LNG, Methanol and Ammonia Are Reshaping Ship Propulsion

The Decarbonization Imperative

The ships that carry 90 percent of world trade have relied on the same basic propulsion technology for over a century: internal combustion engines burning petroleum-based fuels. This is now changing. Pressure to reduce greenhouse gas emissions is driving the most significant transformation in marine propulsion since steam gave way to diesel. The fuels that will power shipping through mid-century are being decided today.

No single fuel has emerged as the definitive replacement for heavy fuel oil. Instead, the industry is pursuing multiple pathways simultaneously, with different solutions suiting different vessel types and trading patterns. Understanding these options—their advantages, limitations, and readiness—is essential for anyone making long-term investment decisions in maritime.

The Regulatory Push

International Maritime Organization regulations are forcing the pace of change. The IMO’s initial greenhouse gas strategy targets a 40% reduction in carbon intensity by 2030 and at least 50% reduction in absolute emissions by 2050, with a pathway toward full decarbonization.

The Carbon Intensity Indicator (CII) now rates vessels annually from A to E. Ships rated D for three consecutive years or E for a single year must submit corrective action plans. Rating thresholds tighten each year, eventually rendering conventional vessels non-compliant regardless of operational efficiency.

The EU Emissions Trading System now covers maritime, requiring ships to surrender carbon allowances for voyages to and from EU ports. This creates direct financial incentive for lower-carbon operations, with costs potentially reaching thousands of dollars per voyage.

LNG: The Transition Fuel

Liquefied natural gas has become the leading alternative to conventional marine fuels, with nearly 1,000 vessels now operating on LNG and hundreds more on order. The technology is mature, infrastructure is expanding, and the emissions benefits—while not zero—are substantial.

Compared to heavy fuel oil, LNG offers:

• 20-25 percent reduction in CO2 emissions
• Near-elimination of sulfur oxide emissions
• Significant reduction in nitrogen oxides
• Elimination of particulate matter

These benefits made LNG attractive as sulfur regulations tightened and pressure grew on air quality. Major shipping companies including CMA CGM, MSC, and Carnival have built substantial LNG-fueled fleets.

LNG Infrastructure Expansion

Bunkering infrastructure has expanded dramatically. Singapore, Rotterdam, Fujairah, and dozens of other ports now offer LNG bunkering via truck, barge, or ship-to-ship transfer. LNG bunkering vessels allow fueling without port calls at dedicated terminals.

Pricing has become more predictable as the market matures. LNG is typically priced against natural gas indices rather than oil, providing some hedge against oil price volatility.

The Methane Problem

LNG’s climate benefits are complicated by methane slip—unburned fuel that escapes through the engine and enters the atmosphere as a potent greenhouse gas. Methane has roughly 80 times the warming potential of CO2 over a 20-year period, meaning even small leakage rates can offset CO2 reductions.

Engine manufacturers are working to minimize slip through improved combustion and exhaust treatment. High-pressure injection engines virtually eliminate the problem but are more expensive and complex. The latest generation of LNG engines has substantially reduced slip compared to earlier designs.

Despite its limitations, LNG offers a proven pathway for immediate emission reductions while zero-carbon fuels mature. Vessels built today with LNG capability can potentially transition to bio-LNG or synthetic methane as these become available, providing a bridge to deeper decarbonization.

Methanol: Growing Momentum

Methanol has emerged as a serious contender for maritime decarbonization, with major orders from Maersk, CMA CGM, and other leading operators signaling industry confidence in this pathway.

The appeal of methanol includes:

• Liquid at ambient conditions – Simpler storage and handling than LNG or ammonia
• Existing infrastructure – Already traded as a commodity chemical
• Scalable production – Can be made from natural gas, biomass, or renewable electricity
• Retrofit potential – Engines can be converted relatively easily

When produced from fossil sources (gray methanol), the fuel offers modest emissions benefits. The real potential lies in green methanol—produced using renewable electricity and captured carbon—which can achieve near-zero lifecycle emissions.

Maersk’s Methanol Bet

Maersk has committed to green methanol for its new container vessel program, ordering over 25 methanol-capable vessels. The company’s first methanol-fueled container ship, Laura Maersk, entered service in 2023, demonstrating commercial viability.

The challenge lies in securing sufficient supply; current green methanol production is negligible compared to shipping’s fuel requirements. Maersk has signed supply agreements and invested in production projects, but scaling remains the critical bottleneck.

Ammonia: The Zero-Carbon Candidate

Ammonia produces no direct CO2 emissions when burned, making it a leading candidate for deep decarbonization. The fuel can be produced using renewable electricity to split water (for hydrogen) and extract nitrogen from air, creating a potential pathway to genuinely zero-carbon shipping.

