Throughout recent years, and especially last year, LNG has emerged as a widely used transition fuel, offering lower CO2 emissions compared to other fossil fuels. As described previously, under the FuelEU Maritime Regulation, LNG vessels are at an advantage over other fossil fuel ships due to their lower greenhouse gas intensity.
Looking beyond fossil LNG, bio-LNG is already a common surplus generator under FuelEU, especially seen as the enabler of some of the super pools offered on the market. However, the real game-changer is e-LNG. Produced using renewable electricity and captured CO2, e-LNG is classified as a Renewable Fuel of Non-Biological Origin (RFNBO) under the FuelEU Maritime Regulation. The fuel, therefore, classifies for the RFNBO multiplier: its energy content counts twice in the FuelEU GHG intensity calculation, significantly improving the compliance balance of an e-LNG-fueled vessel.
Given this multiplier effect, ships using e-LNG can generate impressive compliance surpluses, which could be banked for future use or sold on the FuelEU surplus market, turning compliance into a revenue-generating opportunity. But what does this mean in practice? How does e-LNG compare to fossil LNG, and when does it become a financially viable choice? Today’s newsletter shall answer these questions.
Case Study: A Sample Fossil LNG-Powered Vessel and Its Compliance Data
To explore the impact of e-LNG, let’s take a typical fossil LNG-fueled containership and analyze its compliance performance under FuelEU Maritime. First, we establish a baseline using conventional fossil LNG before comparing the results with e-LNG.
Baseline Case: Fossil LNG Usage
For a vessel running on fossil LNG, compliance is determined by its fuel consumption and the applicable emission factor.
Annual fuel consumption: 10,000 tonnes of LNG
Engine type: LNG Diesel (dual fuel slow speed)
Emission factor (Well-to-Wake, fossil LNG): 76.08 gCO2e/MJ
Compliance balance (Surplus): 6,508 t CO2e
Potential surplus earnings (250 €/tCO2e*): 1,627,000 €
Using standard assumptions, the sample vessel generates a significant surplus of 6,508 t CO2e and additional revenue of 1,6M €, based on a conservative surplus value.
e-LNG under FuelEU Maritime: The High-Value Surplus Generator
With the introduction of e-LNG, a synthetic, renewable alternative to fossil LNG, compliance opportunities further improve. Since e-LNG is classified as an RFNBO, it benefits from a multiplier effect under FuelEU, effectively reducing the vessel’s reported GHG intensity.
The most important advantage of e-LNG is that it requires no modifications to existing LNG-fueled ships, meaning shipowners can switch seamlessly without investing in costly retrofits.
Case Study: The Same Vessel Using e-LNG
Now, let's assume the vessel replaces 3,000 t of fossil with e-LNG.
Annual fossil LNG consumption: 7,000 tonnes
Annual e-LNG consumption: 3,000 tonnes
Engine type: LNG Diesel (dual fuel slow speed)
Emission factor (Well-to-Wake, fossil LNG): 76.08 gCO2e/MJ
Emission factor (Well-to-Wake, e-LNG): 11.38 gCO2e/MJ
Compliance balance (Surplus): 22,460 t CO2e
Potential surplus earnings (250 €/tCO2e*): 5,615,000 €
With e-LNG, the ship increases its potential revenue on the FuelEU surplus market by more than 300%, amounting to 5,615,000 €.
Sensitivity Analysis
Sensitivity Analysis I: When Does a 70/30 LNG Mix Become a Good Business Case?
Generating surplus and increasing surplus revenue is only one side of the story; the increase in fuel price and OPEX costs another. The key question for shipping companies is: At what price point does e-LNG become more attractive than fossil LNG under the new regulatory framework of FuelEU?
To evaluate this, we compare different pricing scenarios of our sample case.
Baseline LNG price: 905 € per tonnes (Titan weekly in ARA, Feb 14)
Expected e-LNG price: 2,800 € per tonnes (Supplier estimate)
Sample LNG mix price: 1,473.50 € per tonnes
Impact of surplus trading on fossil LNG price: -162.70 €/t fossil LNG
Impact of surplus trading on sample LNG mix price: -561.50 €/t LNG mix
Break-even price for sample LNG mix: 1,303.80 € per tonnes
The above values showcase the power of the FuelEU Maritime Regulation, its pooling mechanism, and the RFNBO multiplier. With the 70/30 fossil/e-LNG mix, today’s conservative supplier estimate of 2,800 € per tonnes for e-LNG is almost as financially attractive as using fossil LNG. If the price falls to 2,235 € per tonnes e-LNG, the 70/30 sample case reaches a break-even point at which the LNG mix is as cheap as fossil LNG.
