Hydrogen export | ‘Big wave’ of orders for huge ammonia tankers underway — but will any of them ever carry NH3?
Shipyards inundated with commissions for Very Large Ammonia Carriers (VLACs)
Orders are flying in for massive ships that can carry vast quantities of ammonia — the hydrogen derivative that enables the production and intercontinental export of low-carbon H2 — suggesting that shipping companies are betting big on ammonia-capable carriers to future proof their cargo businesses.
But despite some buyers’ claim that the early moves into big ammonia carriers indicates investment in zero-carbon industries, serious questions remain about whether the ships will ever carry NH3.
Hydrogen is technically difficult and very expensive to transport long-distance, on account of its low volumetric energy density, and the cost of liquefaction. As a result, many prospective low-carbon H2 producers are counting on converting hydrogen to ammonia via the Haber-Bosch process to transport it to customers across the world’s major sea routes.
In the past two months alone, Korean shipbuilders have received preliminary orders for up to 15 very large ammonia carriers (VLACs) capable of shipping vast volumes (over 70,000 cubic metres) of H2 long-distance as low-carbon ammonia — potentially a boon for renewable H2 exporters which some experts say are facing an acute shortage of ammonia carriers later on this decade.
This week, Samsung Heavy Industries reportedly received a $240m order from an unnamed buyer for two VLACs for delivery in 2027.
In early December, Maersk Tankers, collaborating with Japanese conglomerate Mitsui, placed firm orders for four VLACs with a capacity of 93,000 cubic metres from Hyundai Samho Heavy Industries for delivery in 2026, with the option to increase the order by a further six carriers.
And in late November, Greek shipping firm Naftomar confirmed an order for four 93,000 cubic-metre VLACs from Hanwha Ocean.
In total, shipbroking firm Affinity estimates there are now a record 19 VLACs on order (15 from Korea and four from China), including the four commissioned by Singapore-based Eastern Pacific Shipping from China’s Jianguan shipyard in May 2023, and two by Greece’s Capital Gas Ship Management from Hyundai Heavy Industries in September.
In fact, if all preliminary orders are fulfilled (i.e those which have been agreed as an option but not yet inked) this could rise to 26, and Affinity reports enquiries for a further ten vessels on top of this.
This run on VLACs comes from a base of zero: before Eastern Pacific Shipping’s order, there were no VLACs in existence at all, despite the fact that over 18 million tonnes of ammonia is already traded across borders.
The question is, will the quantities of green ammonia currently mooted for international export be enough to fill these ships when they hit the water in 2026 — and will ship-owners choose to use them for this purpose?
The International Energy Agency (IEA) estimates that 70 very large ammonia tankers of more than 80,000 cubic metres will be needed by 2030 to meet the demands of international hydrogen trade (compared to the 40 mid-size vessels capable of transporting it today), and as recently as last year, experts were warning that there may not be enough ships to transport new volumes of green ammonia.
The 114 vessels loaded with ammonia over the past two years, according to energy cargo tracking firm Vortexa, had the equivalent capacity to carry around 1.9 million tonnes of ammonia.
To give a sense of scale, giant Neom green ammonia export project in Saudi Arabia, expected to come online in 2026, plans to produce 1.2 million tonnes of ammonia per year for its European customers.
But the 19 ships on order have a conservative combined capacity of around 1.7 million cubic metres, enough to transport around one million tonnes of ammonia — a drop in the ocean compared to the 18 million tonnes transported today, or even just the output of Neom alone.
Cause for optimism?
Maersk Tankers’ CEO, Tina Revsbech, has described the company’s initial order as means to “service clean ammonia producers and users”, to “to aid the [energy] transition”.
But while the flurry of orders might suggest that the shipping industry is optimistic about the future international trade in green hydrogen and is planning to pick up volumes from Neom and others, some experts suggest that this might be a red herring.
In fact, argues one shipbroker, it is likely more indicative of the shipping industry’s tendency to order gas tankers in cycles, which in the past would have been very large gas carriers (VLGCs) used to ship liquid petroleum gas (LPG).
According to Nick Pugh, an analyst in newbuilds at shipbroker Affinity, the industry is now experiencing the start of another “big wave” of orders for very large gas carriers that will continue into 2024, after a wave in 2005 to 2006 and another between 2013 and 2015.
Now, however, shipping companies are opting to “future-proof” their vessels so they can carry either ammonia or LPG.
Unlike VLACs, which can carry ammonia or fossil fuels such as LPG, propane and ethane, VLGCs are usually not suitable for carrying ammonia (see panel below).
“Considering the high toxicity, even at low concentrations, and corrosiveness of ammonia (with certain materials), sustainable safety and storage requirements lead to specifications that are significantly different compared to the ones for gas carriers,” Elias Yfantis, professor of marine engineering at the Hellenic Naval Academy and senior scientist at the Cyprus Marine and Maritime Institute, tells Hydrogen Insight.
“We are discussing a very different gas with different density and chemical composition,” agrees Martin Cartwright, global business director of standards organisation DNV’s gas carriers and FSRUs unit. “With that comes several variables to consider ranging from the structural integrity of the vessel design through to cargo tank material, piping, gas detection requirements and more.”
