The price put on the IMO’s decision to reduce the global level of sulphur in fuels has been estimated at around $60bn. This is based upon forecast premiums for compliant fuels or the capital cost of emission abatement technology more commonly known as scrubbers.
The regulations concerning SOx reduction in exhaust emissions is potentially the most expensive regulation that shipping has ever had to meet although the cost will inevitably be passed along the line finally ending with consumers ashore. More to the point, the effect of SOx regulations are felt by almost every vessel afloat regardless of age. This is because, unlike the NOx rules which apply to the engine rather than the ship, SOx rules fall on the ship itself.
As things stand the only step in the MARPOL Annex VI timetable still to be taken is the final reduction in the global cap from 3.5% to 0.5% which will take place on 1 January 2020. The impact of this and the controversy surrounding the IMO’s acceptance of the 2016 review has been covered in a special ShipInsight Report on the 2020 Cap. This will be a particularly expensive exercise for the shipping industry as none of the options for meeting the global cap are cheap. They include making use of expensive fuels or installing exhaust gas cleaning systems.
MARPOL sets limits by mass for the sulphur content of fuels as the primary means for controlling SOx emissions from ships. Reducing SOx levels in exhaust emissions can come about in one of two ways. Either the sulphur level in fuel has to be reduced or abatement technology – commonly referred to as scrubbing – has to be employed. Unlike with NOx, there are no adjustments that engine manufacturers can make but the use of low sulphur fuel requires additional precautions that need to be taken in the choice of engine lubricants.
Because it is purely a product of the combustion process, SOx is only an issue for vessels burning residual fuels either in diesel engines or in boilers. Ships that operate purely on low-sulphur distillates, LNG or any of the newer gas fuels that do not contain sulphur are not affected by any of the regulations controlling SOx and are saved the additional expense of complying with the requirements of MARPOL.
Only ships fitted with dual-fuel engines can use LNG as an alternative to oil fuels. For all other vessels, the only fuels that allow compliance without some form of treatment are distillates. Almost all diesel engines can run on distillates without modification and indeed it is quite normal to do so when manoeuvring in ports in any case.
There are two factors that prevent owners from opting to run solely on distillate fuels, the first is price and the second is availability. Distillate typically cost between 50% and 100% more than residual fuels making them an expensive option when bunker fuel already accounts for between 30% and 50% of running costs. Availability is not a problem when the normal quantities of distillates used by ships are considered but increasing availability could be a huge problem. Only about 20% of all ship fuels are distillates the rest being HFO. Distillates for shipping compete with fuels for land use so increasing the quantity five-fold is a big ask.
Through the first ten months of 2018 several economic analysts have forecast that the effect of the SOx regulation will extend to all areas of fuel use outside of shipping itself. This is because meeting the demand for distillate fuels will mean that refiners will either need to add desulphurisation plant to their refineries or to refine much more crude oil. While some desulphurisation capacity has been added the amount is considered well below that needed.
If refiners are obliged to process more crude this will inevitably mean that a lot of residual fuel will be unsellable and so the price of all distillates will have to rise. Furthermore, the distillates used by the shipping industry are also used by other forms of transport and power production thus competition will increase between the different industries driving up prices.
One of the questions most commonly asked about fuels is whether the sulphur can be extracted from the fuel before use. This is possible in refineries but it is an expensive process and the equipment is not available in all refineries. The refining sector is under no obligation to shipping to provide compliant fuels but operators must become compliant when the global cap comes into effect.
Small scale desulphurisation plant is in the process of being developed and may well become available before the 2020 date arrives. These systems may be too large for shipboard use but could be used by bunker suppliers or by co-operatives of operators producing and storing compliant fuel ashore for use as needed.
Exhaust gas cleaning
It was initially intended that the only means of compliance would be to use fuels that met the regulations but under pressure from ship operators it was agreed that abatement technology would also be permitted and in 2009, the MEPC.184(59) guidelines for Exhaust Gas Cleaning Systems (EGCS) were adopted. These guidelines enable a ship to achieve low-sulphur requirements by water washing the exhaust gas stream prior to discharge to the atmosphere. Each country party to Annex VI needs to ensure that its port and terminal facilities can accommodate residues from exhaust gas cleaning systems.
Long before SOx was considered an issue for the shipping industry it was being regulated around the globe in connection with the use of large diesel engines in power production and other shore-based industries. As a consequence, exhaust gas cleaning or scrubbing technology is already a long-established reality in shore-based situations cleaning up emissions from oil and coal-based power plants.
When fuel oil containing sulphur is burned in the presence of air, the sulphur in the fuel combines with oxygen to form sulphur oxides. In a scrubber, the sulphur oxides in the exhaust are removed from the exhaust gas which then passes out of the system.
The technology falls into two distinct basic categories – wet and dry. In shore-based scenarios, scrubbers not only remove SOx from exhaust gases but in doing so the by-products are used in the production of plasterboards for use in the construction industry. Space limitations and power consumption of the scrubbing equipment are rarely factors to consider when used ashore but they are of much greater importance for ship operators so these profitable side effects will not be available.
The wording or MARPOL means that the decision whether to allow scrubbers to meet the emission requirements rests with flag states, and although none have yet declared against scrubbers it is possible that their use may not be available to every vessel. Where scrubbers are allowed, MARPOL rules permit their use by setting equivalent emission limits in regulations 14.1 and 14.4 of ANNEX VI. These limits are expressed as a ratio of SO2(ppm)/CO2(% v/v) and work out at approximately 43.3 for each 1% of sulphur content in the fuel
There are several makers of marine scrubbing systems, most of whom are members of a trade body known as the Exhaust Gas Cleaning Systems Association (EGCSA). Their products operate on similar lines to shore-based systems although the use of dry systems is limited to a choice of one or two.