Sensitivity Analysis II: When Does e-LNG Become a Good Business Case?
But what if we would fully switch to e-LNG? What would be the price requirement for e-LNG in that example? To evaluate this, we assume 100% e-LNG compared to our initial fossil LNG sample case:
Annual e-LNG consumption: 10,000 tonnes
Engine type: LNG Diesel (dual fuel slow speed)
Emission factor (Well-to-Wake, e-LNG): 11.38 gCO2e/MJ
Compliance balance (Surplus): 41,070 t CO2e
Potential surplus earnings (250 €/tCO2e*): 10,267,500 €
With 100% e-LNG, the ship doubles its potential revenue on the FuelEU surplus market compared to the 70/30 case, amounting to 10,267,500 €. How would such a case influence the break-even price for e-LNG? To evaluate this, we again compare the different pricing scenarios:
Baseline LNG price: 905 € per tonnes (Titan weekly in ARA, Feb 14)
Expected e-LNG price: 2,800 € per tonnes (Supplier estimate)
Impact of surplus trading on fossil LNG price: -162.70 €/t fossil LNG
Impact of surplus trading on e-LNG price: -1,026.75 €/t LNG mix
Break-even price for e-LNG: 1,769.05 € per tonnes
When compared 1:1, the break-even price at which e-LNG would result in the same OPEX costs as fossil LNG is 1,769.05 € per tonnes. Note that EU ETS is not considered in this analysis but further improves the cost-effectiveness of e-LNG. If you want to find out by how much, check out this newsletter.
Sensitivity Analysis III: How Does Surplus Value Influence e-LNG’s Business Case?
The above sensitivity analyses are based on a conservative surplus value of 250 €/t CO2e. Since the market is dynamic, it is worthwhile to study a higher value scenario (400 €/t CO2e):
Potential surplus earnings (fossil LNG, 400 €/tCO2e): 2,603,200 €
Potential surplus earnings (e-LNG, 400 €/tCO2e): 16,428,000 €
Now, these figures change the impact of surplus trading as depicted below:
Baseline LNG price: 905 € per tonnes (Titan weekly in ARA, Feb 14)
Expected e-LNG price: 2,800 € per tonnes (Supplier estimate)
Impact of surplus trading on fossil LNG price: -260.32 €/t fossil LNG
Impact of surplus trading on e-LNG price: -1,642.80 €/t LNG mix
Break-even price for e-LNG: 2,287.48 € per tonnes
When compared 1:1, the break-even price at which e-LNG would result in the same OPEX costs as fossil LNG at an increased surplus value of 400 €/t CO2e is 2,287.48 € per tonnes.
Challenges and Uncertainties of e-LNG Adoption
While e-LNG presents an interesting way forward, there are some challenges to consider:
Production and Scalability: The availability of e-LNG remains limited, with production still ramping up.
Pricing Volatility: e-LNG is still significantly more expensive than fossil LNG, and pricing structures vary depending on production methods and location.
FuelEU Surplus Market: The surplus market development is crucial to improving the price attractiveness of e-LNG. Shipping companies may decide to provide pooling rights to e-LNG suppliers in return for cheaper e-LNG to reduce exposure to market risks
Conclusion: Is e-LNG the Next Big FuelEU Play?
With FuelEU Maritime multipliers, surplus trading opportunities, and seamless compatibility with LNG-powered vessels, e-LNG presents a compelling compliance strategy. The financial case for e-LNG depends on its price relative to fossil LNG, but the potential for surplus generation and trading makes it an attractive option for forward-thinking shipping companies.
The FuelEU compliance market is evolving rapidly, and e-LNG represents a high-value compliance and emission reduction strategy for those looking to turn regulatory obligations and sustainability targets into financial opportunities.
If you are interested in purchasing e-LNG, reach out to us via email — info@bettersea.tech!
BetterSea’s FuelEU Maritime Compliance Platform with integrated marketplace provides you with a fast, streamlined, end-to-end process covering all potential compliance options, including external pooling and surplus trading. Book a demo below!
Stay tuned for more insights on navigating the FuelEU compliance mechanisms in our upcoming newsletters. If you have any questions or need further guidance on pooling, feel free to reach out!
Best regards,
The BetterSea Team
Contact Us: info@bettersea.tech
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*The surplus value is estimated to be 250 €/tCO2e (Disclaimer: This is an assumption)
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