Decarbonizing the offshore vessel fleet: the three key methods to reach net zero

Spinergie analyst Hugo Madeline examines current decarbonization efforts in the offshore vessel fleet and the three measures that will ensure future expansion.

The offshore vessel market is vast and significantly more complex than the shipping industry due to its various vessel types, specifications, and specialized activities.

With around 10,000 vessels categorized by more than 20 different specializations - not counting dredgers and tugs, those supporting oil and gas and offshore wind development take 70% and 11% of the market share, respectively. The activities performed by these vessels range from heavy lift operations through turbine installation to pipelaying, geophysical surveys, and wreck removal. However, the largest category, taking up 60% of the fleet, is the support fleet, which includes, but is not limited to, platform supply vessels (PSV), service operation vessels (SOV), and anchor handler vessels (AHT).

Taking lessons from the shipping industry

In 2023, the Marine Environment Protection Committee (MEPC80) closed with an agreement to reach net-zero emissions for the shipping industry by 2050. The International Maritime Organization (IMO) defined two indicative checkpoints: a 20-30% reduction by 2030 and a 70-80% reduction by 2040 compared to the 2008 baseline. Furthermore, earlier this year, the shipping industry became part of the EU carbon trading system (EU ETS), where vessel owners pay for what they emit.

Today, the offshore vessel sector agrees that GHG emissions must be reduced. To do this, the construction vessel sector must participate in global shipping initiatives to mitigate its impact on climate change. The case could be made that the offshore industry is a step ahead of the EU MRV regulation and should, therefore, be included in the reporting structure from 2025, followed by an introduction into ETS from 2027. Already, the sector is setting itself well to be prepared for any future regulations that are implemented.

The role of operators and developers

Charterers and vessel owners are already taking steps to improve emissions, with the market indicating that greener vessels are preferred. Some charterers are willing to reduce the carbon footprint of their operations by contracting greener assets to reduce scope emissions. Furthermore, decarbonization efforts lead to improved fuel economy for vessels, improved offshore project economics, and reduced fuel dependence.

Beyond regulations, vessel owners have begun taking proactive actions. It is becoming more prevalent to see the publication of sustainability reports with disclosed vessel emissions and clear net-zero targets. Indeed, measuring and reporting emissions is swiftly becoming the norm for more offshore vessel owners, and the importance of this step towards decarbonization cannot be understated. The path to net zero must begin with measuring and reducing emissions – it would be impossible to understand the impact of emission-reducing initiatives without knowing the starting baseline.

Beyond vessel owners, and looking at offshore wind specifically, regulatory bodies are increasingly pressing to incorporate emissions-related non-priced criteria into licensing auctions. These criteria encompass aspects such as environmental impact regulatory compliance, technological innovation, and social acceptance. More and more countries, including Norway, France, and the Netherlands, are considering emission-related non-price criteria in their offshore wind auctions.

We see that industry stakeholders strongly desire to reduce emissions, and the benefits of doing so are clear. But how can we collectively achieve decarbonization across the board?

The three levers to fleet decarbonization

The decarbonization journey will be long, but complementary solutions—operational efficiency, alternative fuels, and equipment upgrades—will help reduce fuel consumption and GHG emissions along the way.

Operational Efficiency

Improving operational efficiency within the fleet is key, and digitalization is an important component of achieving this. By utilizing a digital fleet management system, vessel owners benefit from better marine coordination, weather routing, and fuel consumption benchmarking, which are considered short-term measures.

While this is a short-term measure, it is also a cost-effective way to reduce fuel dependence and begin the decarbonization process. Beyond this, it is impactful in reducing emissions, with expectations of a 10 to 15% drop once all applicable measures have been implemented.

Equipment upgrades

Equipment upgrades installed on board are a more medium-term solution to specifically reduce fuel consumption. These upgrades can include hybrid electric systems with energy battery onboards and shore power connections.

