Ammonia poised to overtake LNG as most cost-effective fuel by mid-2030s - GMF

Liquefied natural gas (LNG) and ammonia are the most cost-effective pathways for ship operators to comply with the new IMO rules, but ammonia is expected to surpass LNG by the mid-2030s as the preferred low-emission fuel, a new report from the Global Maritime Forum (GMF) forecasts.

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The conclusion stems from total cost of ownership (TCO) modelling—an approach that considers all capital and operational costs of using a fuel over the vessel’s lifecycle. Devised by research institutions UMAS International and UCL, this includes not just fuel price, but also vessel retrofitting, emissions penalties, potential rewards and infrastructure needs.

IMO measures trigger long-term fuel shift

The insight brief was published in the wake of a major regulatory development: the International Maritime Organization’s (IMO) adoption of binding greenhouse gas (GHG) reduction measures. These include a tiered global fuel standard and economic instruments such as remedial units (RUs) for emissions above the set threshold and surplus units (SUs) for ships that outperform targets. The measures will enter into force in 2028 and grow more stringent through 2040.

LNG and ammonia lead today’s fuel choices

The TCO model shows LNG and ammonia dual-fuel ships offer the lowest cost pathways for compliance with IMO’s new emissions framework. LNG, in particular, is projected to remain the most competitive fuel through 2035, especially when combined with onboard carbon capture systems.

Meanwhile, blue ammonia—produced from fossil fuels with carbon capture—is nearly as competitive and can generate surplus emission credits under the current IMO compliance system. These credits can offset costs or be traded, adding to its appeal.

Ammonia to take the lead from 2037 onward

Starting around 2037, the analysis indicates ammonia will emerge as the most economically viable fuel, even in the absence of financial rewards. This shift is driven by the IMO’s steep GHG intensity reduction targets, which increasingly favour fuels with minimal carbon emissions.

E-ammonia—produced from renewable electricity—is expected to become the lowest-cost fuel after 2045, assuming policy support continues to evolve. However, the report warns that without substantial incentives or rising penalty prices, e-fuels like e-ammonia may struggle to scale early enough to meet decarbonisation goals.

Industry urged to invest ahead of curve

GMF’s report stresses the importance of early investment in ammonia-capable vessels. While LNG and blue ammonia offer cost-effective options today, the IMO’s emissions trajectory means that only fuels with near-zero emissions—such as e-ammonia—will be viable in the long term.

The brief also highlights the risk of delayed transition: shipowners relying on short-term compliance strategies may face fuel price volatility and risk asset obsolescence. In contrast, early adopters of ammonia technology are more likely to secure long-term cost and compliance advantages.

Policy mechanisms could accelerate transition

The report suggests that appropriately designed reward mechanisms and subsequent revisions to remedial unit prices will be crucial to accelerate the uptake of scalable zero-emission fuels.

"A reward that helps close the cost gap for e-ammonia can play an important role in ensuring that scalable e-fuel production is developed in time," the report argues.

By Tuhin Roy

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