It is now two weeks since I issued an invitation at the end of a commentary on fuel availability for readers to provide a reasoned argument as to why there will be a ready supply of high-sulphur fuel over the long term for use on scrubber-equipped ships.
My reason for asking was to provide a counter to the argument that I discussed in that piece. An oil refining consultant had told me that his industry was more focused on squeezing more profitable products from each barrel of crude than providing bunker fuel for shipping.
No one has yet accepted that challenge. Instead, Dr Tristan Smith, Reader in Energy and Shipping at University College London, got in touch to issue an equally stark warning to refiners: “The rather brutal truth … is there is no long-term future for refineries and crude oil use … if the Paris Agreement targets are to be met,” he said.
Based on his comments, perhaps I have misread shipping’s expectations about high-sulphur fuel availability: Tristan believes that most shipowners who invest in scrubbers don’t see them as a long-term investment, saying that they are “a stop-gap for the early 2020s whilst clarification on what the longer term fuels for shipping will be.”
However, Tristan does not expect an abrupt change in high-sulphur fuel availability. “There are still many refineries that are old-tech and have had to make a decision about whether to retrofit desulphurisation hardware,” he said. Any refineries that are unable to desulphurise will eventually die out but in the meantime they will have residual production that they need to get rid of, he remarked.
Regular ShipInsight readers will know that Tristan has also long been involved in discussions around decarbonisation of shipping so his argument about the future of refining was not only based on sulphur content. He also drew my attention to IMO’s Initial Strategy on reducing greenhouse gasses (GHGs) from shipping which was adopted by its Marine Environment Protection Committee in April 2018. That strategy’s long-term goal focuses on efforts towards phasing them out entirely.
That implies, Tristan pointed out, that future energy sources will not be fossil-derived. “Then the question each owner will need to answer is: am I an early adopter of the long term fuel, or do I invest in an interim solution such as LNG, LSFO, MDO or biofuel?” That latter approach risks being caught with a stranded asset if the switch away from fossil fuels happens faster than the shipowner expected, he added.
In his view, my refinery consultant had overlooked this scenario, despite strengthening political resolve towards that goal, which will be further reinforced at next month’s UN Climate Action summit, he said.
On that basis, his expectations for decarbonisation are more ambitious than IMO’s. His team’s forecasts and other modelling “show that by 2040 we can expect to see of the order of 50% of shipping’s energy needs met from other sources,” he told me.
That is about 10 years earlier than IMO’s 2050 target of reducing GHG emissions by at least 50%. By then, according to Tristan’s analysis, “we don’t think there will be any crude-oil-derived product used in shipping globally.” In support of this ambitious forecast, he said that it is “where we are most likely to end up because the IMO target is not Paris-target-aligned at present.”
I find that forecast astonishing. How can shipowners prepare for a completely non-carbon energy environment in just 30 years? Some ships being delivered today and in the next few years may still be in service then.
The International Chamber of Shipping has been thinking about how the industry can meet IMO’s GHG goals and in June it published a document on reducing CO2 in the ‘key issues’ area of its website. That document confirms ICS’ and its member national associations’ commitments to the phase-out of GHG emissions but describes IMO’s targets as “very ambitious” for which “the technologies necessary to achieve [them] do not currently exist at a scale or in a form which is commercially viable for widespread use by international shipping.”
That document would make a useful primer for a one-day conference that ICS will be holding on 11 September – during London International Shipping Week – called ‘Setting course for 2050: Powering global trade’. I will be attending and, at the time of writing, registrations are still being accepted. I plan to ask what delegates think of Tristan’s even more ambitious forecast.
What do you make of this? If a zero-carbon fuel environment is to be reached by 2050, what should individual shipowners and machinery makers be doing now? What are you doing to prepare? Email me with your views now.