Rystad Energy has warned that potential maritime demand for biofuels is continuing to grow but the production capacity is not keeping up while shipping will face strong competition from other sectors.
According to Rystad Energy, the shipping industry’s push toward net-zero carbon emissions is driving increased demand for biofuels, which are compatible with existing ship engines and can be integrated relatively easily. Despite this growing interest, current production capacity for biofuels such as biodiesel and bio-liquefied natural gas (bio-LNG) falls significantly behind demand.
Rystad Energy analysis indicates that unconstrained demand for biodiesel already exceeds global supply, with a similarly limited outlook for bio-LNG in terms of both availability and production scalability. Biofuels offer a potentially cost-effective alternative to traditional marine fuels like very low-sulfur fuel oil (VLSFO), particularly when aligned with the International Maritime Organization’s Greenhouse Gas Fuel Intensity (GFI) standard.
In a scenario without supply limitations, global demand for biodiesel in the shipping sector could exceed 140 million tonnes of fuel oil equivalent by 2028. However, even under optimal conditions, total biofuel production is expected to peak at around 120 million tonnes.
Demand for biodiesel, if unrestricted, outstrips the total supply. The situation with bio-LNG is also constrained, with challenges for both production and allocation capacity. While projected demand is a relatively modest at 16 million tonnes in fuel oil equivalent by 2028, the apparent surplus in supply is misleading.
…said Junlin Yu, Senior Data Analyst, Shipping, Rystad Energy.
Yu, further explained that over 84% of global biomethane is already committed to electricity generation, with an additional 10% allocated to road transport. This leaves only 6% available for all other sectors, including maritime, making actual access far more limited than the numbers suggest.
As explained, this is a supply crunch that the shipping industry cannot afford to overlook. While future-facing fuels such as ammonia and methanol offer long-term promise, they come with high costs and infrastructure challenges, leaving many shipowners hesitant and waiting for clearer market signals.
In the meantime, biofuels stand out as the most practical route to meet the IMO’s tightening emissions standards. However, this transitional solution is fragile. Without careful planning and proactive action, the bridge to compliance could quickly erode.
Biodiesel and bio-LNG can be cost-effective under the IMO Net-Zero Framework, but only if their lifecycle greenhouse gas (GHG) emissions are low enough to qualify for IMO incentives. However, demand for bio-LNG in maritime transport far exceeds current production, revealing a significant supply gap.
…Junlin Yu commented.
Furthermore, Junlin Yu highlighted the urgency to navigate the changing regulatory landscape, shipowners must act quickly, securing dependable biofuel supplies and aligning with GFI targets. In the race for cleaner shipping, success hinges not just on choosing the right fuel, but on securing it ahead of competitors.
Biofuels are currently more cost-effective than traditional marine fuels, especially when they meet strict low-carbon standards. While blending biofuels at 30% or 50% can help meet emission targets in the short term, fully switching to 100% low-emission biofuels offers the greatest long-term savings and rewards.
Notably, bio-LNG stands out as a cheaper option than biodiesel, particularly when supported by government subsidies, making it a promising fuel for the shipping industry’s transition to cleaner energy.
