Getting Behind Gas

Gas is driving investment across maritime, from investment in new tonnage powered by LNG, the most prevalent and reliable diesel substitution today; to investment in R&D and construction of a new generation of CO2 transport ships.

By Barry Parker

Northern Lights LNG CO2 carrier rendering.

Image courtesy Northern Lights/Dalian Shipyard
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Sometimes shipping companies will re-brand by freshening up their name, but doing little else. However, with Capital Clean Energy Carriers Corp. (previously Capital Products Partners LP, or CPLP), the new name was buttressed with new vessels and a revamped financial structure.

In its late-August announcement, the company explained that it was morphing from a Limited Partnership structure, with the new name and symbol (Nasdaq: CCEC) “…emphasizing the company’s strategic pivot to the LNG and energy transition business.” It added that, three years out, when vessels on order are delivered, “…CCEC expects to become the largest U.S.-listed LNG transportation company and well-positioned for future growth.”

In some ways, observing this company is like peering into the future of shipping’s fuel dynamics.

The group behind CCEC (and CPLP previously) is tied to the Greek shipping magnate Evangelos Marinakis, who comes from a privately-owned ship owning operation which had evolved into Capital Ship Management Corp by the early 1990s and then later into Capital Maritime & Trading Corp., which he chairs. Amid a flurry of public listings for shipping fleets, CPLP, initially operating refined products carriers and then container vessels, was listed in 2007, with limited partnership units in the hands of outside investors. Fast forward to the mid-2020s, at a time of pervasive uncertainty about future alternatives to conventional diesel fuels (and demand for maritime transport of oil and gas generally), the Marinakis-linked companies are moving at full speed ahead.

Analysts from VesselsValue (part of Veson Nautical) in an October 2024 report described “Greek shipowners piling into gas,” and Marinakis-led entities have been in the lead.

Chart courtesy Vessels Value

In an interview during the 2024 Marine Money Week, conducted by Poten & Partners’ Chairman Emeritus Michael Tusiani, Marinakis expressed a bullish view on prospects for continued maritime oil and gas movements, adding that “We have also have invested in dual fuel LNG tankers.” He added that: “We believe that it is worthwhile to pay the premium, $20 to $25 million, depending on the type of vessel, so we can protect the environment as well,” likely referring to a widely publicized four vessel order, placed with Hyundai Samho Heavy Industries in Q1 2024. The 174,000 cu m vessels, said to be priced around $270 million each, are set for delivery by late 2027.

When talk turned to ‘future fuel’ Marinakis said: “What we need to consider first, is if we choose LNG / methanol / ammonia, is the price, safety and then is the infrastructure there? From what we’ve seen so far, from expert reports, we are going for LNG. It’s cleaner than oil, for propulsion, and the propulsion and engines have been tested; it works.”

Evangelos Marinakis interview at the 2024 Marine Money event. Image courtesy the Marine Money

The Price of Growth is Hefty

In August 2024 the company referred to a “$3.9 billion investment, notable both in asset value and scope, demonstrates our commitment to becoming a leading provider of transportation for LNG and other clean fuels.” Financing sources include proceeds from sales of container vessels (including five 5,000 TEU ships sold to HMM in October 2024 for nearly $120 million), as well as taking on new debt when vessels are delivered, supported by LNGs going onto term charters. In November, 2023, the listed company (then CPLP) acquired 11 LNG carriers from the private company (six of which were on the water at the time), in a transaction worth in excess of $3 billion. The vessels now in the CCEC fleet are a mix of ships ordered initially by Capital Gas Ship Management (a private entity tied to Capital Maritime & Trading) and new ordering by the listed company.

Not surprisingly, the sector has been attractive to institutional investors who favor long-term deals; Stonepeak, a leading infrastructure investor, acquired what had been Teekay LNG, while investment manager BlackRock’s Infrastructure division took GasLog (linked to the Livanos family) private. Both deals occurred in 2021. Deep-pocketed charterers of the CCEC’s LNGs included Japan’s Tokyo Gas, which took Assos on a 10-year time charter, and Jera,w hich took Apostolos on a 10.5-year time charter with three optional years, as well as Nigeria’s Bonny Gas Transport (taking Axios II and Aktoras both on seven-year bareboat charters with three optional years).

