Almost 100 years, after the vessels started to shift from burning coal to fuel oil, the shipping industry faces another profound change, in its fuel consumption tactics. This change will come, as a result of IMO environmental regulation. Sulfur limits for bunker fuels worldwide, will drop from 3.5% to 0.5% starting on 01/01/2020.
by Capt. Dimitrios Mattheou
Capt. Dimitrios Mattheou is the Managing Director of Arcadia Shipmanagement CO LTD & Aegean Bulk | Chairman of GREEN AWARD Foundation
Almost 100 years, after the vessels started to shift from burning coal to fuel oil, the shipping industry faces another profound change, in its fuel consumption tactics. This change will come, as a result of IMO environmental regulation. Sulfur limits for bunker fuels worldwide, will drop from 3.5% to 0.5% starting on 01/01/2020.
1. Outside ECAs
maximum limits for sulphur content of the fuel oils:
2. Inside ECAs
Maximum limits for sulphur content of the fuel oils is:
Even if refineries, decide to invest in new capacity, or upgrade the existing plants, they would not be ready by the deadline.
Retrofitting
According to data from “Clarksons Shipping Intelligence Network” (SIN), the number of vessels fitted with Exhaust Gas Scrubbers, reached 240 on December 2017. Other sources raise this figure to 300 and even more. With only about 500 Scrubbers’ potentiality to be fitted in a year (based on global yards’ capacity), all estimations provide for about 25% of the global fleet, to be fitted with Scrubbers by 2025.
Alternative fuels and Powering options
Engines burning other kind of fuels (such as LNG, Bio-fuels, Fuel cells, Hydrogen), using other Technology options (Nuclear, Batteries) or vessels driven by Renewable energy sources (Wind and Solar) energy, are still not wide-spread
Ship Owners/Operators
They are facing the options of:
For Bunker Fuel supply, they will have to decide, whether to UNDERTAKE TERM CONTRACTS, or operate on the SPOT MARKET from 2020 and on.
Especially for those operating a large fleet on a spot basis with differing voyage destinations, this would be DIFFICULT TO DECIDE, mainly due to the risk of fuel compatibility.
As it is predicted by the Oil Companies, there will not be one single very low sulfur fuel oil, with a 0.5% sulfur content available in the market, but new fuel blends will appear.
The issues of Fuel blends
Engineers and chemists are “ringing the bell” regarding the new fuel blends, advising that these, will most probably, cause ENGINE FAILURES.
The two key-properties to watch into these blends are:
Additionally, Sludge forming at the bottom of a bunker tank after a fuel separation, can block a vessel’s filters and lead to engine malfunction and failure
To fit a scrubber or not to fit
Adopting 0.5% sulfur fuel:
Equipping vessels with exhaust gas cleaning systems:
The future Fuel Oil price differentials, between FO<3.5% Sulphur and the 0.5% Sulphur - 0.1% Sulphur FO or MGO, WILL DICTATE THE PAYBACK PERIOD of a new Scrubber retrofit installation
Burning Low-Sulphur Fuels
NOT ALL engine components of existing vessels, are in general built for CONTINUOUS burning of ultra-low sulphur fuels.
Potential Issues
Vessel Modification for Scrubber
The main concept of Scrubbers: Sulphur in the exhaust gas is neutralized by an absorbent
Different absorbents can be used:
The most common solution is to use sea water, as the absorbent in an “open loop” system.
Manufacturers also offer “closed loop” and “hybrid” systems, using caustic soda or magnesium hydroxide
The main types of Scrubbers
OPEN LOOP: uses ambient seawater for exhaust gas scrubbing. The SEA WATER is filtered for heavy metals and particulate matter and then DISCHARGED INTO THE SEA, containing all the sulphur cleaned from the exhaust. These are simpler systems and do not require large amounts of waste storage and handling on board, but there are issues of water intake quality. More IMPORTANTLY, some ports and areas may not permit the discharge of the waste water containing sulphur.
CLOSED LOOP: uses FRESH WATER that is chemically treated usually by caustic soda injection, to effect scrubbing. Most of the scrubbing agent is re-circulated with only MINIMAL water intake and effluent discharge. These systems, avoid the issues of waste water discharge, but are more COMPLEX, more COSTLY TO RUN and create WASTE STORAGE AND HANDLING issues on board.
A HYBRID SYSTEM: A COMBINATION of closed and open loop scubber, in order to offer only the advantages of both Solutions, through FLEXIBILITY.
DRY SCRUBBER: The system sprays DRY REAGENTS - calcium hydroxide Ca(OH)2 - into the exhaust stream. These chemicals can react differently, depending on which material they are specifically targeting for removal. Exhaust Gas is not cooled down, since the gas cleaning operation is possible in hot exhaust. No Wash water is used.
The DRAWBACK is that, consumable Ca(OH)2 needs to be bunkered.
1. Considerations over Scrubber installation
Characteristics (dimentions - weight - placement) of:
2. Sea chest and wash water outlet pipe location
3. Integration with existing systems
Weight and Volume of the vessel will INCREASE Stability:
4. Affect upon Equipment:
The next day to IMO 2020 Global Sulphur Cap
With OLDER VESSELS, there is less payback time for investment of the SCRUBBER installation.
It may be more ECONOMICAL, to switch to cleaner fuel alternatives.
It is a trade-off, which depends on the INDIVIDUAL economic and operational specifics of each ship and trade.
Fit the Scrubber and the ship can CONTINUE to burn heavy fuel, which is usually going to be both cheaper and more readily available.
However, fitting a Scrubber involves:
Scrubbers to remain minority option in 2020
The more scrubbers are installed, the less switching from HSFO to 0.5% blend will be required and the less strain will be placed on the global refining system.
The vessel’s age, plays a considerable role in this case.
Price-spread estimation
An AFRAMAX burns about 35 tonnes per day. The spread between LSMGO and HSFO is about $185 / mt. Assuming that this will go up to $250 / mt by 2020, bunker costs could be around $8,750 per day higher for burning LSMGO, compared to burning HFO.
Assuming that a vessel spends about 100 days at port and/or for delays, that leaves about 265 days of trading. Multiply that by the incremental rise in daily bunker costs, it would add up to $2.3m for each vessel per year.
For a SUEZMAX (old type engine), burning about 50 tonnes per day, the annual rise to fuel cost reaches $3.3m for each vessel.
New built SUEZMAXES (energy efficient, equipped with electronic engines and hull / propeller modifications) burn about 30 tonnes per day. For these vessels the annual rise to fuel cost reaches $2.0m for each vessel
A simple calculation can be carried out based on spread between cost of LSFO and high-sulfur marine fuel (HSFO), cost of exhaust gas scrubber including operating cost, annual fuel consumption, and residual ship life to justify the decision