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Flexible future? Part 1 of a series about alternatives to marine fuels

15 November 2019

Maritime transport plays a key role in the global economy, as 90% of world trade takes place by sea. It is the most efficient and cheapest way to transport a large amount of goods and raw materials around the world.

But ships are not exactly environment-friendly: they emit large quantities of sulfur, nitrogen and particulates. In 2008, shipping emitted 921 megatons of CO2, which is approximately 2 to 3 percent of the world’s total CO2 emissions, and it is expected that this figure will increase by 2050 by another 50 to 250 percent if no action is taken.

Therefore, a major change will take place from January 2020 – the new directive on sulfur emissions comes into force: marine fuels still contain a maximum of 0.5% sulfur, compared to 3.5% now.
The world fleet currently has around 90,000 ships. Lloyds estimates that there are around 50,000 to 60,000 ships to which the sulfur limit applies.

And this reduction in 2020 is just the beginning, because the International Maritime Organization (IMO) has set itself the target of achieving half the CO2 emissions reduction in worldwide shipping by 2050 compared to 2008. The sulfur restrictions will be followed by nitric oxide (NOX) and particle emission restrictions. Climate change is a reality and must be pushed back to prevent serious consequences for people and nature. The traditional way of propelling ships with “cheap” fossil fuels will soon be a thing of the past. There is a growing interest in alternatives to ship fuel.

Below is the first of a series of six blogs about the possible alternatives.

 

 Energy transition outlook 2019 part 1
Credits: Energy transition outlook 2019, a global and regional forecast to 2050; DNV-GL

Refined fuel

Many shipowners will switch to fuel with lower sulfur content. The advantage is that no adjustments to the ships are needed, therefore no additional investments. In fact, this means that the heavy fuel oil (HSFO) makes way for much more refined diesel (marine gas oil, MGO or Ultra-low sulfur fuel oil, ULSFO); this diesel is further processed, hence more expensive. In addition, this fuel is (still) scarce, which results in an additional price increase. Between January 2019 and July 2019, the price difference between HFSO and MGO was around $235.

For owners of large ships, such a price increase gives a drastic increase in the operational costs of a ship. Large container ships use between 100 and 300 tons of fuel per day, while smaller container ships also use between 50 and 250 tons of fuel per day. Containerliner Maersk expects his annual fuel bill to increase by $2 billion.

Not only is the price tag a problem, infrastructure is also a problem. The large oil companies all claim to have enough refining capacity for the introduction of the new sulfur limit, but the question is whether the distribution of the low-sulfur fuel will spread to all corners of the world quickly enough.

In first instance, ports close to a refinery will be offered the possibility of bunkering IMO 2020 fuels; the major ports such as Antwerp, Rotterdam, Genoa, Marseille, Singapore, Laem Chabang (Thailand) and Hong Kong are also mentioned as the first delivery points.
This means that some parts of the world are not covered, and this also makes it difficult for regional shipping. Ship owners on these shipping routes must look for alternatives.

Scrubbers

An alternative is the installation of a scrubber. Ships can continue to sail or HFSO, while these scrubbers filter the sulfur from the exhaust gases: up to 99% sulfur emissions can be reduced. Some systems store the filtered sulfur on board, while other scubber systems dispose the filtered sulfur by discharging it into the ocean.

A scrubber requires a substantial capital investment, depending on the size, type and age of the ship, between $ 2 million to $ 5 million per ship. Another disadvantage is that a scrubber takes up quite a bit of space. The installation of a scrubber on some container ships cost loading space of a few dozen teu’s.

Shipping company Spliethoff already started equipping its fleet with scrubbers in 2014, subsidiary Transfennica had already started in 2012. This is a substantial investment, for which Spliethoff used a special credit facility from ING and the European Investment Bank (EIB), which is aimed at “greening” the European shipping sector.

But there are even more snags when choosing scrubbers: installing a scrubber only makes sense if fuel consumption is high, so if it is a big expense to use more expensive fuel. However, over time, fuels with a lower sulfur content will become more common and therefore cheaper, while the availability of HSFO in small or distant ports becomes uncertain as refineries reduce their production of such fuels and shrink global supply.

There is still a great deal of uncertainty about guidelines regarding the discharge of sulfur-contaminated waste water: some ports, such as in Singapore, Germany, Belgium, a number of US states, Fujairah and China, no longer want ships on which the open-running scrubbers are installed in their port. The reason is that the harbor water is polluted with the sulfur emissions from the scrubbers. Whether this is indeed the case is still being investigated. Recent research from CE Delft shows that the environmental impact has not been conclusively proven.

Flexibele toekomst?

According to Clarksons, in the spring of 2019 more than 3000 ships were equipped with a scrubber or will soon be using it. The EGSCA (Exhaust Gas Cleaning Systems Association) expects that by 2020 at least 4000 ships will be equipped with scrubbers. That is approximately 7% of the 50,000 to 60,000 ships in international trade.

In a subsequent blog, LNG and biofuels will be discussed, currently, in addition to the use of scrubbers or the use of low-sulfur diesel, the only technically feasible and cost-effective solutions for the deep-sea segment.