However, ammonia presents significant challenges:

Toxicity – Ammonia is acutely toxic at concentrations that can occur during leaks or spills. This creates safety concerns for bunkering operations, onboard handling, and port community exposure. Safety protocols and detection systems add complexity and cost.

Engine development – While ammonia-fueled engines are under development, commercial marine engines are not yet available. MAN Energy Solutions and WinGD are leading development efforts, with first applications expected in the late 2020s.

Energy density – Ammonia contains less energy per unit volume than conventional fuels, requiring larger fuel tanks and affecting vessel design and cargo capacity.

NOx emissions – Ammonia combustion can produce nitrogen oxides, requiring exhaust treatment systems to meet emission standards.

Despite these hurdles, ammonia’s zero-carbon potential has attracted substantial research investment. Engine manufacturers are developing dual-fuel designs that can burn ammonia alongside conventional fuels during the transition period.

Hydrogen: Long-Term Promise

Hydrogen represents the ultimate clean fuel—producing only water when burned or used in fuel cells. However, practical challenges have limited its adoption in maritime applications.

The fundamental problem is energy density. Hydrogen must be stored either as a cryogenic liquid at -253°C or compressed to extremely high pressures. Either approach requires substantial tank volume and weight, reducing cargo capacity significantly on long voyages.

Current applications focus on short-sea shipping where range requirements are modest. Ferry operators in Norway and elsewhere have demonstrated hydrogen fuel cell vessels, proving the technology works for suitable applications. The MF Hydra became the world’s first liquid hydrogen ferry in 2023.

For deep-sea shipping, hydrogen is more likely to serve as a feedstock for synthetic fuels—ammonia, methanol, or e-fuels—rather than being used directly. These hydrogen carriers offer better energy density while retaining the zero-carbon benefits of renewable hydrogen production.

Biofuels: The Drop-In Option

Biofuels offer an attractive proposition: drop-in replacements for conventional fuels that require no engine modifications or new infrastructure. Ships can blend biodiesel with conventional fuel or burn pure biofuel with minimal changes.

The maritime industry has conducted successful trials with various biofuels including FAME (fatty acid methyl ester), HVO (hydrotreated vegetable oil), and bio-LNG. These trials demonstrate technical viability for existing vessels.

Scalability is the key challenge. Sustainable biofuel feedstocks—waste oils, agricultural residues, dedicated energy crops—are limited. Aviation is competing for the same supplies, and biofuel production cannot easily scale to meet shipping’s enormous fuel demand of approximately 300 million tonnes annually.

Biofuels may play a transitional role, particularly for vessels that cannot be retrofitted for alternative fuels, but they cannot serve as the primary pathway for maritime decarbonization.

Wind-Assisted Propulsion

While not a fuel, wind-assisted propulsion deserves mention as a proven technology for reducing fuel consumption. Modern wind systems supplement engine power rather than replacing it, offering 5-30 percent fuel savings depending on vessel type and trade route.

Technologies include:

• Rotor sails (Flettner rotors) – Spinning cylinders that generate thrust through the Magnus effect
• Wing sails – Rigid airfoils that provide lift like aircraft wings
• Suction wings – Boundary layer control systems that enhance aerodynamic performance
• Kites – High-altitude systems that capture stronger winds

Multiple commercial vessels now operate with wind-assist systems, demonstrating real-world fuel savings. Cargill has deployed Flettner rotors on bulk carriers, reporting 20%+ fuel savings on favorable routes. The technology pairs well with alternative fuels, reducing consumption of whatever fuel is aboard.

Comparing the Options

Each alternative fuel involves tradeoffs:

Making Investment Decisions

Shipowners ordering vessels today face unprecedented uncertainty. A ship commissioned in 2026 will operate until 2050 or beyond, spanning the entire transition period for maritime decarbonization. Choosing the wrong fuel pathway could leave owners with stranded assets.

Several strategies help manage this risk:

• Fuel flexibility – Designing vessels that can switch between fuels as availability and economics evolve
• Future-proofing – Including tank space and structural provisions for later conversion
• Portfolio diversification – Spreading bets across different fuel types
• Charterer alignment – Matching fuel choices to customer requirements and willingness to pay

Newbuild premiums for alternative fuel capability range from 10-25% depending on technology choice. These investments make sense where charterers will pay premium rates or where regulatory compliance requires cleaner operations.

The Path Forward

The maritime energy transition will unfold over decades, not years. LNG and methanol will likely dominate the near-term orderbook, with ammonia gaining share as engine technology matures and safety frameworks develop. Hydrogen may find niches in short-sea shipping while serving primarily as a feedstock for other synthetic fuels.

The maritime energy transition will create winners and losers. Companies that navigate it successfully will emerge with modern, efficient fleets serving customers who increasingly demand low-carbon shipping. Those that delay or choose poorly may find themselves operating obsolete vessels in a transformed industry.