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Green regulations driving change in the bunkering industry

perational changes in the bunkering industry are largely driven by one concern – environmental protection. With bunker fuel

increasing use of the scrubber technology and a certain degree of non-compliance. “As a member of the original drafting

derived from the bottom of the crude oil barrel, it is no wonder that environmental concern is the elephant in the room. The emission of carbon dioxide is stirring

increasing concern worldwide due to its global warming effects. Additionally when bunker fuel is in its natural state, it is an almost solid sludge that poisons and destroys marine life when spilled into the sea. As the exploding world population takes its toll

on the earth's natural resources and habitat, awareness of preservation and sustainability has heightened at the same time. The spotlight has been cast on the bunkering industry, pressurising it to adopt changes to mitigate the polluting effects from the burning of bunker fuels. An immediate and major change is the 1

January 2012 global sulphur content limit of 3.5% in bunker fuel, adopted by IMO. This regulation is not difficult to comply with, as many refineries worldwide are already producing less than 3.5% sulphur bunker fuel. Refiners that are currently producing bunker

fuel with sulphur fuel content of more than 3.5% will likely optimise crude slates or exercise blending options to optimise supply capability of less than 3.5% sulphur, according to ExxonMobil. “ExxonMobil has been monitoring the changes

in IMO regulations and is prepared to address the changes that take place in January 2012,” says Damon Davis, Asia-Pacific general manager at ExxonMobil Marine Fuels. Following closely from the 3.5% sulphur cap

regulation are a slew of stricter IMO sulphur limits until a global cap of 0.5% is achieved in 2020 or 2025. Davis believes that the overall refining

industry is expected to invest in more residue conversion capacity. “However, any significant investments in fuel oil processing facilities like hydro-desulphurisation units, cokers, and hydrocrackers, will be decisions made by individual refiners, based on each refiner's view of market opportunities.” Robin Meech, director at UK-based Marine and

Energy Consulting, doubts there will be sufficient 0.5% fuel available by 2020, triggering an

committee for Annex VI at IMO, I pushed for the introduction of a global cap of 1.5% but the major oil companies didn't want to meet such stringent levels and lobbied for the mish-mash of regulations we have now that have not been well enforced,” Meech says. Even before the issue of distillate availability has

Environmental agenda O

been satisfactorily dealt with, another bold proposal has been presented to the discussion table – ditch bunker fuel and replace it with the cleaner LNG. Tapping on nuclear energy to propel ships is yet another option. But this alternative has its own set of challenges to overcome, including costs and resource constraints, and political and societal concurrence. In the midst of all these alternatives, there is the

availability of specialised technology to reduce the sulphur emissions from using high-sulphur bunker fuel. Ships are able to continue using high-sulphur bunker fuel as the scrubber allows for onboard lowering of the fuel's sulphur emissions instead of desulphurisation at the refineries. Davis says that based on estimates from

various sources, refinery processing can result in a 3-10% net increase in greenhouse gas emissions versus the onboard scrubber option. Meech notes that most vessels built after 2017

will have scrubbers fitted as a standard option. By 2030-35 most vessels will have scrubbers and some 70% of bunkers will revert to residual fuels. “The refiners are realising this and are even less inclined to invest simply to meet marine distillate demand,” he says. An ExxonMobil study suggests that scrubbers

make economic sense as well. Using a conservative estimate of capital, operating and feasibility costs for scrubbers, a vessel spending only 50% of its time in an Emissions Control Area could potentially achieve payback on its investment in less than five years. Taking on the environmental challenge is about

the industry's commitments and willingness to throw in substantial capital expenditures upfront in the hope of reaping projected rewards over the long-run. The bunkering industry can no longer ignore

calls for emissions reduction, especially when there are opportunities and pressures to do so.

Any significant investments in fuel oil processing facilities like hydro- desulphurisation units, cokers, and hydrocrackers, will be decisions made by individual refiners, based on each refiner's view of market opportunities.

Damon Davis, ExxonMobil Marine Fuels

’ Seatrade Bunkering Report 2011 7


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