Home / Shipping News / International Shipping News / Feature: Shipowners ready to embrace cleaner fuels but concerns remain

Feature: Shipowners ready to embrace cleaner fuels but concerns remain

With a key meeting of the International Maritime Organization less than two weeks away, the financial, environmental, regulatory and energy-related implications of changing shipping fuel emission norms has come back into the spotlight.

IMO’s Marine Environment Protection Committee will meet in London October 24-28 amid a raging debate on how best to handle the proposed implementation of a 0.5% cap on sulfur content in marine fuel from 2020.

“This transition will be more disruptive than the switch to the 0.1% sulfur blend in the ECAs because the 0.5% cap will affect the industry worldwide and have a significant impact on fuel supplies,” Goh Swee Chen, chairperson of Shell Singapore, said at the Singapore International Bunkering Conference.

The higher cost of production and increased use of gasoil in the blend will drive up the cost of 0.5% sulfur fuel oil and a lack of demand for high sulfur fuel oil will drag down HSFO prices, Swee Chen said.

According to shipping industry estimates, close to 2.5 million b/d or over 75% of the current bunker fuel market will be displaced when the lower sulfur content norms are implemented.

While more than half of this or 1.5 million b/d will be used in the incremental coker capacity that is expected to come on stream, it still leaves another 1 million b/d of surplus putting pressure on HSFO prices.

Alternative markets such as bitumen will have to be found to dispose off fuel oil, Andy Milnes, BP’s CEO for Integrated Supply and Trading for the Eastern Hemisphere, said at the conference.

The displaced bunker fuel will be substituted with middle distillates. More than 7.5% of existing global distillates production of 33 million b/d is expected to be needed for cleaner marine fuels, according to industry estimates.

“It is not just about switching a configuration of the refinery but to change the very nature of fuel [the industry] is producing and it entails investments,” ExxonMobil’s Policy Planning Senior Adviser Eddy H. Van Bouwel said.

There is a provision for IMO to delay the implementation of the new sulfur content cap to 2025.

While a decision is not expected anytime soon, the MEPC meeting later this month will take up any matter concerned with the prevention and control of pollution from ships.

SHIPOWNERS’ DILEMMA

“We would like the industry to go as clean as possible in what is economically viable for the companies and the sooner they make their choice, the better it is for the planet,” Jacques Werner, the Dutch ambassador in Singapore, said at the conference.

The shipping industry is urging for clarity on the sulfur content issue soon so as to plan their investments accordingly.

The IMO’s decision on whether to implement the sulfur cap in 2020 or delay it to 2025 will also have an impact on the number of ships that will be recycled.

“An earlier timeline might mean an earlier ship recycling date and these decisions too will have cost implications,” Shell’s Swee Chen said.

For the last few years, owners have been ordering ships with engines that can be run on both gas and bunker fuel or dual fuel-fired engines, said Carlos Torres, BP’s global head of marine fuels in the eastern hemisphere.

A bigger challenge for the industry was to design supertankers which carry oil cargoes but are run on LNG, without operational hazards, Torres said.

Ships that run on LNG need to have a fuel tank system that can pressurize gas and is fully segregated from the oil cargo space.

Retrofitting existing oil tankers with LNG fuel compliant storage and engines may be a complex and expensive task, but trials on designing new ships are going on and a few product tankers already run on LNG.

“LNG is too dense and dissipates quickly and segregating it in fuel tanks in ships that carry oil cargoes is not an insurmountable issue,” said Arthur Bowring, managing director of the Hong Kong Ship Owners Association.

River-trade vessels deployed in China are being retrofitted to run on LNG, Bowring said. Currently, there are around 80 LNG-fuelled ships in operation worldwide with dozens more on order. Global merchant fleet population is over 85,000 ships.

Experts say that LNG fuel will become popular with ships moving on specific routes and between ports with bunkering facilities. They include cruise lines, container ships, Ro-Ro vessels and ferries.

“We are heading into an era of multiple fuels where both gas and low sulfur fuels will be used,” Torres said, adding that dry bulk carriers and containers would be able to make a relatively easier transition to LNG fuel.

This also brings into focus the role of oil majors that produce and refine fuels and also trade in them and move them on ships.

“We can provide market intelligence on the kind of fuel to be used depending on the routes, ports and ship types,” Torres said.

To comply with multiplicity of regulations worldwide, including various Emission Control Areas, ships have to maintain up to three different types of fuel in segregated tanks.

High and low sulfur fuels are incompatible and utmost care needs to be taken while changing fuels to avoid any choking of filters, said Narhari Mahanta, a consultant scientist with Andrew Moore and Associates. PORTS GEAR UP FOR LNG BUNKERING

Shipowners are currently reluctant to make an investment in cleaner fuel tonnage because they don’t seen enough returns or incentives and ports needed to set up adequate infrastructure to instill confidence among them, BP’s Milnes said.

An international focus group that includes Singapore, Rotterdam, Antwerp and Zeebrugge and which is working towards building a network of LNG bunker ready ports along the Asia-Europe shipping route, was expanded this week to include Jacksonville, Ulsan and representatives from Norway and Japan.

Currently LNG is mostly offered on an as-is-where-is basis but as demand grows there will be need for more testing on specifications such as methane content, water level and impurities, said Bhavnani Raghuvir, vice-president of Viswa Lab.

“We will provide a suitable environment to companies for delivering cleaner fuels to their clients,” said Bob Sanguinetti, CEO, Gibraltar Port Authority, which signed an agreement with Shell to provide LNG.

Enforcement of rules will also be critical. “Penalty for non-compliance has to be higher than the cost of compliance,” said Joshua Low, global head of trading at Maersk Oil Trading.
Source: Platts

Leave a Reply

Your email address will not be published. Required fields are marked *

*

captcha

Please enter the CAPTCHA text

Recent Videos

Hellenic Shipping News Worldwide Online Daily Newspaper on Hellenic and International Shipping