Image courtesy CCEC

The new LNGs are 174,000-cbm ships with MAN ME-GA two-stroke engines delivered from Hyundai Heavy Industries/Hyundai Samho. According to MAN Energy Solutions, the MAN ME-GA design engines are suitable for LNG carriers, where cargo boil-off is fed into the engine, because “gas is admitted during the compression stroke…” which supports a low pressure fuel gas supply system. These engines also utilize and Exhaust Gas Recirculation (EGR) design to reduce “methane slip.” The engines can also operate on conventional marine fuel. The containment system on the vessels is a Flex GTT Mark III, found on numerous LNG’s in that size class.

The present – hauling LNG – turns to the future – liquid carbon transport – with a new order from the listed company of “10 state-of-the-art, high-specification gas carriers, including four unique handy multi gas carriers that can carry liquid CO2,” with an aggregate price-tag of $756 million. These 22,000-cbm vessels, priced at $78.2 million each, were ordered from Hyundai Mipo. The CEO of the public company, Jerry Kalogiratos, had said that LNG transport would be the core business. However, CCEC will be looking at the transportation of other fuels, and, importantly, the inchoate trades in liquid carbon.

“This transaction puts a strong emphasis on the energy transition, as these new acquisitions will have the capability to move Liquefied Petroleum Gas (LPG), ammonia, butane, propylene and liquid CO2,” said Kalogiratos. The six remaining vessels in the 10-ship order are described as Dual Fuel Medium Gas Carriers, four at 45,000-cbm (ordered at Hyundai Mipo), and two at 40,000-cbm (ordered from the Nantong CIMC Sinopacific Offshore & Engineering Co. Ltd.), capable of burning both LPG and fuel oil.

The rationale for pursuing this new sector were explained in the Marine Money interview, with Evangelos Marinakis pointing to favorable supply/demand dynamics: “We like the [low] orderbook … it was the right time to invest in the sector,” he said, and ammonia, as a cargo, is coming. “We also like that we are one of the first ones to order ships with a new dual fuel technology … we are the first to order large ammonia carriers that will have (dual fuel) ammonia engines.”

In response to a question from Tusiani, he did note cautions throughout the industry on the practicalities, at present, of ammonia as a marine fuel. “The yards and manufacturers are trying to find the safest ways for these engines to work.”

The four 22,000 cbm vessels are pointing towards the future.

From Ammonia Burning to CO2 Transporting

The company explains that: “…they are alternative-marine-power-ready and with options for ammonia propulsion and/or onboard carbon capture, thus potentially significantly reducing carbon emissions.”

The company pegs its annual deliverability of liquid carbon (from industrial facilities emitting carbon dioxide- to dedicated receiving facilities) at “…more than 1 million tons of liquid CO2.” Marinakis, in the Marine Money interview, explained, “We wanted to make sure that, until the time that the CO2 cargoes are there, [we could] trade the ship successfully as an LPG carrier, or an ammonia carrier. We designed the vessel to be able to do both.”

The capture (onboard vessels and ashore) as well as the transport of liquid carbon, albeit not happening right away, is gaining traction with the big oil companies, as well as mid-cap forward thinkers such as CCEC.

The oil giants have also climbed aboard.

In late 2022, Northern Lights: a consortia of Shell, Equinor, and TotalEnergies, ordered a pair of vessels for hauling liquid CO2 in the North Sea, with 7,500 cbm capacity in pressurized cargo tanks, from China’s Dalian Shipbuilding Offshore Co. (DSOC). The two DNV-classed vessels, Northern Pioneer and Northern Pathfinder (with MAN ME-GI engines fueled by LNG, with wind assist from Norsepower rotor sails) were launched from the DSOC yard in April, 2024. The vessels, to be managed by a UK based subsidiary of K Line, will be working in northern European waters, taking CO2 generated as a byproduct of land-side cement and fertilizer production that ultimately will be injected into offshore reservoirs in the North Sea.

