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Green corridors for shipping coming to life

Photo: Pilbara Ports Authority port-hedland-welcomes-first-lng-fuelled-vessel.jpg
Nearly one year on from the COP 26 Climate conference in Glasgow where the concept of “Green Corridors” was unveiled in the Clydebank Declaration, consultants McKinsey have evaluated potential routes.

Working in conjunction with the Maersk Mc-Kinney Møller Center for Zero Carbon Shipping (MMMZCS), McKinsey has provided a framework, 104 pages in length, for evaluating potential corridors. According to its authors, the report, titled “Feasibility Phase Blueprint”- “provides an approach to designing and demonstrating the feasibility of green corridors”.

It is intended to serve as a ready-to-use guide for any stakeholder involved in green corridors for decarbonising shipping and includes 80 plus off-the-shelf pages outlining methodology, analysis, and illustrative templates at each step of the value chain and across the ecosystem.” Importantly, the report is meant to be “a living document that will be refined over time as we collectively gain more knowledge and hands-on experience building green corridors.”

The presentation style is very much from the playbook of a high-end consultant which presumably will be hired to evaluate potential corridors defined here as “shipping routes on which there are commercially operating ships using exclusively alternative fuels”. It is full of checklists and graphic diagrams, including flow-charts, timelines, and Gantt charts, to guide “stakeholders” in their evaluation of potential trades.

Three types of corridors are defined, a “single point”, “point-to-point” (two ports), and a “network” (three, or more, ports). Evaluating the feasibility of a route involves prognostications on simultaneously determined variables too numerous to list. Broadly, major areas to be considered are alternative fuel supply chains, port and bunkering infrastructures, the vessel capability, and then the demand side of moving particular cargoes on the route. In the background of all this are regulatory frameworks for supporting all of the preceding variables.

The report is rich in examples of what micro portions of the analysis might look like, including excellent graphics showing estimates of cargo demand, going forward, on a particular corridor, along with estimates of how much alternative fuel might be available for vessels, and the “total cost of ownership” surrounding alternative fuel production.

The financial aspect of decarbonization is considered on a corridor by corridor basis as opposed to the blanket statements along the lines of “$3 - 4 trillion needed, overall, to decarbonize shipping”.

One important analytical step being pioneered in this methodology is to “Define the number of newbuilds and retrofitted vessels with modifications over time,” on a particular route, and then to “Quantify the capex requirements for converting existing and new vessels.”

Though the McKinsey/ MMMZCS report has been published in late September, 2022, a number of Green Corridors have already been established, albeit through agreements among participants in particular trades rather than through exhaustive studies and formal declarations. Shipowners Star Bulk Carriers and Oldendorff Carriers have agreed with miners BHP and Rio Tinto to develop a corridor for moving iron ore between Australia and “East Asia”, in an arrangement facilitated through the Getting to Zero Coalition.

At the recent Global Maritime Forum (GMF) session in New York, Svein Tore Holsether, President and Chief Executive Officer, Yara International, described a short distance corridor already in operation in the Oslofjord, with the zero emission container vessel Yara Birkeland moving boxes that otherwise would be hauled by truck.

Other corridors under discussion include a link between Montreal and Antwerp, a China to WC Canada container run, and pathways around northern Europe through the “Nordic Roadmap.” In his GMF remarks, Yara’s Holsether also referred to the First Movers Coalition and its efforts looking “across value chains” to “create incentives and structures…to think from production, and shipping, to the end consumer.”

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