Preparing For Emission Regulation Change – Market Commentary

[London, March 2018] – With the sulphur cap date fast approaching, and amid the on-going debate on suitable technology and appropriate system, it appears that less than 1% of the global merchant fleet is currently equipped to handle the upcoming emission regulation.​ During the recent Asia Pacific Maritime event in Singapore, the shipping community seemed to be divided on what the best available solution is for Owners – whether to use scrubbers or use complaint fuels – with both sides coming out with their own set of arguments. ​ The current dilemma faced by Owners is whether to retrofit their vessels with scrubbers, or with LNG engines and tanks, or alternatively use compliant fuels, which a few Owners are doing.​ Proponents of scrubbers argued that installing scrubber takes only around two-to-three weeks of dry docking and comes with a capex payback period of approximately 12-18 months, depending on various other factors. ​ However, their availability as well as a choice between closed loop and open loop systems, present a different set of problems. Installing an open loop scrubber means polluting the sea instead of the air, while closed loop systems will have inherent operational costs associated with it. It will also eat into the most precious commodity on-board a vessel: “space”!​ The story does not end here. Owners will also have to look into the IMO regulations on carrying non-complaint fuels after the emission norms come into effect. There was no clarity on the issue, as a few opined that the IMO should make the fuel suppliers responsible for supplying complaint or non-complaint fuels. A few others said that the IMO could come out with a set of regulations anytime in 2020 which could allow the vessels to carry non-complaint fuels, provided they have appropriate systems on-board.​ Use of LNG as bunker fuel found less favour, for reasons ranging from infrastructural bottlenecks to capex incurred on its installation and lack of an industry manual on the handling of LNG as a bunker fuel. LNG pricing has also not been as transparent as other bunker fuels. ​ A few Owners, however, have backed a third option. Teekay, for example, will be using low sulphur compliant fuels (excluding LNG), as it expects their availability to remain “normal” after the regulation comes into effect.​ Blended fuels could also be an alternate solution, however, it could bring in other problems, such as stability, uniformity, compatibility and availability of the fuel, both within the region as well as across regions.​ However, refiners appear to differ. Cost of installing a system on-board a vessel to meet emission regulations is far cheaper than upgrading refineries to produce compliant fuels. ​ Nonetheless, irrespective of what type of technology and system Owners adopt, they will have to train their crew in handling those systems.​

2018-10-26T10:41:51+00:00