Maritime Transport evolution perspectives in light of new shipper’s regulations & requirements

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Capture d’écran 2017-08-28 à 10.20.22On October 27th, the International Maritime Organization (IMO) confirmed the implementation date of its revamped global regulations, reducing marine fuel sulphur content from 3.5% to 0.5% by 2020 (excluding SECA area). This reduction in sulphur emissions should avoid early mortality of 40,000 people yearly worldwide caused by this pollution.

Reminding us that, although maritime transport has the lowest GHG emissions per, all modes considered, its emissions of pollutants remain fairly high, in particular the sulphur item. The reason is about the type of fuel in wide use in deep sea shipping, HFO (Heavy Fuel Oil), which generally has a sulphur level rated between 1 and 3.5%.

This reduction in pollution will require a financial effort on the part of carriers. To adapt their fleet to the new regulations, they will have two options:

  • Use lighter but more expensive fuels: MDO (Marine Diesel Oil) or MGO (Marin Gas Oil). HFO with a sulfur content that meets the new standard represent only 0.5% of the current supply of HFO, and therefore will not be able to meet all demand.
  • Invest in scrubbers, allowing to filter exhaust gases. Regulations permit the continued use of HFO in the presence of those devices, provided that Sulphur emissions levels are equivalent or less than those of a compliant fuel type.

These solutions are similar to those used in SECA area. However, this much higher demand for fuel globally is likely to lead to higher prices for MDO & MGO, which is already more expensive than HFO, which would then make investment in scrubber devices more attractive on an economic angle.

Using more expensive fuels will undoubtedly push forward carriers to take steps to reduce fuel consumption, in particular by increasing slow-streaming (operating below nominal speed). Although these two scenarios allow for compliance respect, they do not have the same consequences in terms of pollutants and GHG rejected.

To analyze the impact of these solutions, TK’Blue Agency compared three configurations: a 1900-3849 EVP HFO container carrier, a Tier 2 SSD engine; the same vessel using a purification device; and finally a ship using MGO. The external costs pollutants releases and GHGs are shown on the graph below and the costs per ton of pollutant in the following table. The operational costs – use costs – are detailed, while those in the upstream phase were regrouped together for greater clarity.

tableau art transport maritime copie

* HFO Consumption= 96.13 kg/km ; MGO Consumption = 90.54 kg/km ; Medium tonnage =18490 T

Pollutant CO2eq SO2 NOx PM25
Upstream cost [€/tPol] 90 10241 10640 28108
Use cost [€/tPol] 90 4368 3928 10062

Even with a scrubber, HFO sulphur emissions are still slightly higher than those of MGO. On the other hand, the MGO leads to higher emissions in the upstream phase due to its more complex refining process (HFO being a residue).

Thus, the HFO scrubber configuration reaches costs level equivalent to the MGO option, whereas it is much less preferred: in addition to the complexity of induced operations (computerized monitoring of emissions, collection of residues,…) uncertainty about the fuel market future trends makes it difficult to take the right investment decisions.

This trend is confirmed by Lloyd’s List’s survey of owners, operators and industry in the sector (2015), where 27% of respondents consider the return on investment for an “uncertain” scrubber system and only 32% are confident about the industry’s ability to adapt itself to regulation by 2020.

In addition, the reduction of pollutant emissions is also achieved by reducing fuel consumption: if MGO vessels use more fuel-reduction devices because of the high price of this fuel, the move to MGO would therefore, be the cheaper impact scenario for society. Finally, NOx emissions remain high in all scenarios: their reduction would involve using specific purification technologies for this pollutant, or by the construction / conversion of more LNG vessels, an investment of magnitude which would allow to effectively reduce the releases of all pollutants studied.