APAC Presents Unique Opportunities for CO2 Shipping

Shipping is poised to play a vital role in APAC cross-border CCUS initiatives, with annual CO2 shipping volumes projected to reach 100 MtPA by 2050, according to a joint study by the Global Centre for Maritime Decarbonisation (GCMD) and Boston Consulting Group (BCG).

The study has identified that shipping will play a key role in enabling CCUS initiatives, particularly when there is a large geographical mismatch between potential captured CO2 sources and sequestration hubs.

The report “Opportunities for Shipping to Enable Cross-border CCUS Initiatives” found that shipping CO2 will be especially important in Asia Pacific (APAC) due to the vast oceans and seas that separate emitters and sequestration sites, when compared to Europe. To address this, several APAC governments, including Australia, Indonesia, Japan, Malaysia, Singapore and South Korea, are pursuing cross-border partnerships and initiatives to support cross-border CO₂ transportation and sequestration.

The study estimated that approximately 100 million tons per annum (MtPA) of CO2 captured using carbon capture technologies is expected to be transported across national borders in APAC by 2050. Transporting this annual tonnage would require between 85 to 150 liquefied CO2 carriers of 50,000t capacity, and the total investments needed for these vessels by 2050 could reach up to $25 billion.

Creating a market of this scale will necessitate concerted efforts from both the public and the private sector, including economic incentives, long-term contracts for midstream players, and greater clarity on key standards.

Engaging approximately 60 individuals from 17 industry stakeholder organizations in group workshops and interviews, the study explored scenarios where shipping could play a role in CO2 transport. The study found that shipping becomes economically advantageous compared with pipeline transport of the same amount of CO2 at longer distances. A threshold distance of 500km was identified to be economically viable for transporting 5 MtPA CO2 transport via shipping.

The emerging cross-border CCUS hubs and routes that are aligned with this criteria for CO2 shipping include the Northern Lights project, which spans 500 to 1,000km; intra-Southeast Asia routes ranging from 450 to 970km; and the longest routes, Northeast Asia to Australia, which extends from 6,000 to 11,000km.

The investment required to scale up cross-border CCUS, including shipbuilding, port and terminal infrastructure development, is substantial. The end-to-end levelized cost of cross-border CCUS with shipping ranges from $141-174 per ton of CO₂ for Southeast Asia routes to $167-287 per ton of CO2 for Northeast Asia-Australia routes. Capture and shipping costs constitute 60-80% of the estimated total expenses.

A significant gap exists between levelized cross-border CCUS costs and domestic carbon pricing in APAC. Current carbon taxes and emissions trading system prices range from USD 2 to 18 per ton of CO2, representing approximately a 10-fold gap with the range of levelized CCUS costs in this region. Without additional financial support, the economics of cross-border CCUS could impede its development.

Nascent regulations could also hinder the development of cross-border CCUS in the region. Countries need to establish domestic regulations governing carbon accounting and verification methodologies for CCUS, as well as permitting procedures for cross-border CCUS projects. 

Additionally, bilateral and multilateral frameworks are required to clarify jurisdictional authority for cross-border projects and allocate commercial and operational liabilities for CO2 leaks during transport across the value chain. Establishing these regulations and frameworks can provide greater certainty for project developers, mitigating policy risks and supporting CCUS projects and offtake agreements.

To stimulate cross-border CCUS investment, stakeholders need clear technical specifications for CO2 pressure, temperature, and purity, as these have significant cost, operational, and safety implications.

While shipping CO2 under low pressure may offer economic benefits, such as increased vessel capacity and lower capital expenditure, it is operationally disadvantaged because storing CO2 at such conditions, which are closer to the triple point will increase the risk of dry ice formation.

Impurities in CO2 may also have implications on infrastructure buildout. The purification process to remove impurities can be costly, presenting a trade-off for companies who must decide between the cost of purification and the risk of accommodating impurities impacting the infrastructure system.

CO2 purity specifications and responsibility for purification need to be aligned within a project’s value chain from capture to sequestration, to provide clarity and interoperability among participants along the value chain.

In APAC, the prevalence of sizeable emitters (defined as > 1 MtPA CO2 emitted) reduces the need to aggregate captured CO2 from different emitters. This opens the possibility of relaxing impurity thresholds compared to open-source models, which are more prevalent in Europe, that need to maintain more stringent CO2 purity specifications to accommodate the aggregation of captured CO2 from a diverse set of emitters.

The study identified three components that governments and private sector players must provide to activate the shipping industry for cross-border CCUS.

Direct economic support: Governments can extend economic assistance to midstream players, such as shipping and port providers, through financial incentives and new business models. These measures can reduce upfront capital expenditure and overall project costs, making cross-border CO2 shipping more viable.  

Long-term contracts and minimum volume guarantees: Emitters need to provide long-term contracts to shipping and terminal providers – ideally 10 years or more - and commit to transporting a minimum volume of CO2. This will give value chain participants greater certainty for planning and obtaining necessary financing for investments in vessels and terminal capacity.  

Clarity on standards and specifications for shipping: Shipping providers need clear regulations and guidelines on the standards governing tolerance limits for impurities in CO2 cargo, operating pressures, and temperatures along the value chain. Early alignment on specifications will enable midstream players to develop interoperable infrastructure.

The success of CCUS hinges on the simultaneous development of all parts of its value chain, including midstream activities like shipping and intermediate storage. By collaborating and addressing the challenges identified in this study, both public and private stakeholders can successfully develop the full CCUS value chain, unlocking the decarbonization opportunities offered by this solution.

Carl Clayton, Partner & Associate Director, Global Co-Lead for BCG’s CCUS Topic said: “The unique distribution of large emitters and sequestration sites across APAC offers significant opportunities for CO2 shipping and cross-border CCUS. Northeast Asian emitting countries have a chance to drive technological innovation and strengthen their leadership in commodity shipping, while Southeast Asia and Australia can utilize their vast depleted oil and gas and other storage assets, to foster green economy growth and international collaboration. Government support will be essential in the short term to ensure economic viability and to address cross value chain risks. Additionally, the industry must align on technical specifications, including CO2 pressure, temperature, and purity specifications, to enable seamless operations and infrastructure interoperability.”