According to Norway’s energy research and business intelligence company Rystad Energy, biofuels, which are compatible with existing ship engines and can, therefore, be adopted ‘with relative ease’, the capacity to provide biofuels like biodiesel and bio-liquefied natural gas (bio-LNG) and the overall outlook for bio-LNG are restricted in both allocation and production.
With emerging technologies and tightening regulations, shipping faces unprecedented pressure to innovate and make strategic investments. Rystad Energy has highlighted that biofuels could represent a more cost-effective solution compared to conventional marine fuels (like very low-sulfur fuel oil, or VLSFO), especially when aligned with the low-emission thresholds established by the International Maritime Organization’s (IMO) Greenhouse Gas Fuel Intensity (GFI) standard.
As divulged, while blending biofuels at 30% or 50% can help meet emission targets in the short term, fully switching to 100% low-emission versions offers the biggest long-term savings and rewards. Notably, bio-LNG stands out as a cheaper option than biodiesel, particularly when supported by government subsidies.
In a scenario where there are no supply constraints, Rystad Energy spotlighted that global demand for biodiesel in shipping could go well past a 140 million tonnes of fuel oil mark by 2028. That said, even under ‘perfect’ conditions, total biofuel production capacity is not projected to peak over around 120 million tonnes, which could drop sharply to just 40 million tonnes when sustainability criteria—prioritizing cleaner, second-generation biofuels—are applied.
When production risks, actual output levels and competition from other sectors are taken into account, the volume of biofuels realistically available for the maritime transportation industry dwindles even further, the company’s report has stressed.
“The situation with bio-LNG is also constrained, with challenges for both production and allocation capacity. While projected demand is relatively modest at 16 million tonnes in fuel oil equivalent by 2028, the apparent surplus in supply is misleading,” Junlin Yu, Senior Data Analyst, Shipping, Rystad Energy, elaborated.
“Over 84% of global biomethane is already committed to electricity generation, with an additional 10% allocated to road transport. This leaves only 6% available for all other sectors, including maritime, making actual access far more limited than the numbers suggest,” Yu further underscored.
The company’s report has stressed that this supply crunch cannot be overlooked. Even though future-facing fuels like ammonia and methanol are believed to offer ‘long-term’ promise, they come with a hefty price tag as well as with infrastructure challenges that have left shipowners hesitant and waiting for clearer market signals.
What is more, biofuels may be a more practical road to net zero, but Rystad Energy cautioned that without careful planning and proactive steps, the bridge to compliance could nevertheless crumble.