There is a premium to be paid for ordering a ship that is able to transport ammonia, however. Tradewinds reported recently that it costs $1-1.5m more for an ammonia-capable ship than a typical VLGC.
But although they are shouldering the extra cost for ammonia-capable vessels, ship-owners are unlikely to shift wholesale to carrying ammonia rather than LPG, argues Pugh.
“All of these VLACs are effectively still LPG carriers which is which is what those [shipyard market] positions always were,” he says. “They're not really being built to carry ammonia. They’ve been built to carry LPG.”
He adds: “The cost benefit analysis of paying the extra for strengthening [required for ammonia cargoes] so that you can one day take ammonia [is] just a no brainer. So every LPG ship is now an ammonia carrier.”
This assessment is borne out by comments made by Evangelos Marinakis, founder and chairman of Capital Gas Ship Management’s parent company, who in November said that the company’s VLACs will be put to work as VLGCs if there is insufficient ammonia to transport.
“In order to check the market properly you need the vessel,” Tradewinds reported Marinakis as saying. “We will be prepared for the new market.”
Eastern Pacific declined to comment on its intention for its VLACs, while Maersk Tankers told Hydrogen Insight that it is still working out how the vessels will be used.
“As we have just placed the order for the first four vessels, we are currently in dialogue with our network of clean ammonia producers and users to secure deployment for the vessels, which will be delivered from end-2026 onwards,” a spokesperson for the Danish company said.
Neither Capital Gas Ship Management nor Naftomar responded to questions from Hydrogen Insight.
“The wider shipping fleet, VLGCs included, is undergoing renewal,” adds Pugh. “Expectations for future demand for liquefied gas transport is strong as new production comes online primarily for methane, with ethane and propane also present.”
So the question appears to be whether ammonia will be available in sufficient volumes to displace LPG.
“For real volume change you have to take note of the next wave of demand coming from the energy sector,” says DNV’s Cartwright. “Here we can watch the capacity developments of blue and green ammonia, where large export volumes will be transported by seaborne trade and so we can expect seaborne volumes to increase tenfold over the next decade with production coming from the likes of Australia, Middle East and the Americas.”
He adds: “Demand is also already coming from the likes of Japan who look to commercialise ammonia power generation in the coming years, first starting with co-firing of ammonia at coal-fired plants.”
The German-led H2Global scheme, due to announce its winners in the coming months, will underpin the investment in ammonia export projects, potentially leading to more 4demand
According to Hydrogen Insight's estimates there is around 13 million tonnes of capacity from the world's biggest low-carbon ammonia export projects scheduled to come on line by 2027 (see table below) — but just a fraction of these have taking final investment decision, indicating massive uncertainty.
Moreover, the bulk of the deliveries of VLACs announced so far will come in 2027, after Neom comes online but before most large-scale export-orientated low-carbon ammonia projects are expected to begin operation.
DNV does not believe will change until after 2030, meaning that many VLACs could be in line to carry LPG or other fuels for at least three years after commissioning.
“There is still a lot of work to be done both on the scale up of green ammonia production, and on [shipping] safety codes for its widespread transportation and combustion,” says Pugh. “Either way, shipping is positioning itself to be ready to carry whatever the cargoes of the future will be. In the case of ammonia, the premium for future versatility between ammonia and LPG cargoes is small.”
The IEA’s analysis looks slightly more optimistic however. It recently downgraded the number of VLACs required for global hydrogen trade from 175 to 70 on the back of a corresponding downgrade in its forecast for low-emissions hydrogen production and trade — but this still requires the commissioning of a further 50 VLACs between now and the end of the decade.
“The number of ammonia tankers will depend on their size, ranging from medium to very large gas carriers,” the IEA tells Hydrogen Insight. “If the ammonia trade relies more on medium-sized carriers like today, more tankers would be required, e.g. around 70 if assumed an average carrying capacity of 80 000 cubic metres or around 140 if assumed around 40 000 cubic metres.”
But if and when the shipping industry starts using ammonia as a maritime fuel — which is currently hotly disputed — this could prove a game changer, according to DNV’s analysis.
“The coming decade will see little change in trading volumes and patterns, but as ammonia starts to be used in significant quantities as a maritime fuel, trade volumes will increase,” DNV says in its Hydrogen Forecast to 2050, published in 2022. “We expect a twenty-fold increase in ammonia seaborne transport from 2030 to 2050, with fuel use growing from virtually nothing in the mid-2030s to 95% of the trade in 2050 — of a total shipment of 150 million tonnes at that time.”
In fact, several of the vessels under order from Korean and Chinese shipyards come with the option to install an ammonia-fired engine, when these become commercially available.
But while VLACs are easy to build from a technical standpoint, operating and regulating ammonia-fired engines is not. Ammonia is inherently toxic, requiring a host of new regulations and safety protocols in order to protect human life and the aquatic environment, not to mention commercial innovations to bring down the cost of operation — all of which could put a spanner in the works for ammonia uptake, and the use of VLACs.
Pugh says: “It is the challenge of combusting ammonia on board safely that is the true innovation here, rather than carrying ammonia as cargo.”