Hydrogen export | ‘Big wave’ of orders for huge ammonia tankers underway — but will any of them ever carry NH3?

“Big wave”

This week, Samsung Heavy Industries reportedly received a $240m order from an unnamed buyer for two VLACs for delivery in 2027.

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).

“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.”

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.

“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.

“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.”

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.

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.

Pugh says: “It is the challenge of combusting ammonia on board safely that is the true innovation here, rather than carrying ammonia as cargo.”