Image courtesy Northern Lights

Two additional 7,500 cbm sister vessels are now under construction at DSOC – one to be managed by K-Line, and another to be managed by Bernhard Schulte. Class society DNV has been working with DSOC on designs and a 20,000 cbm liquid CO2 carrier, and for a 50,000 cbm floating LCO2 storage and injection unit (FSIU).

In early 2024, CCEC’s Marinakis was among a group of Greek owners, including listed companies Star Bulk and Navios Maritime Partners, behind the establishment of the Maritime Emissions Reduction Center (M-ERC) in Athens, a collaborative effort with Lloyd's Register (LR) with a goal of reducing greenhouse gas emissions from the global fleet. LR, working closely with Hyundai MIPO in building CCEC’s 22,000 cbm gas carriers, has recently granted an Approval in Principle (AIP) to the yard for a 20,000 cbm liquified carbon dioxide carrier. The yard has also gained AIP for a larger (40,000 cbm) vessel for transporting liquid CO2.

Other Class societies have also entered the fray.

A consortium of Japanese shipowners have gained an AIP from ABS and ClassNK (working jointly) for construction of 23,000 cbm and 50,000 cbm liquid carbon carriers. ABS is also reviewing a design by the yard for a 35,000 cbm vessel. ABS and LR are both members of consortium that includes shipowner Stena Bulk and equipment provider Alfa Laval on PROJECT REMARCCABLE (actually Realizing Maritime Carbon Capture to Demonstrate the Ability to Lower Emissions), and the group has been examining the feasibility of deploying carbon capture onboard Stena Impero, built 2018, an MR sized tanker hauling oil products.

!!! NEED IMAGE Stena_Impero_source_OGCI Image courtesy Oil and Gas Climate Initiative (OGCI)

In an October 2024 report, consortium member Oil and Gas Climate Initiative (OGCI, whose members include leading energy producers), pegged the overall abatement cost of the retrofit (with the nearly $14 million capital expenditure amortized over the vessel’s remaining life), at $769/per ton of CO2, but its report was quick to add that this cost could “…come down by approximately 75% through increased system size, economy of scale, etc.”

The impediments to deployment of onboard liquid carbon capture extend well beyond the hull; the report points out that: “While the engineering analysis revealed no major technical barriers to adapting a carbon capture system for use on marine vessels, the primary barriers remain commercial in nature including an initially high abatement cost and a lack of infrastructure for offloading captured CO2 at ports and terminals.”

With CO2 liquification potentially playing a major role in reductions in vessel emissions, and new types of tankers being the lynchpin of transporting CO2 generated by industrial companies, a lot of collective work lies ahead. Emphasizing the importance of onboard emission reductions, CCEC’s Evangelos Marinakis said, at the inauguration of the M-ERC, that: “Its goal is to collaboratively work towards achieving a feasible, safe and sustainable decarbonization pathway for the maritime fleet.”

Image courtesy MHI

OSG’s Sam Norton on Liquid CO2 Transport

At Capital Link’s Maritime Forum, held late last year in New York, Sam Norton, the CEO of Overseas Shipholding Group (previously with a public listing but now part of the privately-owned Saltchuk Group), offered perspectives on the maritime transport of liquid carbon, with views echoing those from PROJECT REMARCCABLE.

Norton said: “We are experimenting now with carbon capture aboard our vessels…the principal impediment is not cost or technology…it’s infrastructure.”

In the session moderated by Blank Rome Partner Tony Salgado, Norton explained that power generation in Florida is generating considerable CO2. He added that injection of these molecules into below-ground rock formations locally is impractical in Florida, so that alternatives are outbound transport by either pipeline or vessel.

“Pipelines are difficult to get approved and therefore the best solution is going to be maritime … and the benefit of that is if we can build carbon receiving facilities … at ports around the Gulf of Mexico [he specifically mentioned Tampa, Houston, Corpus Christi and ports up the Mississippi River] … principally for capture of carbon generated from industrial processes … you build up the shore basis, and now you have the capability to be able to have ships that have onboard carbon capture, with removal and disposal facilities that will be available at ports.”

Image courtesy MHI
Marine Technology Magazine
January 2025