Class & fuel Countdown to 2015
class society fuel expert recently warned,‘If you wait and see, it could cost you your business.’ Lloyd’s Register’s Timothy Wilson was talking about urgent decisions which owners affected by Marpol Annex VI need to make as soon as possible. This relates to air pollution from ships and is the next crunch date for owners with ships trading in or into Emission Control Areas (ECAs). So far there are only two – one in northern Europe covering the North Sea, English Channel and the Baltic, with a second – in the US and Canada – due to enter force in August 2012. So far, owners operating in these regions have three options. They can decide to burn 0.1% sulphur fuel from 2015, costing about twice the price of the 1% fuel they use today. Or they can invest in emissions ebatement technologies, largely focussed on dry and wet scrubbers to treat exhaust gas. Or they could consider the conversion of main engines to burn liquid and gas fuels in a dual-fuel arragngement, or gas only. All of these options primarily target the reduction of SOx emissions from ships sailing in ECAs. Ships with keels laid from January 2016 will also need to tackle NOx abatement. However, the pressing issue is for existing tonnage in operation today, to lose no time on adopting cost effective SOx compliance strategies, Wilson declares.
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MARPOL Annex VI has set limits for NOx and SOx emissions but there still remains the ongoing debate on CO2. Some believe this is an even greater challenge, and suggest that perhaps this should have taken precedence over SOx and NOx. In hindsight IMO perhaps got its priorities wrong, they say, and should have focused first on CO2, if indeed climate change is considered to be the greatest threat.
But sulphur compliance is now the top priority, warns Wilson. Owners who adopt last-minute compliance strategies, he says – attempting to fit scrubbers late in 2015, for example – are likely to join a long queue of similar-minded folk. And unless they have a timely survey due at that time, they will face an extra docking at what
Ferry operators face huge hike in fuel bills
are likely to be, by then, significantly inflated prices.
They will also face the higher cost of running on 0.1% sulphur distillates and questions over its availability in sufficient quantities. By the time the likely backlog is cleared in 2017 or 2018, their regular charterers could well have opted for ships that have applied the cost benefit of still being able to run on cheaper fuels by having a scrubber system on board, or on ships with retrofitted dual-fuel gas engines. Wilson believes that many in shipping have failed to grasp: one, the urgency; and two, the scale of the likely impact on global maritime business. Suggesting that Annex VI and 2015 and 2020 could equal or even surpass the impact of the switch from sail to coal and subsequently from coal to oil, he declares: ‘This is such a big issue, probably the biggest ever to hit shipping.’ Wilson explains that the move away from sail to coal, then to oil, was an evolutionary process and the decisions taken by shipowners were fundamentally commercial ones. In contrast, the impact of 0.1% sulphur fuel in 2015 will be imposed on the industry, hitting some owners disproportionately hard. North Sea short-sea shipping lines, for example, or Jones Act coastal companies are facing a potentially lethal blow to their traditional operation economics.
Owners whose ships trade internationally outside ECA waters, on the other hand, can sit back and relax on the fuel issue. They have time on their hands, with 3.5% sulphur fuel acceptable from January 2012 until at least January 2020 and, say experts, probably later, perhaps to 2025. Then there are the thousands of also-rans whose ships fly flags which are not signatories to Annex VI, and dubious flags without a jurisdiction or a legal framework. Such vessels ship growing volumes of trade between developing countries, most of which have more pressing issues to deal with than the sulphur content in ships’ fuel. The measure of non-compliance will be an interesting trend to watch, says Wilson. However, owners of ships operating outside of today’s ECAs should not get too smug too soon. The challenges faced by owners serving northern Europe and, from next year, the US and Canada, could soon become a headache for many others, as ECAs proliferate in various regions. In any case, from 2020 or 2025, sulphur limits in ships’ fuel are likely to come down to 0.5% universally, leading to new challenges on using a lesser understood blend of petroleum fuels. An increase in LNG usage and abatement technologies could offer an option to lessen the blow, or at least, that’s the plan at the moment.
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