Investigating Carbon Capture and Storage for an LNG carrier

Exploring Carbon Capture and Storage for an LNG Carrier

A Joint Industry Project investigated the business case and feasibility of a Carbon Capture and Storage (CCS) system on board a 109,000 dwt/174,000 cbm LNG carrier to achieve compliance with the IMO decarbonization goals towards 2050. The ship is assumed to begin operating in 2025. The project partners included DNV, TotalEnergies representing the charterer, HD-HHI (Hyundai) as the shipbuilder and CCS equipment manufacturer, SK Shipping as the ship operator and Marubeni as a ship financier. The JIP was specifically interested in determining whether a strong business case can be put forward for an LNG-powered vessel with CCS as a solution to tackle the decarbonization challenge following the success of the consortium project results in 2022 that investigated an array of decarbonization pathways.

The IMO decarbonization ambition, now aiming for a carbon-neutral shipping industry by 2050, is best illustrated using the Carbon Intensity Indicator (CII). The CII measures, in grams of CO2 emitted per cargo-carrying capacity and nautical mile, how efficiently a ship transports goods in terms of carbon emissions. The ‘baseline’ LNG carrier used for the study will remain compliant until around 2030 simply by burning LNG. From 2030 onwards, the LNG carrier will need to do ‘something’ to remain compliant, and after 2030/31 it will have to blend in increasing amounts of biofuel combined with CCS to comply with the tightening CII requirements.

The pressure to achieve zero carbon by 2050 is on and the green transition is in progress. The industry must embrace all technologies that can realistically support it. The green transition will inevitably be costly. When pondering investing in CCS, there are ‘soft’ factors to consider, including: Carbon Capture and Storage is a realistic approach to achieve compliance. The JIP has shown that even the added costs in the least favourable scenario make the business case a highly relevant option going forward. In addition, CCS gives the shipowner increased flexibility and marketability, important factors in a highly uncertain world regarding the energy price development. CCS reduces the impact of fuel price fluctuations. If biofuel becomes very expensive or is in short supply, CCS will immunize the operator by providing the option to use fossil fuel.

Carbon Capture and Storage (CCS) is a mature technology on land. A variety of projects are underway to adapt it for maritime use. The process involves several steps: First, the exhaust gas is cooled down, then sprayed with an amine solvent in an absorber unit to wash out some or all of the CO2. In a subsequent regeneration process, the solvent is separated from the CO2. The solvent is reconditioned for re-use, while the CO2 gas is condensed, compressed and liquefied for storage and eventual offloading at a port.

On the LNG carrier under study, the CCS process arrangement will be located on deck to minimize interference with other equipment and the line of sight from the bridge: The CO2 capturing skid (mainly the CO2 absorber, CO2 stripper, solvent tank and solvent heat exchanger) is placed aft behind the deck house; the CO2 liquefaction skid (pre-cooler, dryer, compressor and condenser) is placed amidships; and several storage tanks for the captured and liquefied CO2 are lined up on deck. Some hull reinforcements and a raised superstructure may be necessary. For this particular LNG carrier, four CO2 storage tanks, each holding 750 m3, are suggested.

A variety of scenarios were examined in the JIP study with the following key assumptions: CO2 capture rates of 25%, 50% and 70%; Energy penalty of 14%, 10% or 9%, applied to the 25% CO2 capture rate; fossil and biofuel price scenarios; CO2 offloading costs ranging from USD 50 to 100 per tonne of CO2; a current CCS system design with a 25% capture rate, plus an improved system capturing 50% or 70%; plus two scenarios assuming lower CCS system CAPEX and OPEX; global CO2 emission taxes rising from USD 100 in 2026 to USD 200 from 2040

Key results of the calculations performed by the JIP include: the CCS system with an energy penalty of 14%, proved to be inefficient. In this case it is always more expensive to run the CCS system compared to simply using blend-in carbon-neutral LNG from around 2032 to remain compliant. With a better-performing CCS solvent, pushing the energy penalty to 10% or even 9%, the fuel costs will be lower since the vessel can use more low-cost fossil fuel without blending in bioLNG because the CCS system is running. However, the total operational costs will be marginally higher than those of the reference vessel without CCS because extra costs will result from offloading as well as CCS CAPEX. In this case, the CCS is turned on for about two thirds of the lifetime of the vessel, i.e. from 2032–2035 onwards. Naturally, higher offloading costs will make CCS less attractive.

