2020 fuel: shipping’s biggest challenge’, says V.Ships technical head

Paul Gunton
Paul Gunton
ShipInsight

04 July 2019


Moving the global fleet onto low sulphur fuel is “the biggest challenge we’ll see” in shipping, V.Ships’ head of technical matters for ship management, John Kerr, told ShipInsight. It surpasses its regulatory rival – the introduction of ballast water management – because 1 January 2020 marks “a hard line in the sand” whereas the deadlines for treating ballast water have been delayed and are staggered over an extended period.

He was speaking to ShipInsight during an exclusive interview during Nor-Shipping last month and described the choices facing its clients as they head towards complying with the 0.50% fuel sulphur cap that comes into force on 1 January. With about 2,200 ships on its books for one or another of its services, including around 600 under full management, the world’s largest ship manager has a unique overview on their options.

John kerr

A huge majority of those 600 are opting to use compliant fuel rather than scrubbers and he stressed that V.Ships does not make any specific recommendation as to whether an owner should choose a scrubber or compliant fuel; “we give as much information as we can [but it is] the owners who have to make the financial decisions – and it’s a huge investment.”

Just 12 of its managed ships are scheduled to be fitted with scrubbers, and half of those belong to one client. Its experience reflects the global fleet, he said; “a tiny percentage of shipowners have gone for the abatement solution.”

It began preparing its clients for the change in the first half of 2018 at a time when few shipowners had begun making plans, he said. There was a great deal of uncertainty, particularly over the future availability of high sulphur fuel and the likely payback time for a scrubber investment.

And those uncertainties remain. “There’s a huge question mark over availability of these fuels,” he said, with some analysts predicting that high sulphur fuel may only be available for another three-five years. That makes it essential to get a return on the investment as fast as possible, with some owners setting themselves a 15-month target. But in another scenario, the fuel remains available for longer but its price rises to nearly that of low-sulphur fuels, removing the margin needed to show a return. But “nobody knows [what will happen] and that’s the biggest challenge,” Mr Kerr said.

Among the parameters to consider when assessing whether to fit a scrubber or use compliant fuel are the ship’s daily consumption and its trading pattern. In general, it is larger ships – such as Suezmax and VLCC tankers and Capesize bulk carriers – that will get most benefit from scrubbers, thanks to their high fuel consumption and available space to fit the equipment. “If you look at handy size or MR tankers or small chemical ships, not that many are looking at scrubbers,” he pointed out.

He put some figures to that assessment, based on the approach taken by V.Ship clients. Some have identified 46 tonne/day fuel consumption as the watershed figure to justify a scrubber, he indicated. Those owners believe that ships burning more than that quantity can expect to see a return within the three-five year window. Less than that makes the justification borderline, Mr Kerr said, “and certainly when you’re down at 25-30 tonnes/day a day, it’s questionable whether you would actually get your return” in that period.

Because that window of opportunity is critical, some studies have suggested that if a scrubber is not fitted by July 2020, “you’re potentially going to be too late,” he said, describing that date as a “tipping point”. For owners that do plan to fit them, there is now limited dock space available, not to mention delivery schedules for the scrubbers themselves, and after 1 January, their ships will have to use compliant fuel until their scrubbers have been fitted.

But Mr Kerr is concerned that there are still uncertainties about the fuel that will be available, such as the lack of a specification. “Ultimately it will fall on managers, or owners who are operating their own vessels, to try to mitigate risks as much as we can,” he said. This includes developing ship implementation plans, which may include dividing existing bunker tanks to create more storage options to avoid mixing different fuel stems. “I see ships taking smaller parcels of bunkers more often just to ensure that they don’t mix the fuel,” he said.

V.Ships is also liaising with engine manufacturers to understand the impact of the new requirements and making sure its crew have been trained in their implications. It is not simply a matter of knowing how to manage fuel changeovers, he said; because of the various ECAs and SECAs, they have several years of experience of doing that. What they additionally need to understand is the potential for compatibility and stability issues, among other topics, he said.

Ultimately, his message to shipowners is a simple one. “Just be aware of what’s coming,” he said. For its clients, V.Ships is “trying to give them tools so they can see what the potential risks are to make them as ready as they can possibly be.” Reflecting on his own years as a seagoing engineer, from cadet to Chief, “that’s the information I would want to know,” he said.