With the 2020 cap on the sulphur content of marine fuel oil looming on the horizon, the global shipping industry has started expressing concerns. While a number of shipping companies, including Maersk, Hapag Lloyd and Klaveness, have indicated that they will likely move to low sulphur fuels, others are giving it a second thought because of LSFO’s pricing.
Another option is the installation of scrubbers, which again is a highly expensive affair. Installing scrubbers can cost upto USD 4 to 5 million, which will have a direct impact on the capital expenditure. Besides, scrubbers will leave ‘sly’ as the residue, which has to be discharged at designated spots near ports only. Many ports across the world are not well equipped to treat sly generated by the scrubbers.
Scrubbers, however, are far from a better solution, opine experts. From 2020, in order to reduce sulphur oxide (SOx) emissions from shipping, IMO regulations dictate that fuel must have a maximum of 0.5% sulphur content. Ship operators will need to either switch to low sulphur fuel, or use a scrubber to remove the SOx from the exhaust gas.
While switching to low-sulphur fuel tackles the problem of air emissions at source, scrubbers are an end-of-pipe technology, which produces a residue (sludge and wash-water) from the cleaning process that needs to be disposed of – and there is concern that scrubber residue and wash-water could end up being dumped in the ocean.
A recent increase in media articles on the issue suggests that many shipowners have yet to decide which route they will take in order to meet the regulation: install scrubbers or move to low sulphur fuels.
A low number of shipowners have preferred scrubber installation. Some bunker fuel industry players are somewhat cynically claiming that installing scrubbers is the cheapest option. The new year had barely dawned before it was reported that due to alleged “low interest” from carriers with regard to retrofitting scrubbers, some bunker suppliers actually want to pay for carriers to install scrubbers, provided of course that the carriers continue buying the suppliers’ fuel.
On the other hand, by switching from HFO to distillate fuel, ship operators would incur minimal or no technical intervention on ships, so switching fuels can be readily undertaken by the existing fleet. Enforcement of the sulphur regulation would also be simpler when using low-sulphur fuel, since ships would have no need to carry fuels with a higher sulphur content than 0.5%.
Concerns have been raised about the availability of low sulphur fuels; however, according to the official IMO fuel availability study and the IMO secretariat, the required volumes of low-sulphur fuel will be available for the world fleet from 2020.
Maersk, the world’s largest container ship operator, has identified commercial, technical and operational challenges as its reasons for not investing in scrubbers to meet the new sulphur cap in 2020. Some international shipowner associations are now openly supporting a ban on the carriage of fuels containing more than 0.5% sulphur on vessels which are not equipped with scrubbers, in order to simplify enforcement of the sulphur cap.
Recently, Wood Mackenzie grabbed the headlines by saying global bunker fuel costs could rise by USD 60 billion annually from 2020, in a full compliance scenario, when the International Maritime Organization (IMO) regulation kicks in.
The underlying assumption for this figure was based on the majority of the world fleet switching from high sulphur fuel oil (HSFO) to marine gas oil (MGO). “A combination of higher crude prices and tight availability of MGO could take the price of MGO up to almost four times that of fuel oil in 2016, and eventually cost the entire industry additional USD 60 billion annually,” Wood Mackenzie said.
(References: IBIA, The Guardian, Clean Arctic Alliance)
Sea News Feature, April 6