Sulphur 2020 – The options

The prescribed reduction in the sulphur content of fuel oil used by ships is only two years away. About 70,000 existing vessels need to be ready to meet the requirements of IMO’s global sulphur limit of 0.50% m/m in 2020. Yet many ship owners are still undecided and have not made up their minds about how to comply with the new regulations. A recent study by ExxonMobil showed that 32% of the respondents predict that a combination of heavy fuel oil, marine gas oil and fuels and blends will be used, whereas 69% believe the cap will lead to the development of new low sulphur fuels. Basically there are four different options for ship owners for compliance:

  1. Compliant fuel oil
  2. Gas oil
  3. Alternative fuel
  4. Emission abatement technologies

In this article we focus on some of the advantages of the compliance options and issues which may arise by opting for one solution or another.

Lately there has been much said about exhaust gas cleaning systems such as scrubbers. Big market players like Maersk have questioned the use of scrubbers for meeting the global sulphur cap. But why? To begin with, a scrubber is a piece of equipment that sprays alkaline water into a vessel’s exhaust to remove sulphur and other unwanted chemicals from the fuel. So, a scrubber’s principal advantage is to enable ship owners to continue burning fuel oil while complying with the new regulations. But there are high costs for retrofits with up to $6 million needed to install the equipment on each vessel and on top of the capital expense is the cost of taking the vessel to dry dock for about a month, not mentioning the added costs dealing with sludge retention and disposal. After installing, scrubbers require high maintenance and specialised personnel. Though the scrubber technology can be cost effective over time, it may not be a long-term solution as the recent equipment is not designed to cope with all of the environmental regulations likely to be imposed on shipping over the next decade.

Other industry players, as well as many politicians in Europe and North America, see liquefied natural gas bunkering as a solution to the shipping industry’s environmental problems. LNG enables 100% reduction of SOx emissions and 90% reduction of NOX emissions compared to heavy fuel oil. Furthermore, the CO2 emissions are 25% lower than those ones from heavy fuel oil and marine gas oil and looking into future LNG also protects against environmental restrictions for shipping on nitrogen, particulate matter or carbon emissions.
But there is a downside to all of this as LNG leaks methane, which has a negative impact on global warming. In fact, the natural gas that can escape while bunkering can raise even higher greenhouse gas emissions than a gasoil-based bunker fuel. Looking from a financial point of view, ship owners and ports are facing high costs for retrofitting current ships and providing the necessary infrastructure in ports if they opt for LNG. At present LNG bunkering is mostly being done by passenger vessels steaming short distances around Scandinavia. Though there are tangible infrastructure developments on the way, the availability and infrastructure remains less than transparent to ship owners and operators. Especially for ships with no fixed trading patterns this becomes an issue as details of how, when and even sometimes exactly where bunkering operations will be carried out are not fully settled.

For many others, marine gas oil may be the way to go. Japanese shipbuilder Onomichi President Takashi Nakabe recently said: “I personally think marine gas oil is the solution for the shipping industry”. As MGO is a proven distillate-based light fuel oil, it already meets the IMO global sulphur cap regulation and the higher standards in near-sea emission control areas. In addition, MGO can be used in most HFO systems and only minor adjustment in auxiliary equipment is needed in some cases, which makes MGO to a straight forward solution for meeting the sulphur limit. In comparison to LNG the cargo capacity of MGO is not restricted, meanwhile, as well as LNG, the price is double compared to HFO. Switching to MGO may also require upgrading to the fuel treatment plant due to the significantly lower viscosity of the fuel. Whereas the capital investment for MGO is low, the operating costs might be very high. During the implementation of the SECA areas the majority of operators simply switched to MGO fuels. If the shipping industry follows the same pattern again, increased MGO prices are inevitable in the short term as refineries would seem to prefer to produce MGO to heavy fuel oil as it is more profitable.

So far, the simplest option for ship owners seems to be opting for 0.5 sulphur fuel. But, as with all the other solutions, there are issues as well. First of all there is no accepted standard for refining 0.5% sulphur fuel. Essentially the sulphur can be reduced from the fuel oil in two different ways: hydrocracking and blending. Hydrocracking requires enormous investments and lead times on the part of refiners, which will very quickly impact the price. As for blending, the process raises the risk of fuel incompatibility as the fuels commingle and settle in the fuel tanks, creating sludge and other problems that can lead to unexpected stoppages or even engine failure. As long as there is no standard specification for low sulphur fuels engine manufacturers can’t give appropriate operational and maintenance advice, which results in uncertainty. However, fuel treatments, like Aderco, can meet these concerns. They reduce the likelihood of unexpected stoppages and sludge rejects as they are designed to solve fuel-related problems while protecting the fuel pump, injection system and the whole operation before, during and after combustion.

Just by looking at these options it seems that there is not just one solution for the shipping industry to comply with the sulphur cap in 2020. The marine sector is heading into a mixed fuel future. Overall, it’s not only about making the right decision for meeting the directive, but also saving your fuel investment from instability and incompatibility issues.