ports. The infrastructure required to support clean bunkering operations – storage facilities, pipelines, bunkering vessels and so on – is currently often lacking or underdeveloped. Constrained land availability, high investment costs and an uncertain payback period make investing in infrastructure a high-risk activity. Collaboration between government and private stakeholders is needed to advance infrastructure building at ports. Port authorities would be well advised to conduct feasibility studies and establish regulatory sandboxes for conducting pilots on clean bunkering, while ensuring investment in clean bunker infrastructure via JVs/PPAs or the provision of funding/subsidies

• Uncertain supply of clean fuel. Integrating clean fuels into existing bunkering supply chains necessitates collaboration between various stakeholders, including fuel producers, distributors, bunkering operators and vessel owners. Critical challenges remain in the area of ensuring the availability of clean fuel at bunkering ports, establishing reliable supply chains and managing logistics efficiently. The production of clean fuels also presents its own set of challenges, notably access to biogenic CO2, particularly in regions with abundant renewable energy sources. We recommend that port authorities collaborate with private and public industry stakeholders to cultivate a production ecosystem near ports, ensuring the cost-effective supply of clean fuel. Such initiatives can alleviate concerns regarding the scarcity of clean bunkers and promote the seamless integration of clean fuels into maritime operations

• Lack of regulation and operational standards. Clear, consistent regulatory frameworks are indispensable for instilling certainty and confidence in investors and stakeholders in the clean bunkering industry. Regulations governing fuel production, storage, transportation and bunkering operations must be formulated and enforced in order to ensure safety, environmental protection and fair competition. Regulation also plays a pivotal role in stimulating market demand for clean bunkers and compatible vessels. Moreover, a favorable global carbon policy that renders fossil fuels more costly to consume will expedite the maritime industry’s transition to cleaner fuels. Standardized definitions, methodologies and certifications are currently lacking, creating a further barrier to adoption. Port authorities should collaborate with regulatory bodies to establish the necessary licensing regimes and regulatory frameworks