Energy Storage System (ESS), a standalone solution that reduces emissions in most activity modes, first became a matter of interest in 2018 when the market began to see increased conversion and newbuild orders. Over the years, the support fleet has driven several of the recorded ESS conversions. This is the emission-reduction technology with the highest penetration rate in the market, with over 300 vessels equipped worldwide.

While electrification retrofitting has slightly slowed down since 2023, activity is anticipated to pick up once again, and it will become common practice to install it on newbuilds.

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Alternative fuels

Perhaps the most effective driver of improved efficiency, albeit the least mature, is using alternative fuels. Of course, using such fuels relies heavily upon a strong supply chain and collaboration with all players, so it is not without barriers.

The offshore industry is already exploring the use of alternative fuels, and to date, Spinergie has recorded 150 dual-fuel-capable vessels. A third of that number are LNG capable, with LNG fuel leading the market with a strong penetration rate in the PSV sector. As for methanol and hydrogen, the majority of announcements so far have come from the wind support market with CTVs and SOVs. Meanwhile, 15 vessels have been publicly disclosed as using biofuel.

Most recent announcements have regarded newbuilds (30% of the recorded newbuild announcements are dual-fuel capable) or recently delivered vessels, indicating a marked shift in the industry where vessel owners prepare themselves for using new fuels anticipating the supply chain. However, the use of alternative fuels needs to be approved and certified by a classification society. As such, only seven vessels using e-fuels (excluding LNG and biofuel) have received specific notations. Of these vessels, one is a gas-fueled ammonia class PSV from DNV; five are ammonia-ready class vessels from DNV, and one is a Hydrogen-class CTV from Lloyd’s.

Challenges surrounding sustainable fuels include the requirement for a strong supply chain, meeting regulatory approval, and sourcing from renewables otherwise, all environmental benefits of using these fuels are negated. For now, the offshore industry continues to seek the right balance for the fleet, and no consensus on using such fuels has been reached.

It remains difficult to evaluate the efficiency of equipment upgrades; however, as each technology is specific to vessel type - there is no “one fits all” solution that can be analyzed accordingly.

Selecting the right solution

As we have seen, there are multiple ways to begin decarbonization efforts. However, observation of available data highlights that the industry is still looking for the perfect alchemy of available solutions. In reality, the best way to decarbonize will depend on a variety of factors, and no one solution will fit all sectors or vessel owners. A customized approach that considers fleet composition, regionality, utilization rates, and long-term objectives will impact the choices of vessel owners.

But how do you define the right strategy for your vessel or fleet?

One of the most effective ways to understand your fleet's needs is to use a tool to measure carbon emissions by activity mode. Once you understand how much is being consumed during various activities - whether in transit, on standby, etc. - you can begin benchmarking. Using aggregated data, a consumption baseline is created from which the entire fleet can be benchmarked. This benchmark allows for an evaluation exercise to show where to concentrate efforts, specific fleet behavior adjustments, or upgrades to reduce fuel consumption. A specific carbon intensity metric per activity mode must be defined to target a clear decarbonization strategy.

For example, how would you know if a shore power connection system would be useful in your vessel fleet? First, you would need to know the exact share of your CO2 emissions at the quay to evaluate any potential benefits. The next step is understanding how much time each vessel spends at a quayside equipped with a shore power system. Only with these two crucial data points can you successfully evaluate the benefit of introducing shore power to your vessel.

Moving forward, your GHG strategy can become better defined by targeting upgrades with indicative checkpoints and a clearly defined investment program.

Conclusions

Even as global regulations evolve, the offshore vessel industry is well-placed to engage in an ambitious decarbonization strategy within the broader maritime sector. By collaborating and leveraging the fleet's diverse nature, vessel owners and charterers can develop clear GHG reduction strategies that align with net-zero ambitions. Proactive action now will position the offshore industry for future regulatory compliance and demonstrate its commitment to a more sustainable future where collaboration with all value chain actors is key.