THE world’s biggest carbon carrier vessels to date were launched at a Chinese shipyard earlier this month, representing a milestone for CO2 transport globally. But a lack of mature industrial carbon capture projects and low CO2 prices have been holding back newbuilding CO2 carrier orders.

Northern Lights, a joint venture between oil majors Shell, TotalEnergies and Equinor, launched its first two 7,500 cu m CO2 carriers at China’s Dalian shipyard earlier in April. The JV plans to transport and store up to 2m tonnes of CO2 annually between European industrial plants and its CO2 receiving terminal in the Norway.

Japanese shipping group K Line will manage the two ships after signing a charter agreement with Northern Lights.

Despite the significant progress in the Northern Lights project, the shipping industry has been slow to order CO2 carriers, as the maritime sector waits for projects backed by final investment decisions and majority government funding.

“Carbon capture and storage is a proven technology, but it’s capital intensive,’ Northern Lights business development director Bariş Dolek told Lloyd’s List.

“So the companies investing in this technology surely need long-term support to materialise these projects. That’s where the governments need to step in and set a high enough price on carbon emissions.”

Greek shipowner Peter Livanos-backed EcoLog was among the first shipping companies to announce plans to order CO2 carriers back in 2022, although the company has yet to place newbuild orders since then.

Its head of shipping, Panos Deligiannis, said EcoLog now aims to order four 22,000 cu m CO2 carriers around the beginning of 2025, as the company is part of a Greek CCS project that plans to take a final investment decision later this year.

“The main issue with CO2 transport projects is high risk, as these are capex- and opex-intensive investments with high levels of uncertainty along the supply chain,” said Deligiannis.

Lack of long-term contracts and sufficient government incentives are two of the main reasons behind the shipowners unwillingness to order CO2 carriers, said Daniel Caceres Larsen, climate and sustainability consultant at Boston Consulting Group.

“There are three main conditions for the carbon capture and storage market to pass the inflection point: freedom to operate with public acceptance of the CCS, government incentives and improved project economics across CCS value chain," Larsen said.

Deligiannis added: “Government funding is one of the prerequisites for any CO2 project.” 

The Norwegian government funded 80% of the first phase of the €2bn Northern Lights project.

Another blocker for carbon capture projects involving seaborne transport has been weaker carbon prices in the EU. The bloc’s Emissions Trading System price dropped to as low as €51 per tonne in late February before rebounding to €70 this week, according to data from Ice Exchange.

“We need ETS prices at €100-€150 to get carbon capture, storage and transport going, as today’s prices are not competitive given the cost of transport,” said Eadbhard Pernot, policy and advocacy director at carbon capture industry group the Zero Emissions Platform.

Pernot said industrial facilities in the EU can avoid paying ETS tax if they capture and store their CO2 emissions.

European shipping companies are also hoping governments will channel ETS revenues back to maritime projects.

“ETS revenues will come back to member states who have the responsibility of sharing that with the industry,” Deligiannis said.

BCG expects more than 20 CO2 carriers will be needed by 2030 given the current CCS pipeline. The EU has an official CO2 storage target of 50m tonnes by 2030.

There are eight large CO2 carriers on order including Northern Light’s two vessels that were launched earlier this month. The joint venture has two more 7,500 cu m vessels on order that are under construction at Dalian.

Greek shipowner Evangelos Marinakis’ Capital Maritime & Trading ordered four 22,000 cu m CO2 carriers at Hyundai Mipo Dockyard Company. The quartet, costing $71m-$80m each, are scheduled for delivery between December 2025 and November 2026.

Separately, there are four CO2 carriers in operation today that transport food-grade CO2 to greenhouses, mostly in northwest Europe. The vessels, owned by Norway’s Larvik Shipping, are converted dry cargo vessels with a CO2 capacity between 1,000-2,000 cu m.

Northern Lights setback

Even the most advanced CO2 transport project faced setbacks despite 80% government funding. Northern Lights agreed to carry carbon for German cement maker Heidelberg and Norwegian energy producer Hafslund Oslo Celsio with its first two vessels, starting from 2025.

But Hafslund postponed its plans to start capturing carbon to 2028 pending renewal of its final investment decision this summer, a spokesperson told Lloyd’s List.

Larsen, of BCG, said: “Although the postponement by a key customer is a setback, the strong demand for CO2 storage from northern and central European countries in the North Sea supports both this project’s and the entire industry’s fundamental viability.” 

Despite the setback with Hafslund, Northern Lights was able to secure two new contracts with ammonia producer Yara and renewables firm Orsted to transport and store 800,000 tonnes of CO2 a year from 2025. Yara and Orsted plan to start transporting CO2 with Northern Lights from 2026.

Hafslund’s postponement could halve actual volumes Northern Lights’ CO2 vessels transport next year, as it agreed to carry 400,000 tonnes each for both Hafslund and Heidelberg.

“Heidelberg doesn’t necessarily need two vessels, but we’ll likely use both vessels to gain experience, although no final decision was taken on this,” said Dolek.

The company might need to order a fifth vessel if Hafslund renews its final investment decision, Dolek said, noting that their total capacity will likely reach 6m-7m tonnes of CO2 in the second phase of our project.