LNG retrofits surge as maritime industry seeks short-term carbon reduction solutions

Lloyd’s Register’s (LR) latest Engine Retrofit Report reveals that while the maritime industry has made strides in its ability to execute ship engine retrofits for alternative fuels, a critical lack of supply-side incentives threatens to delay progress.  

Since LR's initial report in 2023, the industry has seen the completion of the first methanol fuel conversions since 2015 and a continued expansion of shipyards with retrofit capabilities.  

However, the new report emphasizes that the incentives needed to accelerate the adoption of alternative fuels are evolving at a slower pace. Despite regulatory drivers such as the EU’s FuelEU Maritime and Emissions Trading System (ETS), which impose penalties for carbon emissions, demand for alternative fuels remains low due to an absence of strong incentives for fuel producers. 

A surprising development in 2024 was the resurgence of LNG retrofits as shipowners sought immediate carbon reductions to navigate regulatory requirements. More than 305 LNG-fueled ships were ordered last year, accounting for approximately 14% of newbuilding orders, significantly outpacing methanol and ammonia alternatives. 

While LNG offers a near-term compliance solution, the report warns that deeper emissions reductions will be necessary beyond the next decade. Methane emissions and the long-term availability of bio- and e-LNG remain challenges, but with zero-emission fuel supply chains still in their infancy, many operators see LNG as the most viable retrofit option today. 

Supply chain readiness is another important factor highlighted in the report. It warns that without improved coordination between engine manufacturers, fuel system suppliers, and shipyards, lead times for conversion projects could stretch beyond 18 months. On the regulatory front, recent amendments to the MARPOL Annex VI NOx Technical Code are expected to ease certification challenges for converted engines.  

Another significant issue identified in the initial report was the limited capacity of shipyards capable of undertaking alternative fuel conversions. While the number of capable yards has increased (around 16 shipyards, mainly in China and the Middle East), the latest report identifies current retrofit capacity at approximately 465 vessel conversions annually—well below the projected peak requirement of over 1,000 conversions per year.  

Despite a slow evolution of new retrofit orders in 2024, engine designers are proactively preparing for future market demands. The relatively shorter lead time for retrofit projects than newbuilds mean that more projects for completion in 2026 and 2027 could be announced in 2025.  

In response to the initial report that identified shipyard capability as a potential obstacle to retrofits, LR has developed a methodology for evaluating potential shipyard candidates. This provides shipowners with confidence that chosen partners can fulfil retrofit project requirements.  

Claudene Sharp-Patel, LR's Global Technical Director said: “LR’s new Engine Retrofit Report demonstrates that while technology and regulations are evolving, decisive action is needed to secure the future fuel landscape. The technology and shipyard capacity to retrofit vessels is improving, but without decisive action to scale up alternative fuel supply chains, shipowners will face increasing compliance costs and operational uncertainty. We need greater regulatory clarity and investment to bridge the gap between ambition and action.”