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

October 1, 2019

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

But ships are not really environmentally friendly: they emit large quantities of sulphur, nitrogen and particulate matter. In 2008, the shipping industry emitted 921 megatons of CO2, which is about 2 to 3 percent of total global CO2 emissions, and this figure is expected to rise by another 50 to 250 percent by 2050 if no action is taken.

As of January 2020, a major change will occur - the new sulphur emissions directive will come into force: marine fuels will contain a maximum of 0.5% sulphur, compared to 3.5% today.
The world fleet currently numbers some 90,000 ships. Lloyds estimates that between 50,000 and 60,000 ships will be subject to the sulphur limitation.

And this reduction in 2020 is just the beginning, as the International Maritime Organization (IMO) has set a goal of halving CO2 emissions from global shipping by 2050 compared to 2008. The sulphur limits will be followed by nitrogen oxide (NOX) and particulate emission limits. Climate change is a reality and must be reduced to avoid 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 for ship fuel.

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

Hybrid future 1
Bron: Energy transition outlook 2019, a global and regional forecast to 2050; DNV-GL

Refined fuel

Many ship owners will switch to fuel with a lower sulphur content. The advantage is that no modifications to the ships are required, so no extra investments are needed. In actual fact, this means that heavy fuel oil (HSFO) will make way for much finer refined diesel (marine gas oil, MGO or Ultra-low sulphur fuel oil, ULSFO); this diesel is more elaborate and therefore more expensive. In addition, this fuel is (currently) scarce, resulting in an additional price increase. Between January 2019 and July 2019, the price difference between HFSO and MGO was approximately $235.

For owners of large ships, such a price increase results in a drastic increase in the operational costs of a ship. Large container ships guzzle between 100 and 300 tons of fuel per day, smaller container ships also consume between 50 and 250 tons of fuel per day. Container liner Maersk expects its annual fuel bill to rise by $2 billion.

The major oil companies all claim to have sufficient refining capacity for the introduction of the new sulphur limit, but the question is whether the distribution of the low-sulphur fuel will spread quickly enough to all corners of the world.

Initially, ports close to a refinery will offer the possibility of bunkering IMO 2020 fuels; major ports such as Antwerp, Rotterdam, Genoa, Marseilles, Singapore, Laem Chabang (Thailand) and Hong Kong are also mentioned as initial delivery points.

This means that some parts of the world are not covered and this also makes things difficult for regional shipping. Shipowners 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 sulphur out of the exhaust gases: up to 99% of the sulphur emissions can be reduced. Some systems store the filtered sulphur on board, other scrubber systems dispose of the filtered sulphur by discharging it into the ocean.

A scrubber demands a considerable capital investment, depending on the size, type and age of the ship, between $ 2 million and $ 5 million per ship. Another disadvantage is that a scrubber takes up a lot of space. The installation of a scrubber on some container ships took up several tens of teu.

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 made use of a special credit facility from the ING and the European Investment Bank (EIB), aimed at 'greening' the European shipping sector.

However, there are further hurdles to the decision to use scrubbers: installing a scrubber only makes sense when fuel consumption is high, i.e. when it is a major expense to use more expensive fuel. However, in the course of time, fuels with a lower sulphur content will become more common and therefore cheaper, while the availability of HSFO in small or distant ports will become uncertain as refineries reduce their production of such fuels and global supply shrinks.

There is still great uncertainty about guidelines concerning the discharge of sulphur-contaminated waste water: some ports, such as Singapore, Germany, Belgium, a number of American states, Fujairah and China do not want ships on which the open-circuit scrubbers have been installed in their harbours. The reason is that the port water is polluted with sulphur emissions from the scrubbers. Whether this is indeed the case is still being investigated. Recent research by CE Delft shows that the environmental impact has not been conclusively proven.

According to Clarksons, by spring 2019, more than 3,000 ships were equipped with a scrubber or will soon be sailing with one. The EGSCA (Exhaust Gas Cleaning Systems Association) expects at least 4,000 ships to be equipped with scrubbers by 2020. That is about 7% of the 50.000 to 60.000 ships in international trade.

Flexible future?

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