What the first green methanol refueling operation in Egypt’s Port Said means for MENA: Last month, Dutch-based chemical producer OCI Global completed a six-hour operation refueling the world’s first green methanol-powered container ship with 500 tons of the green fuel in Egypt’s East Port Said. The refueling operation by OCI Global took place under a partnership with shipping and logistics giant AP Moller-Maersk.

Enterprise Climate sat down with Ahmed El Hoshy (LinkedIn), CEO of OCI Global and Fertiglobe, the strategic partnership between OCI Global and Adnoc. Euronext-listed OCI Global is one of the world’s top producers and distributors of hydrogen-based products, including ammonia, nitrogen fertilizers and other nitrogen products, methanol, green methanol, and biofuels, with a four-continent footprint and a production capacity of 16.8 mn metric tons per annum (MTPA). Fertiglobe is the world’s largest seaborne exporter of urea and ammonia combined and the largest producer of nitrogen products in MENA, with a combined production capacity of 6.7 MTPA of urea and merchant ammonia.

OCI’s partnership with Maersk is really a pioneering one. Taking green methanol as a shipping fuel into a container vessel hasn’t been done before; green methanol is one of these replacements for diesel or very low-sulfur fuel oil or heavy fuel oil. It’s one that can have materially lower greenhouse gas content, but it just isn’t used yet day-to-day. This meant we had to navigate new questions for the first time, such as how we can get temporary bunkering licenses in five different ports — considering the ship went from Korea, through Singapore, to Port Said where it was refueled, then back into Europe through Rotterdam, and ultimately will arrive in Copenhagen next week.

The maritime shipping industry is carbon-intensive — around 3% of greenhouse gasses are just from maritime shipping — but it’s also the best way to ship heavy items over long distances. It’s more CO2 intensive to carry cargo over long distances via plane, for example. So what that means is that long-distance shipping is going to be primarily marine for the foreseeable future.

Maersk has been kind of a pioneer in the low-carbon shipping space for the last several years — they’ve gone above and beyond to order over 20 dual-fuel vessels, which they can use to reduce their carbon footprint, even before the regulations come into place to decarbonize the industry.

A lot of what we did for this partnership was new territory, and it’s leading the way to open an industry that’s just starting out and doesn’t yet have regulations driving demand. As it currently stands, there’s just not that much available green methanol in the world — OCI Global is the global leader in green methanol today, and we have a capacity of 200k tons, which we’re looking to increase.

When you talk about regulation vs supply and demand, it becomes a “chicken or egg” question: You need regulation to create demand, because today you’re still not pricing CO2 in a lot of industries, including shipping. So CO2 is a negative externality for the world — there’s no price on it now in most global regions, save for the EU. Regulations are just starting to be formed, and that’s why Maersk and others like CMA CGM and Xpress Feeder Lines are getting ahead of it. If the regulations on CO2 emissions for the shipping industry are there and people start ordering the ships, then the supply of green methanol will come over time.

Currently, producing green methanol in and of itself costs more than producing regular methanol from natural gas or coal, so we need to see the bid from the demand side and that will incentivize the supply. If you just wait for there to be abundant amounts of fuel, that ramp-up in supply just isn’t going to happen. If you don’t price CO2, it won’t make economic sense to lean more on green methanol — everyone will just keep burning fossil fuels because it’s cheaper.

There are lots of projects that have been announced to produce green methanol in the form of bio-methanol or e-methanol, but these projects are all facing two major challenges. The first challenge is that sometimes these are new technologies — a lot of sustainability initiatives are driven by innovation. New technologies need somebody to take an outsized risk by taking on a higher cost of capital. If there’s an offtaker like Maersk or others in the shipping space that say I’m bringing in 20 ships and I need some fuel supply, that’s when people see that they can sell at a price to justify the risk, and that’s when you’ll start seeing more production projects.

For OCI, we were able to take those risks because we have existing infrastructure. We are one of the top five methanol producers globally and the number one global green methanol producer, so we have existing facilities and existing customers. So if we have the capacity to produce 33 mn tons of conventional methanol a year and up to 200k tons can be green methanol, we can use our existing plant and our supply chain.

The EU has taken a first step with maritime fuel by putting a price on CO2 and polluting fuels like heavy fuel oil and diesel, and they’re also giving support or credit to low-carbon fuels like bio-methanol and e-methanol. Today, green methanol is a 300k ton market and is expected to become a 6 mn ton market in the next five years. That’s a huge amount of demand that’s going to help more projects happen and come to fruition. But the regulations need to be in place to answer the question of who’s going to pay for the premium.

This isn’t just applicable to the EU and western markets, however — the MENA region has lots to benefit from in terms of advancements in green methanol. First and foremost, Egypt stands to benefit significantly. Around 12% of global marine traffic and 30% of container traffic passes through the Suez Canal, and despite this high volume and great revenues for the canal, it’s not a major bunkering hub. OCI produced the green methanol for Maersk in Texas, but in the future Egypt could be a great green marine bunkering hub. East Port Said is an excellent location because you could have those vessels going through on the demand side, and you can supply them with a lot of the renewable potential that Egypt has for green hydrogen and its derivatives.

This isn’t something that’s going to happen overnight, but there’s massive potential, especially for early movers. Fertiglobe, is investing in green ammonia, including in partnership with Fertiglobe in Abu Dhabi and with Masdar. These are all fuels that could be used not only to export the final product to Europe or Asia, but can also be provided at ports that can become major bunkering hubs and suppliers of low carbon fuels in the future. Methanol has the advantage today because there are already methanol engines.

Ultimately, the challenge with green hydrogen in any form is that you have to incentivize demand, whether via carrots or sticks, enough that it makes sense to pay for the higher cost, lower carbon fuel. Otherwise, the fossil fuels industry will continue to dominate and you won’t get these projects to fruition.