Front running scrubbers and LNG leave low sulphur fuel behind as EU's air pollution solution
 A big problem facing European shipping today is how to cope with the near elimination of sulphur oxide (SOx) pollution from ships in 2020 if UN mandated Emission Control Areas (ECA) rules take effect covering the English Channel, North Sea and Baltic Sea - as well as the east and west coasts, and main inland waterways of Canada and the United States.
As it stands, there are three options: 1) install scrubbers to sanitise heavy fuel oil (HFO), 2) burn virtually sulphur-free liquefied natural gas (LNG) or 3) use marine diesel oil (MDO) which dilutes the bunker into an acceptable blend.
While MDO, also known as MGO (marine gas oil) is viewed as more of a stopgap than a solution, it may thrive in Asia, Latin American and Africa where regulators are less stringent.
Shipping confined to the ECA zone or voyaging between control area in the North Atlantic trades feared the first UN 3.5 per cent SOx limit when it kicked in 2012 on the high seas cutting sulphur content back from an allowable 4.5 per cent before that. While with a bit of tweaking on fuel blends they could live with that, but ferry and short sea operators began to fear for their livelihoods when bureaucrats planned to saddle them with a 0.10 per cent limit in 2015.
But then something happened to save the day. The bottom fell out of the world oil prices, which plunged standard bunker from US$100 a barrel to a low of $40 a barrel in 2014-15. Standard bunker fuel costs dropped out of sight while the price of once costly low-sulphur fuel fell to levels previously occupied by heavy fuel oil. So all was well once again.
But worse was yet to come. UN bureaucrats at the International Maritime Organistion managed to get a more stringent standard through. From 2020, the allowable limit will be .05 per cent. Anxious to be greener than thou, France sought to impose a .01 per cent limit not only on the existing ECA, but on the Mediterranean as well.
But Europe's Med ports, are not keen on eliminating their comparative advantage of being unencumbered with regulations that would discourage shipping from calling that their ports. What's more, the North African side of the Med is unlikely to co-operate with the EU or UN unless they get something more than sermons about saving the planet from global warming.
So it boils down to LNG versus scrubbers, because low-sulphur fuel is unavailable in quantities required, is hard on engines and may even be dangerous to use, most likely unable to economically cut its sulphur content to ever-lower levels demanded by regulators.
There are claims and counter claims about the economies of one versus the other. And no one has won the debate as prices oscillate with changes in supply and demand. Nor is either side likely to win until we approach 2020, unless, of course, implementation is delayed again as many desire, which will result in delayed decision making yet again.
Weighing the two leading options, we first look at the scrubber. The first, and biggest, was fitted aboard the eight-year-old Dutch-flagged 18,250-dwt conro Plyca that works the Baltic and Gulf of Finland.
Today its owner, Spliethoff of Amsterdam, has 20 vessels with PureSOx scrubbers.
Spliethoff technical support engineer Roland Hoogeveen supervised the commissioning of scrubbers on 12 company ships.
Because Spliethoff ships ply ECA waters exclusively, and frequent Belgian and German ports, as well as the Kiel Canal, where no water discharge is allowed, they are equipped with hybrid scrubber installations, which can operate either in open-loop mode with seawater or in closed-loop mode with circulation water with an alkaline additive.
"Naturally, the scrubber makes the funnel much larger. But now the circulation pumps are more or less integrated into the new funnel," he said.
Crew reaction was mixed, he said. "Shipping is very conservative and new equipment is only added because of new rules. So some chiefs and engineers were less keen and slower to learn. But others learnt quickly and were happy to get their hands on something new."
In some ways, he said, scrubbers made ECA operation simpler. "Before, there was always fussing with the fuel, where you had to open or close valves and then wait a few hours until the system was flushed for the new fuel type. With a scrubber you just push a button, so the operation requires less work," he said.
"Always changing over between HFO (heavy fuel oil) and diesel oil means much higher wear on the fuel system, and MGO (marine gas oil) is more abrasive to the pumps and injectors," he said. "So there's extra maintenance that can come unexpectedly. Maybe you've just changed over and you're heading into port, which is not the place you want to have problems."
In terms of consumables and waste, Mr Hoogeveen said caustic soda for closed-loop operation is sourced where the vessels anchor in Finland, while the sludge from the water cleaning unit is deposited in St Petersburg where the vessels bunker fuel.
"At first there was a little fuss about how to record the sludge, because it's not oily waste. But now they have separate columns for separator sludge and scrubber sludge. We dispose of 4-5 cubic metres every three weeks, which has become very routine."
Demonstrating compliance to Port State Control officers has become routine, he said. When PSC officials come aboard, the procedure is generally relaxed. "You give them the Exhaust Gas Cleaning Record Book if they want to check it, and a colour-coded printout of the important log values. It's easy to scroll through and see if anything is out of compliance, and then to discuss the reasons."
But he warned that the US Coast Guard may also look into the Onboard Monitoring Manual (OMM), which shows which sensors are fitted and keeps a record of pH values.
