I met Paddy Rogers this week and it was an unforgettable experience. As most ShipInsight readers will know, until recently he was the chief executive of Euronav and has been a vocal critic of fitting scrubbers. I have followed his views over several months yet we had never met until last week, when I attended a seminar on Tuesday (18 June) organised by the UK Chamber of Shipping and the International Bunker Industry Association (IBIA). Its title was ‘Be ready for the global sulphur cap’ and Paddy was a member of a panel of shipowner and port executives set up to field questions about their views on scrubbers.
That appearance is likely to be his last public outing flying the Euronav flag; in February he surprised everyone by announcing he is to leave the tanker operator to be the director at the Royal Museums Greenwich, which includes the world-famous Royal Observatory and National Maritime Museum.
I had wondered if our paths would ever cross. Like skew lines – straight lines that are not parallel but never meet – it seemed I was destined always to be following his career and his commentaries at a distance.
It is an analogy that struck me as I listened to the discussion. There are times when differing views are expressed that are each logical and consistent yet they have no point of intersection; there is nothing that either side in the discussion can pinpoint and say ‘at least we agree on this.’ The best that can be achieved in a skew-lines discussion is to find the closest point of approach.
And that is what we saw last Tuesday afternoon. Paddy was making some powerful arguments based on financial and commercial logic while the ship operators on the panel – Carnival’s vice-president for corporate marine technology Chris Millman and DFDS’ environment and sustainability director Poul Woodall – were stressing scrubbers’ environmental merits. Providing a port’s perspective was Ron van Gelder, senior adviser in the harbourmaster’s division at the Port of Rotterdam, who told us that regular tests on sediments in the port showed no adverse impacts from open-loop scrubbers.
But for this, my first and last review of Paddy’s position, I am going to focus on the direction that his arguments took us.
I took away three key arguments: IMO delegates never intended for scrubbers to be adopted in the way that they have been; just one disruptive event could make them environmentally unacceptable; they only make economic sense based on a fuel price spread that may not last.
Do you see what I mean about skew lines? There is nothing to be gained by countering those points with a paper about whether washwater pollutes ports or with data to show that scrubbers clean particulates out of the exhaust or any of the other valid points made by scrubber makers and many shipowners: the two lines of argument simply don’t cross.
I’ll take his points in turn. It is certainly true that when MARPOL Annex VI was first passed, scrubbers were not included as an option. Soon after it was adopted, I chaired a workshop on what it would mean for shipowners and delegates sat at circular tables around the room. One table had a vocal group from a few manufacturers who argued for allowing scrubbers as an alternative, but theirs was then a minority view.
Paddy Rogers believes that, in accepting that argument, IMO was recalling the imposition of double-hulls on tankers after the Exxon Valdez disaster. “I believe there is a strong cadre of people at IMO who felt there had been a huge penalty imposed on shipowners by the obsolescence of single hull vessels,” he said. In response, they decided that “they would always allow alternative abatement technologies to make sure that they didn’t impose that kind of financial burden again.” So IMO accepted scrubbers as an alternative but he believes that they only expected them to be used to “ensure that [shipowners] could see the ship through to the end of its projected useful life without big problems being thrown up by a change in the fuels that were used.”
On that basis, he senses “a feeling of horror” at IMO that scrubbers are being fitted to newbuildings “because we’re meant to be heading towards a long-term projected reduction in the usage of carbon [and] shifting away from these fuels.”
That leads onto his second point because, from a wider viewpoint relying on scrubbers and HFO is “running contrary to everything that society is going to want from us [and] we are potentially being seen as trying to dodge the drift and trend of legislation.” If the action of “a bad shipowner somewhere in the world in the next 12 months results in a public opinion change, a furore and a very quick political reaction,” everything will change, he said.
And it would change quickly: if the day comes when “somebody wakes up and says ‘it’s all over’ [then] it’s all over.” He made a comparison with the single/double hull transition by saying that, once that requirement had been expressed, “the implementation dates were irrelevant because, five years before [those dates], charterers said ‘I don’t want [a single-hulled ship]’. So your investment case is capable of being disrupted by one event. That’s the environmental/political risk that you run.”
As for his economic case, one of his points centred on the wisdom or otherwise of investing, say, US$5M on a scrubber in expectation of a long-term return based on the price spread between HFO and compliant fuels. About a year ago, that spread was about US$40/tonne, “effectively negligible,” he said, because there was no demand at that time for compliant fuel, which will change post-2020.
But a graph presented by an earlier speaker, which offered a forecast of demand for different fuel types over the next few years, predicted that demand for HFO would recover to its current level in a few years. Paddy seized on that possibility. For the same amount of money spent on a scrubber, “you can buy forward two years’ supply of compliant fuel at the price of HFO.” That would avoid operational risks and remove the prospect of any penalties and reputational damage, he said.
Meanwhile, “if the graph we saw earlier is correct and that in two to three years time there is the same amount of bunker consumption using scrubbers as there is today, we will go straight back to the fuel oil spread we had last year,” he said, which would negate the expected return on investment. Not only that but, with a scrubber fitted, a ship’s fuel consumption will go up.
Paddy’s powerful remarks in the media and at events such as the UK Chamber of Shipping seminar have provided a high-profile counter to the pro-scrubber lobby so I asked him what Euronav’s scrubber policy will be when he has moved on. “I am assured that there is no planned change,” he told me. “They were corporate views.” However, “there’s nothing more dangerous than making forecasts or projections, particularly about the future,” he added.
But he will not be completely leaving shipowning behind and he invited delegates to visit “a perfect example of a zero-emission ship.” He was referring to Cutty Sark, one of the last and fastest tea clippers, and will be his responsibility in his new job. It was delivered 150 years ago, shortly before sail power gave way to steam and the epoch of carbon emissions from shipping really began.
What are your views on Paddy Rogers’ comments? Email me to let me know.