Norwegian developer Scatec has signed a memorandum of understanding with Egypt’s Suez Canal Economic Zone to develop a $1.1bn green methanol plant that will supply marine fuel directly to ships at East Port Said on the Mediterranean coast.

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The Egyptian government plans to issue a green bunkering license to Scatec, which will use a 190MW electrolyser to produce renewable hydrogen that will be combined with captured CO2 to produce 100,000 tonnes of methanol a year by 2027.

However, a timeline for final investment decision on the facility and start of construction has not been disclosed.

“East Port Said is the destination of the green bunkering project due to its location northern Suez Canal, and its integration with the ports of East Port Said and West Port Said, and therefore it is located near the ship’s waiting areas,” said Suez Canal Economic Zone chairman Waleid Gala El-Dien.

He added: “We emphasise that green bunkering is not a main target in itself, but an imperative global requirement, especially since shipping is responsible for 10% of the world’s carbon emissions, so the use of green fuels in maritime transport will significantly affect the reduction of carbon emissions.”

Neither Scatec nor the Egyptian government have disclosed how the CO2 feedstock for methanol production will be sourced.

While orders for ships capable of running on methanol are racking up, with shipping giant Maersk alone ordering 25, some industry voices have warned that there may not be enough methanol on the market to supply these vessels — and depending on the source of CO2, could end up propping up polluting industries for “green” fuels.

However, ammonia — the other hydrogen derivative often proposed for green bunkering — is currently off the table as a major shipping fuel owing to strict regulations both internationally for gas carriers and from port-to-port for all other vessels.

Fortescue recently announced that its Green Pioneer vessel, which had been retrofitted to be able to run on NH3, had had to fuel its voyage from Singapore to Dubai for Cop28 on diesel as the latter port had refused entry if it was using ammonia, an extremely hazardous chemical.

Scatec is also a partner on the Egypt Green hydrogen and ammonia project with Fertiglobe, majority-owned by chemicals firm OCI.

While the 15MW pilot phase of the plant is operational — with the first volumes of NH3 shipped to India last month — the scale-up to 100MW is still awaiting a final investment decision (FID), with original electrolyser supplier Plug Power dropped last year.