Hyundai Mipo Dockyard building the world's largest fleet in methanol fuel for Maersk

[Graphics by Lee Eun-joo and Song Ji-yoon]

South Korean shipbuilder Hyundai Mipo Dockyard will be making a fleet of the world’s biggest methanol-powered vessels for Maersk, another demonstration of Korean shipyard’s leadership in green maritime technology.

According to multiple sources from the shipbuilding industry and foreign media sources, the dockyard under Korea Shipbuilding & Offshore Engineering Co. (KSOE) signed a letter of intent with world’s biggest container line Maersk to build three 3,500 twenty-foot equivalent unit (TEU) methanol-fueled freight carriers including options in what would be the largest fleet in the novel fuel.

Details on financial terms and delivery period are not disclosed but market analysts estimate each vessel to cost between 45 billion won ($39.7 million) and 50 billion won to build, meaning that the Korean shipbuilder would be able to rake in up to 150 billion won if it wins all the option contracts. The two sides plan to sign a final contract soon.

Kim Hyun, a researcher at Meritz Securities said that the deal is significant as it involves vessels using green methanol as power, enabling Hyundai Mipo Dockyard cementer leadership in the new fuel.

About 20 methanol-powered ships are in operation globally today, of which eight units were built by Hyundai Mipo Dockyard.

Shares of Hyundai Mipo Dockyard ended 3.63 percent higher at 88,400 won on Monday, and KSOE 2.64 percent up at 136,000 won.

Methanol-powered vessels have emerged as the next-generation green vessel because it can help reduce sulfur oxides by 99 percent during vessel operation compared to conventional fossil fuel-powered vessels, nitrogen oxide by 80 percent, and greenhouse gas by 25 percent.

The methanol fuel ship order is also a part of Maersk’s long-term plan to add more carbon-neutral vessels by 2023.

Methanol is expected to replace liquefied natural gas (LNG) as sea fuel after it has become easier and cheaper to obtain natural gas, the core base material for methanol, and the new fuel injection technology can help reduce nitrogen oxide emissions from methanol production.

Methanol is produced through hydrogenation after changing natural gas and carbon dioxide to synthesis gas in high temperature. Green methanol uses renewable energy in the process to significantly reduce carbon emissions.

Unlike LNG that requires high pressure and extremely low temperature, methanol is much easier to store and deliver methanol, and it is also water soluble causing less sea pollution.

The Ministry of Maritime Affairs and Fisheries, meanwhile, gave final green light on Korean Register of Shipping’s amended rules on low inflammable point fuel vessels last week that reflect new examination standards of methanol-powered vessels. The approval comes in line with the global trend after the International Maritime Organization in December last year drew up a temporary safety guideline for methanol and ethanol fuel vessels.

KSOE meanwhile continues to fatten order book through the momentum of green fuel migration.

On Monday, it won orders from four foreign shipping lines to build six vessels, including two LNG carriers and three LPG carriers, as well as an order from a European shipping company to build four petrochemical product containers worth combined 1.1 trillion won. KSOE has so far achieved 82 percent of its order target of $14.9 billion by winning 140 vessel orders worth $12.2 billion.

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