The IMO's net-zero framework will allow shipowners to generate surplus units and help them recover biomethane costs beyond cargo owner premiums, Arne Maibohm told ENGINE.
Liquefied biomethane's (LBM) full potential as a bunker fuel depends on more than just cargo owner demand, Arne Maibohm, director of decarbonisation at Hapag-Lloyd said.

The opportunity to generate surplus units under the IMO's net-zero framework is “certainly attractive” as it can help shipowners recover costs and strengthen their case for investing in low-emission fuels, Maibohm said in an exclusive interview with ENGINE.

LBM was a natural choice for Hapag-Lloyd's first ZEMBA contract, given its fleet of 12 LNG-capable vessels ready to use LBM as a fuel. The last of these vessels was delivered in June, and Hapag-Lloyd plans to run most of them on LBM to cut emissions to fulfil the ZEMBA tender.

The Zero Emission Maritime Buyers Alliance (ZEMBA) is a consortium of major cargo owners looking to ship their products with little or zero emissions. Its members include Amazon, Meta, IKEA, Philips and Schneider Electric. In 2023, ZEMBA launched its first tender, inviting proposals for shipping services that achieve at least a 90% reduction in lifecycle greenhouse gas (GHG) emissions compared to conventional fuels such as VLSFO.

Hapag-Lloyd is delivering ZEMBA's inaugural two-year contract, which began in 2025, and providing emission reductions to consortium members by running some of its ships on biomethane.

And it's not just LBM. Hapag-Lloyd is also betting on low-carbon methanol and ammonia as future compliance fuels.

The company has another 24 dual-fuel LNG newbuilds on order for delivery between 2027 and 2029, all with “ammonia-ready” notations. It is also retrofitting five of its container ships for methanol propulsion by 2026, backed by an offtake agreement to secure 250,000 mt/year of green methanol, with fuel deliveries also starting in 2026.

Your contract with ZEMBA focuses on reducing emissions through liquefied biomethane. What key factors influenced this fuel choice?

I think it's rather simple. The ZEMBA contract requires shipowners to use the fuel that has a GHG saving potential of more than 90%. This is higher than standard factors for FAME-based biofuel [blends], so naturally that was excluded.

And since at the time of ZEMBA's contract for 2025-2026, we only had our LNG-fuelled ships available so that was the only molecule that we could actually consume that had a higher [emission reduction] than 90%. So it was a very simple choice.

But that will change going forward, as we're expecting to receive our methanol [capable] ships next year. That will widen our available fuel options and increase our own volume flexibility.

But for ZEMBA's first tender, which we wanted, this was the only choice of fuel to use.

With the IMO calling for large-scale investment in alternative fuels, what kind of demand signals from cargo owners are most effective in helping shipping companies commit to fuels like LBM?

Commitments like ZEMBA's – especially now, with its second tender which has a longer period of five years – are exactly what shipping companies need.

Usually we see that alternative fuels, whether through offtake agreements or project development, also require long-term commitments. So it's really helpful when we get those kinds of signals from customers. Of course, higher volumes are certainly better, but it's really a mix of both volume and duration.

For example, biofuels have a spot market. We hardly see long-term offtake deals there, and that’s fine because we can manage with some spot buying. But for alternative fuels that usually require massive investments, like building ship-specific engines, we need strong demand signals to justify the commitment.

What design elements in the IMO's approved net-zero framework will make it more attractive for shipowners like Hapag-Lloyd to accelerate uptake of low-emission fuels such as biomethane?

On one hand, staying non-compliant will come at a cost. So to avoid that, we need alternative fuels and that's something you can build into your business case. That alone makes alternative fuels more attractive. That's number one.

Number two, the opportunity to generate surplus units is certainly attractive.

And finally, if a surplus trading market evolves to some extent, it could mean that we as a container carrier don't have to rely solely on our customers or their willingness to pay. Through those markets, we could also tap into other shipping segments. Like suppose a tanker company that might not have the means to shift to alternative fuels but still needs to be compliant.

So actually it broadens the ways we can basically recoup the costs that we’re going to face. So for us, it’s a good opportunity to leverage the regulation and it certainly will give us a push to move on further with more alternative fuels.

A Gasum bunker barge supplying LBM to a Hapag-Lloyd container ship in Wilhelmshaven. LinkedIn of Hapag-Lloyd

That said, the [IMO's] final regulation will only be agreed in October, and it's still unclear how the market for Remedial Units and Surplus Units will develop. That's a little bit out in the open. So at the moment, I think we are looking at what information is available. We certainly look into this going forward, but from what we see, we definitely see good potential in what's being proposed.

Could the success of LBM-fuelled voyages serve as a blueprint for how future low-emission fuel contracts are structured across your fleet?

Not necessarily as a blueprint, because at the end of the day, the alternative fuels and also the vessels that we operate in our global network are quite specific. And since it's also not clear at the moment which of the fuels will be available where in the world and at which price, we are fuel agnostic.

We believe that each of the fuels will have a geographical location which is favourable, let's put it that way — in terms of feedstock availability, energy prices, availability of hydrogen, etc. And to produce those fuels, availability in ports, bunkering infrastructure and so on.

So that we can actually move the molecules onto our ship's bunkering infrastructure.

That's also why we go down the methanol pathway, just to have a wider portfolio of solutions. Over time, we'll find out which of the fuels is actually the most suitable alternative in different parts of the world. Ammonia will come into the mix as well, for sure.

And then we'll look more at geographical nuances, where fuels are available or best available at scale.

For a shipowner exploring low-carbon fuels like LBM, do long-term offtake agreements offer the certainty needed to invest or does the spot bunker market still provide the flexibility you prefer?

I mean, at the end of the day, it depends on the maturity of the market. If the commodity is available at large scale, then I think the spot market is not a problem at all. But since that's not the case, especially for LBM, I think long-term volume security is key to give us planning security.

For biofuels, I think the market is currently large enough to meet our demand at a smaller scale. We typically sign contracts for a few months, maybe up to half a year, and we still consider that part of the spot market. It's not week-to-week, but it gives us enough flexibility for now.

But when it comes to methanol or LBM, yes, longer-term offtake agreements are essential. And by long-term, I mean anything beyond five years. That's the kind of timeframe you need to really ensure planning stability.

How critical is the book-and-claim model to scaling the use of higher-cost fuels like e-methane, especially when physical availability is limited and costs remain well above options like LBM?

Yeah, I think book-and-claim is certainly a very good mechanism. The industry uses book-and-claim when it comes to commercialising Scope 3 reductions, that's one use. But the other is a global book-and-claim or mass balancing of fuels. That could also be a good mechanism, but I think it's not [yet] readily adopted by regulators like the European Union.

They don't accept fuels that are not actually burned within European waters to qualify for the EU ETS benefits.

So, in my personal view, global book-and-claim or mass balancing of fuels probably won't happen [yet] at least not for regulatory purposes. But for commercial reasons, I think unless the entire world fleet is already running on alternative fuels, book-and-claim is a very good mechanism to unlock access and support those companies who are willing to invest and take the first steps on the decarbonisation journey.
Source: ENGINE