Overall, Mr Hoogeveen described the inspectors as friendly and curious. "They have a learning curve too. But as their knowledge becomes deeper, they will know more about what to check and look for."
Mr Hoogeveen is convinced that scrubbers are right choice. "For me it was a surprise that they would even install scrubbers on all the ships, since some were almost 15 years old. But if you can earn back the scrubber within two years, it's worth it. If you can use it for three, you've already made a profit."
Now we turn to consider liquefied natural gas (LNG). For this we rely mostly on a paper by Frederick Adamchak and Amonkeye Adede, of Poten & Partners, a New York shipbroker. Their paper, "LNG as a Marine Fuel" gives both sides but plumps for the liquefied natural gas as its preferred option.
"LNG is a potential solution for meeting these requirements - it has virtually no sulphur content, and its combustion produces low NOx compared to fuel oil and marine diesel oil. LNG is not only cleaner-burning, but may have economic advantages - on a calorific value basis even high Asian LNG prices are lower than global bunker fuel prices," say the Poten analysts, contradicting the Dutch scrubber proponent Mr Hoogeveen's claim that his technology would be cheaper.
The Poten team continues: "In some markets, natural gas and LNG are lower priced than high sulphur marine fuel oils on a heating value basis."
Comparative heating value is one issue. The other is what is being quoted as the price of LNG is what they will sell it for where it is - is not the cost of the fuel by the time it gets shipboard. There are costs of distribution, storage and delivery, and in the case of LNG, and there is often infrastructure to be built and maintained at every stage, which adds to the final price carrier pays.
Meeting the regulatory requirements the Poten team sets out the three options 1) low sulphur fuel oil, alternately known as Marine Diesel Oil (MDO) and Marine Gas Oil (MGO), 2) scrubbers using, but treating, standard bunker or Heavy Fuel Oil (HFO) and 3) LNG.
Poten analysts then itemise the problems with MDO/MGO, that is, the scarcity of low-sulphur fuels, and its high price. And then with scrubbers, shipowners face high installation costs, waste disposal problems, and fuel cost.
In this they are joined by Mr Hoogeveen, who said the change over from heavy bunker to low-sulphur fuel is hard on the engine and can result in a complete shutdown - a danger all the more acute in heavily trafficked ECA waters.
In fairness, though, the Poten analysts warn of LNG equipment costs and conversion costs as well as problems with the limited facilities that supply the fuel.
To date LNG fuel initiatives are largely regional. Ships deployed in trade routes between ECAs or ships trading entirely within ECAs such as ships trading from the Baltic Sea to North Sea and English Channel routes are already living with a 1.0 per cent sulphur in fuel oil limit.
Differing views on outcomes for marine fuels arise from uncertainties and how they are likely to be resolved. Timing of 0.05 per cent sulphur fuel limit entering into force poses questions about the likely result of the low sulphur fuel availability, or when or if a 0.01 per cent limit will come into force.
The dilemma is that ships are required to use lower sulphur fuel oils, but refiners are not required to supply it. In fact, refiners have been slow to make multi-billion dollar investments to supply low sulphur marine fuels.
Then there is the question of the expansion of the number of ECAs, and uncertainty arising from this, and what the new requirements would be and when, if ever, would they be imposed. Few large bunker ports are located within ECAs, and estimated 24 per cent of bunker fuels purchased annually come from ports within ECAs.
Expansion of ECAs to encompass Asian ports, which supply 32 per cent of world bunker sales and Middle East ports that supply 12 per cent of world bunker sales would increase and speed the transition to lower sulphur fuels.
However, implementation of new ECAs depends on member countries submitting proposals to IMO to designate new ECAs; it is not an IMO led initiative.
If LNG as a marine fuel is to have a real future, the Poten team said port infrastructure to produce, store and transport it as well as fuelling berths, barges and vessels will be required to reliably and economically bunker ships.
Shipowners will not construct LNG fuelled ships without confidence that LNG supplies will be available throughout its route at economic prices. Developers will be reluctant to invest in LNG fuelling infrastructure until they are confident there will be a market for it.
Coordination and cooperation between port developers and shipowners will be particularly difficult with ships in international trades.
The International Energy Agency (IEA) reports that bunker demand in 2010 was 235 million tonnes, comprising 180 million tonnes of residual fuel based products and 55 million tonnes of distillate fuel products. This is equivalent to 180 million tonnes of LNG.
The Poten team said regional ECA initiatives will lead to increased LNG utilisation. This has occurred in Scandanavia and appears to be developing in the US though neither of these cases will impact the global LNG trade as reliance will be primarily on locally produced LNG.
The global outlook, however, will remain foggy and no clear fuel choice will emerge as shipowners will opt for flexibility in their ship orders until UN's timing and application are settled. Given the considerable uncertainty around both fuel price differentials and regulations, a strategy of flexibility will prove key.
That said, the contest appears to be between adjustable scrubbers and virtually sulphur-free LNG with low sulphur fuel being more costly because of producers’ unwillingness to supply it in needed quantities. While the debate is active in Europe today, it is likely to become a major talking point elsewhere as the regulatory tide rises to engulf the industry worldwide. |
