During his presentation at the last GREEN4SEA Conference, Mr. Stylianos Mavrelos, Technical Director, Capital Ship Management, addressed different compliance options and ULSFO availability. As postponement of the Sulphur cup regulation seems unlikely,
2020 Sulphur Cap is a regulation that the industry has to comply with and there is no simple solution. As different compliance options are available, the most optimum solution will be dependent on fuel price differentials and evaluation of other compliance options, which are dependent on:
- Vessel Type, Size, Age and Value
- Trading pattern
- Time spent in ECA
What are our compliance options?
- Either we will use compliant or low Sulphur fuel oil or low Sulphur distillates,
- We can use HFO plus scrubbers
- Alternative fuels: LNG, Methanol, Hydrogen fuel cells, Battery technology.
- Blending onboard etc.
Each solution offers advantages and disadvantages; the cost implications, however are high. So, Life cycle cost analysis, taking into the “equation” all the “influential parameters” is a must, in order to define the best solution applicable to each particular ship.
If we look at the low Sulphur fuel oil compliance options, then we can ask what types of fuels are we talking about: De- sulfurized fuels or blended fuels? De-sulfurizing fuel needs high investments and refiners are not willing to de-sulfurize. We are expecting to see a lot of blended fuels and with no doubt, a lot of residual fuel oils will remain on future LSFO.
BP in a meeting announced that they will have two types of fuels for Northwest Europe, but Exxon said that it will be more that 2 but less than 42, so you can imagine what type of blends we will have available in the industry. I don’t believe that low Sulphur fuel will not be available. Blended low Sulphur fuels will be available, at least in major ports. However the question is at what price, and what problems the industry will be faced up with, when using such fuels and an “ISO” low Sulphur fuel oil specification is not introduced in the meantime.
What are the concerns when we burn low Sulphur fuel?
Presently there is no universal approved specification. A wide range of refinery streams could thus be used. Moreover, the new ISO standard specifying this type of fuel, is not to be published until 2022 and ISO is working on a less formal 'publicly available standard' (PAS), which will be available before 2019, to describe, at least, what this fuel is going to be about.
But we all know the problems of low Sulphur blended fuels. These are mostly related to, compatibility and stability issues. Stability is whether a fuel will separate over time. Due to stability issues, I don’t think we are going to see the 85% to 15% mix. However, stability may be a less likely problem than compatibility.
Compatibility is whether two fuels brought into contact with each other will separate. I think, presently no one can guarantee that, a low Sulphur fuel bunkered at one port, will be compatible with the fuel that will be bunkered at the next port. Should this be the case, any one can imagine what will happen if we are to commingle incompatible fuels either within one tank and or within the fuel pipes during change overs. We are going to see a lot of problems, with substantial wax deposits at the bottoms of the tanks, clogging of pipe lines, fuel oil filters and or fuel pumps leading to engine stoppages and or failure to start etc. These are safety issues and concerns that a company needs to address, in order to reduce or mitigate the risks associated with the use of such fuels.
I expect all above issues and concerns to be properly addressed within IMO, because, besides environmental regulations and concerns, IMO is the regulatory body for ensuring safety at sea. Introducing new regulations for solving one problem, should not create another one within the industry.
The industry is already experienced with LS MGO. We use it extensively within the ECA areas. The only problem that we have is the price differential.
A lot has been said about scrubbers. So far, 507 vessels are fitted with. The fuel oil supply and demand will depend on how the shipping community will respond to the new challenge. “Commercially” there is strong interest in scrubbers by some, mostly “specialized” shipping companies, but the majority has the “wait and see” approach. Assuming that 5000 vessels (this is on the high side) will be fitted with scrubbers by 2020, the market is focusing on the potential loss of 2.9 million BPD of HSFO to Distillate bunkers.
The other thing that we have to consider is what type of fuels will be available and where? From this it will depend how the industry will move forward. Assuming the industry will move forward with scrubbers, then high Sulphur fuel may be available, but if not, then we will have to ask if refiners will be willing to store high Sulphur fuel. If the industry moves forward with distillates, or low Sulphur oil, I expect refiners will stop storing high Sulphur oil. In this case you might have a scrubber, but not a high Sulphur fuel oil to use. So when it comes to availability, I think the blended low Sulphur fuels will be available, the question is at what price.
The industry is aware of the problems associated with open type scrubbers and the discharging criteria that have to be met. Certain ports within Europe and the States, however, have already stated they will not allow discharges from open loop scrubbers at their ports.
For a VLCC, open type scrubbers may be a viable option, but, for the other type of ships, close loop, or hybrid scrubbers may be a solution, but this is more expensive. As such, there is still hesitation within the industry to move forward to scrubbers and use of high Sulphur fuels.
LNG definitely is an option, it costs less, but I don’t think that it will be significant until 2025 because:
- Retrofit costs are inhibitive
- New build costs 20% to 40% higher
- Price uncertainty
- Lack of infrastructure for bunkering
- Greater economic and operational risks
- More costly than scrubbing.
In summary there is no specific generic solution for compliance. We need to plan. Scrubbing may be the lowest cost route to compliance, but?
The uptake of scrubbers is inhibited by a lack of:
- Technology confidence
- Ship owners’ funds and obtaining a return
- Uncertainty on future environmental regulations
Open type scrubbers may prove beneficial for large ships, but smaller ships will go for the other options. At present and unless other market drivers develop, most ships will use low Sulphur fuel oil, but with all inherent problems there in, as earlier defined.
LNG and Methanol are alternative options, but is unlikely to be a significant factor until 2025. It may start picking up when the new IMO Strategy for curbing CO2 emissions to 50% of the 2008 level by 2050 is agreed.