Following in-depth investigation, what is clear is that CCS offers flexibility for LNG carriers on their decarbonization journey from 2030. With uncertain fuel availability and pricing, CCS has the potential to offer a robust approach even with relatively poor-performing systems but we must move beyond that. As shown, with improved energy penalty moving closer to and even below 10%, an eventual decrease in offloading cost below USD X and an inevitable increase in CO2 taxes, let alone improved capture rates, we move into a positive business case story!

What conditions would make CCS a good business case for this ship? A better performing, reasonably priced CCS system and more powerful CO2 solvents will greatly improve the business case. CCS system manufacturers should be incentivized to continue research and development of shore-based CCS technology, improving performance parameters, maximizing capture rates, upscaling production, and making systems cheaper and smarter. A more mature CCS technology will greatly benefit the maritime industry. A logistics and value chain including in-port offloading infrastructure for captured, liquefied CO2 is of utmost importance. CCS hubs are planned or being built at many ports; however, for CCS to succeed, low offloading costs are crucial and should be ensured by governments as part of their national decarbonization strategies.

The CCS process is energy-intensive and the increased operational costs, the ‘energy penalty’, generated by running the CCS process affects the business case. We assume that the operator can determine when to switch the CCS system on and off. The percentage of CO2 captured from the exhaust gas stream depends on the system, respectively, the amine solvent. The higher the CO2 capture rate, the higher the energy penalty. The feasibility of CCS on the vessel under investigation depends on the energy penalty associated with the CO2 capture rate that must be achieved to remain compliant. To minimize OPEX, the CCS system must be designed to strike a balance between an optimum capture rate (‘CR’ in the figure) and a minimum energy penalty.

The fuel price development is a key parameter for the business case of CCS. A fuel price development where fossil fuel prices are low and bioLNG fuel prices high will improve the CCS business case significantly; CCS will even mitigate a rising fossil fuel price. The graph above compares two different fuel price scenarios at various energy penalty levels. In the low fossil price/high bio price scenario (lower dots), the business case is clearly favourable even at a 70% capture rate. The fact that fuel prices are basically non-negotiable is a strong argument for CCS: Carbon Capture and Storage reduces the shipowner’s exposure to fuel price fluctuations.

Other major cost factors influencing the feasibility calculation include the fees that ports will charge for offloading captured CO2 and future fuel prices. The JIP studied various cost and fuel price scenarios to determine in what conditions the vessel under study would be able to use CCS profitably. Another uncertainty considered in the business case calculations was future carbon taxes. The development of GHG emission allowances under the EU Emission Trading System (ETS), which will include ships above 5,000 GT from 2024, will likewise influence the attractiveness of CCS: in general, higher CO2 prices will improve the business case for CCS. Similarly, the future price spread between fossil and bioLNG will make a difference, with lower-priced fossil LNG offsetting some of the energy penalty of a CCS system whereas cheaper bioLNG will make CCS less attractive.

Use case assuming scenarios with lower CCS system CAPEX and OPEX and lower offloading costs: The system using the best-performing solvent, with a 9% energy penalty, can compete with the baseline case without CCS, enabling vessel lifetime cost savings of about 2%. Assuming a low fossil fuel price and a high biofuel price, CCS could deliver cost savings of up to 7% over the lifetime of the vessel. Independent of fuel prices, the performance of the CCS system has the strongest impact on the business case. A capture rate of 50% or even 70% will strengthen the business case for CCS. However, a greater volume of captured CO2 increases offloading costs, offsetting some of the gains. The capture rate (CR) decides at what level the offloading costs will make the business case positive or negative. Furthermore, a higher CO2 tax will generally improve the business case for CCS.

A considerable number of CCS hub development projects are currently in progress at key ports around the world. As CCS technology for ships matures and gains ground, and the demand for offloading opportunities builds up, this trend will doubtless accelerate further.

After thorough investigation, it's evident that CCS offers flexibility for LNG carriers in their decarbonization journey from 2030. Due to uncertain fuel availability and pricing, CCS presents a robust solution, even with relatively poor-performing systems. It becomes more relevant if energy penalties improve, offloading costs decrease, CO2 taxes rise, and capture rates increase. Retrofitting CCS in the 2030s, such as during the second drydocking, paves a positive path for modern LNG carriers, with improvements in energy penalties, capture rates, CO2 taxes, and offloading costs.