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No Easy Passage for Scrubber Sales

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With the post 2020 fuel availability mix still uncertain shipowners are on the horns of a dilemma over what strategy to adopt to comply with a lower sulphur limit. Exhaust gas cleaning system makers already having to contend with that uncertainty now face another obstacle to overcome.

Fuel for shipping was the subject of two developments at MEPC 72. The first was the adoption of a strategy that if its ambitious goals are achieved would see carbon-based fuels phased out by the end of the century. Decarbonising shipping, if it is achieved by using fuels such as hydrogen or even ammonia which has been touted as a possibility, will have a depressing effect on scrubber sales. Only fossil fuels contain sulphur in any quantity and even their use is phased out then there is no reason for scrubbing the exhaust.

The second development was a ban on ships carrying any fuel for use on board vessels that does not comply with the 0.5% sulphur limit unless the vessel is equipped with a scrubber. Laura Langh-Lagerlof, MD of Finland-based scrubber maker Langh Tech speaking in Amsterdam in April explained how the decision to prohibit the carriage of non-compliant fuel oil will have a material and technical impact on commercial ship operations.

In a special panel session during the Sulphur Cap 2020 conference Langh-Lagerlof told delegates: “If such measures are adopted, any shipowner, operator, master mariner or chief engineer found guilty of transporting non-compliant fuels intended for burning in marine engines could face stringent financial penalties and possible imprisonment.”

“While we completely support initiatives to reduce Greenhouse Gas Emissions and shipping’s impact on the marine environment, the MEPC 72 decision makes clear that technical solutions are now required if shipowners are to comply with the sulphur limit requirements,” she said

Langh-Lagerlof went on to emphasise that of all the possible fuelling options, the use of HFO with a scrubber remains the sensible option. “Given the continued concern surrounding methane slip, LNG fuel could potentially be more environmentally hazardous than the current arrangement, while the direct and indirect costs associated with burning low sulphur fuels would have a considerable impact on the shipowners finances

“The low viscosity, low lubricity, acidity, flashpoint and cylinder oil compatibility of these expensive fuels could also result in corrosion issues and other engine problems. With a scrubber, at least there’s a return on the investment,” she said.

It should come as no surprise that there is a great deal of uncertainty over what will transpire once the 2020 sulphur cap comes into effect in less than two years’ time. From the moment the IMO determined the 2020 date, based on a report which made many assumptions and which was necessarily short on concrete facts, little in the way of factual information has been released about what types of fuel, where and in what quantities will be available.

Adding to the confusion are a multitude of views and opinions on what might be the situation in the future as to the legality of certain fuels or the use of equipment installed to aid compliance with the current regulations. No individual or organisation can say with certainty that they have the answers to all of the questions posed or what new questions may arise as events unfold. All that can be said with any confidence is that the 0.5% cap on sulphur levels in fuel will apply on 1 January 2020 and that at this moment the IMO has said it does not foresee a change in that position.

The annual bill for meeting the 2020 cap has been variously estimated but a figure of between $50Bn and $60Bn is the most widely quoted. Everything else being equal, that cost should eventually trickle down to be spread across most of the world’s population as an element in the final price of goods and commodities. Looked at in that way the price does not seem so high, but it is shipowners that have to pick up the tab in the first instance and with no certainty that they can recover all of it in short order.

If it is at all possible for freight rates to rise immediately to cover the cost of more expensive fuels, then shipowners’ anxieties will soon be forgotten. On the other hand, overcapacity in various segments may make lifting freight rates difficult and cause cash flow and credit problems.

Unless the refining industry can produce low sulphur fuel oil at a price similar to conventional HFO, the options for meeting the cap are all well known and all have their pros and cons. For the vast majority of ships there are really only two choices; a switch to distillate fuels or to install a scrubber. The first implies a continual drain on finances – at least until fuel prices stabilise over time – while the second means an initial high outlay followed by a payback period that could be very short or much longer depending on the price differentials.

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