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Contemplating the future – What’s an owner to do?

Malcolm Latarche by Malcolm Latarche
November 23, 2020
in Opinion
Contemplating the future – What’s an owner to do?
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When it comes to planning new ships for fleet renewal, shipowners have always had to rely on a feel for the market and an eye on the bottom line.

Mostly they get it right. That is because although the world throws up regular obstacles such as wars, oil crises, changes in trade patterns and economic crashes the technology has never changed so rapidly as to make a decision made today unviable in the planned lifespan of the vessel.

There are occasional exceptions that test the rule, LASH, BACAT and 1970s-built tankers too large to enter ports spring to mind, although admittedly the first two did at least operate for the usual 20-25 years before becoming obsolete while some of the latter barely made a handful of voyages.

Technology changes in the past were the result of evolution. Shipowners generally wanted something faster, more efficient, larger and more powerful to cope with growing trade and give a competitive edge over rivals. Very occasionally things happened faster although not so fast that others couldn’t soon catch up. We could count containerisation in that – early pioneers may have had a small advantage but lack of infrastructure in ports was a big hurdle for early leaders to overcome.

Today, it is not technology but regulation that drives change and that is beginning to cause owners a big headache.

While there is as yet nothing mandatory that requires owners to decarbonise in line with the IMO’s ambitious targets of 40% energy efficiency improvement by 2030 compared to 2008 and pursuing efforts for a 70% improvement by 2050, there seems to be no letup in the pressure to meet the targets.

From one side there are lobby groups saying the targets are not ambitious enough and ships should immediately slow down to make some cuts in emissions. That is an easy thing to call for but those that pay the bills for owners are mostly saying the opposite.

There are groups lobbying for LNG to be considered as, if not the whole answer then at least a major step towards it with bioLNG or synthetic LNG as the ultimate goal. Others are pushing the case for ammonia or methanol or LPG and others still for hydrogen. Those are the fuels but there remains the means of converting them into propulsive power with the traditional diesel currently favourite but with fuel cells also having their advocates. On top of that there are other technologies to be considered such as energy storage systems, wind assistance, air lubrication or something yet to be devised.

Most recently nuclear power has again been promoted as a possibility. It has to be said that nuclear is an emotive issue and there are strong arguments against it. There have only ever been four nuclear cargo vessels and we are talking of around 50 years since they were withdrawn. The nuclear technology then was relatively primitive but while there are new technologies available such as molten salt reactors that are much less risky overcoming the reticence of governments and public will not be an easy task.

Proponents of nuclear power such as Anglo-Eastern CEO Bjørn Højgaard, think that nuclear will be commonplace in shipping in 50 years’ time but that will not help much in reaching targets for 2050 or even earlier.

He may be right but for shipowners planning a new ship today, that is an option that is not currently available to them. In fact, most of the options that owners are being told is the future are not available either.

The engines for running on ammonia are still in the research stages.

 Fuel cells have not yet been scaled up to suit marine propulsion – they are almost non-existent for road use where they were once expected to be the only solution.

Batteries are being adopted but with the most sophisticated available still only having the capacity to provide the only power for a large ship for a period measured in minutes let alone hours, they clearly cannot be the choice for anything beyond a tug or ferry.

So what is an owner expected to do?

Speaking during the presentation of Maersk’s Q3 results, CEO Soren Skou Asked about any newbuilding plans,  said, “Ideally we would like to figure out what the future fuels should be and then start building the ships that will fit that type of fuel when we need them”.

The Danish company is a founding member of the Getting to Zero Coalition which aims for a commercially viable zero-emission vessel industry for ships operating along deep sea trade routes by 2030. It was formed just over a year ago in September 2019. Maersk has been a pioneer in ship evolution for most of the 21st Century and if its leader does not yet know which way to jump, the same is probably true for every other owner.

Maersk seemingly does not see a big role for LNG – once considered the epitome of a clean fuel, for at the same presentation Skou said, “We don’t believe that LNG is going to play a big role for us as a transition fuel because it is still a fossil fuel and we would rather go from what we do today straight to a CO2 neutral type of fuel, but I suspect that will be some years in the future”.

Newbuilding activity is currently at a low point for recent times, but ships are still being ordered as owners need to replace vessels. Mostly they are following the conventional route not necessarily because they want to but because there really is no realistic alternative.

If regulators continue to push for the unachievable then one of three things must inevitably happen;

  • No new ships will be built for years until a means of meeting the rules is devised, leaving the present fleet operating for the foreseeable future,
  • With the approval of flag states, new ships built to older rules will be permitted, or
  • The rule making body will either change its mind or wither and die.
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