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Biofuels Use in the Shipping Industry Could Soon Gain Traction
Dr.G.R.Balakrishnan Nov 07 2022 Shipping News

Biofuels Use in the Shipping Industry Could Soon Gain Traction

The use of biofuel blends in the shipping industry could become the norm in the following years, as they seem to make a lot of sense, as a stop-gap solution, until fossil fuel alternatives are available at a larger scale.

In its latest weekly report, shipbroker Gibson said that “iquid biofuels are expected to have an important role to play in meeting future fuel requirements as the energy transition progresses and petroleum demand begins to come under pressure. Increasingly, these required biofuels will be from second and third generation biofuels based on non-food crops, nonarable land, and waste products, whilst fourth generation biofuels will expand the possibilities even further through production optimization improving yields, reducing production emissions and improved chemical performance through genetic engineering. The EU Fit for 55 package of policies makes it clear that future biofuel supply must be at least from second generation blends not competing with food supply”.

According to Gibson, “in terms of potential growth areas, the most promising sectors in terms of demand are likely to be the shipping and aviation sectors, given the specific fuel requirements of those sectors with respect to logistics and practicality…“. Although, there are likely to be strong regional differences, with Europe and North America seeing declines at a much faster rate compared to developing regions such as Africa, Latin America, and Southeast Asia”, the shipbroker noted.

Gibson said that “…Numerous trials have been taken place and are ongoing to find the optimal blend of biofuels with preliminary evidence indicating Co2 reductions in the region of 5-25% depending on blend. However, current high biofuel prices and limited supply could limit the extent of their uptake beyond larger players”.

“The biggest beneficiary in the shipping sector could be the chemical and specialized tanker fleet as well as Handies and MRs who are already key shippers of liquid biofuel and feedstocks such as ethanol, HVO and FAME and as such as likely to see the amount of these and new generation biofuel cargoes increase as more refinery complexes convert to biofuel plants which in turn should positively impact smaller tanker demand and earnings. However, the extent of this will depend on the decarbonization trajectory with respect to overall oil demand and the speed of biofuel uptake”, Gibson concluded.