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Emissions

Sulfur Cap:

Everyone’s A Loser

Shutterstock / Igor Grochev

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s the IMO’s 2020 deadline for the 0.5% sulfur cap looms ever larger, the question of compliance is top-of-mind for everyone in the maritime industry. However, this is somewhat belied by a lack of initiative in compliance with the new rule throughout the industry in general. While newbuilds are almost always designed to comply, owners of existing tonnage appear to be experiencing a kind of standoff. Plausibly, more brain power is being devoted to the question of compliance in the extraordinary seafaring nation of Denmark than anywhere else. Here, the maritime industry is equivalent to 3% of national GDP — of which Maersk, the world’s largest shipping line, is some 2.5% — and any regulations which impact shipping will have a pronounced knock-on effect. There are various options for compliance. One option is the use of LNG, broadly considered to be a green replacement for fuel oil thanks to its low sulfur and negligible particulate matter (PM) content. While many newbuilds today are being designed with LNG in mind, it is considered prohibitively expensive in most retrofit applications, thanks to the requirement for new, expensive, and larger tanks and associated

By Charlie Bartlett, European Editor reduction in cargo space, as well as new engines. With the ever-shorter lifespan of today’s cargo vessels, the expenditure is almost always seen as unjustified. Another option is the use of low-sulfur heavy fuel oil (LSHFO), a new grade of fuel ready to burn in most engines, in which the sulfur content is refined out of ordinary heavy fuel oil using a visbreaker or coker. A high-opex, low-(or in some cases zero) capex option for shipowners, this is anticipated to be popular for older tonnage. While supply concerns abound, oil majors maintain that steps are being taken to ensure that adequate LSHFO is available. But they will have a job. “A coker unit is a billion-dollar cost investment, and it takes 5 years to install,” explains Charlotte Røjgaard, Global Technical Manager of Marine Fuel Services at Bureau Veritas. “If they are not installing it now, it won’t be ready for 2020.” Owners also have the option to fit scrubbers to their vessels, which wash the sulfur from the exhaust gases, generally depositing the resulting sludge in a sediment tank which is then unloaded in port. The IMO has stipulated that, in conjunction with the use of scrubbers, owners will be allowed to continue using heavy fuel oil. “We read that around 2,000 scrubbers

will be installed ahead of 2020. Of 120,000 ships, that is a very small share,” says Svend Stenberg Morhølt, Group COO of Danish bunker supplier and shipowner, Monjasa. “Similarly, we see less than 1% on LNG.” This inaction could, feasibly, be a sign that the market is waiting for the bigger players to show their hands. Thus far, many have anticipated a market which would divide the industry into winners and losers, with a small number of companies carving out a decisive business advantage over those who failed to back the right horse. But on the other hand, the hour grows late, and Morhølt has a different explanation. “The elephant in the room is non-compliance,” he says. “If we look at the Fujairah conference of bunker suppliers, shipowners and charterers in 2017, where they did a survey, non-compliance was tied with compliance in first place. “The stakes are very high and there are going to be issues if we don’t consider how to deal with non-compliance. We just have to acknowledge that the financial incentives of non-compliance are significant.” The fact is that carrying on burning HFO regardless is and has always been the cheapest option, and the fines associated with being caught in the act simply are not May 2018 // Marine Log 23

Marine Log May 2018  

Complying with the Cap: Operators add news ship with fuel, after-treatment flexibility as 2020 looms

Marine Log May 2018  

Complying with the Cap: Operators add news ship with fuel, after-treatment flexibility as 2020 looms