(SWZ article) In shipping, the big countdown has begun. The coming months will undoubtedly be dominated by preparations for the introduction of IMO's 2020 sulphur cap.
In his monthly column "Maritime Markets" (Maritieme Markt) in SWZ|Maritime, editor in chief Antoon Oosting discusses all kinds of hot maritime topics. In the January issue, he discusses the coming 2020 Suplhur Cap, its implications and fuel quality. Read the translated version below or download the article as published in SWZ|Maritime (in Dutch).
Reducing the maximum permitted sulphur content in marine fuel from 3.5% to 0.5% will make shipping considerably cleaner. At the same time, the measures that shipowners have to take in order to comply with the new sulphur standard will significantly increase the cost of transporting cargo by sea.
On 12 December, the maritime sectors of the Netherlands and Belgium drew up an interim balance sheet. This happened during a meeting of the Clean Shipping Platform in Breda, the Netherlands, which attracted over 200 visitors. The Belgians may have stopped building ships, but they do still own a large fleet and a few large seaports.
Cleaner Fuels, Scrubbers or LNG Retrofit
For existing ships, shipowners can choose between between storing cleaner, but considerably more expensive low sulphur marine fuels or installing exhaust gas scrubbers. Retrofitting an existing ship to be able to sail on sulphur-free LNG has only succeeded in a few cases because it is either too expensive or too complicated.
Blends or Distillates
As a result of the new sulphur rules, the world fleet of more than 50,000 seagoing vessels will have to switch to bunkering MGO (Marine Gas Oil), a distillate, or Very Low Sulphur Fuel Oil, a blend, both with a maximum of 0.5% sulphur. In addition, there is the Ultra Low Sulphur Fuel Oil with a maximum of 0.1% sulphur for sailing in ECAs (Emission Control Areas). It is expected that on 1 January 2010 only 4000 ships will be able to continue sailing on High Sulphur Fuel Oil with the aid of scrubbers.
Picture by Hans de Wilde, as supplied for Maritime Markets, SWZ|Maritime January 2019.
Low Sulphur Marine Fuel Production on the Rise
For a long time it looked as if by 1 January 2020 there would by no means be enough low sulphur marine fuels available. For a long time, refineries suffered from low margins and their owners were reluctant to invest heavily in the production of cleaner fuels. Yet, this seems to be changing. Major oil companies such as ExxonMobil and Shell have invested heavily in their production processes to meet the changing demand from shipping.
On Thursday 13 December, Shell-Pernis celebrated the completion of the SDA (Solvent Deasphalter) plant with Europe's largest refinery. By first removing the heavier fractions such as asphalt from the crude oil in this SDA plant, more cleaner fuel containing less sulphur can then be distilled from the oil. This will ensure Shell maintains its important position in the marine fuel market.
Blending Specialist
The Danish container giant Maersk has signed long-term contracts with tank storage companies for the supply of sufficient low-sulphur marine fuels for its vessels. The first contract in this series was with Vopak in Rotterdam. As the largest global operator of tank storage terminals, Vopak is also a specialist in blending of oil products. Vopak has guaranteed Maersk that it will always have sufficient low sulphur marine fuels at its disposal in Rotterdam.
Sufficient, Albeit Limited Refining Capacity
At the seminar of the Clean Shipping Platform, Anton Spierings of the VNPI (Association of the Dutch Petroleum Industry) told us that, according to the research bureau, there is now sufficient, albeit limited, refining capacity worldwide to produce low sulphur fuels for shipping. There is also quite a difference in the sulphur content of crude oil. For example, African or North Sea oil contains much less sulphur than that from the Middle East.
Worldwide, this picture may be correct, but regionally it is not. ‘But now more people can be heard saying that they are confident that the supply will turn out okay,’ says the VNPI spokesman. In the ARA area (Amsterdam, Rotterdam and Antwerp), the supply of low sulphur marine fuels will be sufficient anyway. The expectation is that this will soon also be the case for Houston and the Middle East. The local imbalance in supply and demand is expected to be offset by the supply of low sulphur fuels from elsewhere. For example, a great deal of fuel oil is already being transported from Rotterdam to Singapore.
Cold Properties
What the VNPI spokesman believes still deserves attention, is the question of quality. This concerns stability, compatibility, flash point and cold properties (distillate). However, the VNPI assumes that the necessary solutions will be found. With the experience gained with the development of 0.1% sulphur fuel for navigation in the North Sea and the Baltic Sea prior to its introduction on 1 January 2015, Spierings also believes that it should be possible to develop high-quality low sulphur (max. 0.5%) fuels for shipping. The VNPI assumes that by 1 January 2020 the necessary fuels will be widely available in the main ports.
Use of Scrubbers to Increase
Moreover, the VNPI assumes that after an initial dip in demand for fuel oil, demand for fuel oil will eventually increase again as more and more ships will be equipped with scrubbers. The investment of one to two million euros in scrubbers is quickly earned back by the considerably higher rates (30-50 percent) of low sulphur fuels compared to heavy fuel oil.
LNG Still Suffers from a Lack of Bunkering Infrastructure
The use of the considerably cleaner LNG (because no sulphur, much less NOx and no emissions of sulphur), is still slow to take off because the necessary bunkering infrastructure is still lacking in large parts of the world.
Role of Heavy Fuel Oil Far from Over
Niels Groenewold, director-owner of the VT Group, founded in 1916 as Vereenigde Tankreederij, also expects that the role of heavy fuel oil as a marine fuel is far from over. As a bunkerer, the VT Group is an important link in the availability of sufficient and high-quality marine fuels. The VT Group is active in Europe, Australia and Panama. By using Triple-E Mass Flow Systems, the VT Group tries to guarantee volume and quality of bunkered fuels.
Contaminated Fuels
It is precisely the quality of marine fuels that continuously causes problems. According to Ferry van Eykel of VPS ('Your Fuel Management Partner'), peaks in problems with the quality of marine fuels occur again and again as soon as the standards for sulphur content are lowered again. In 2017 and '18, 150 to 200 ships had problems with the quality of bunkered fuels. They had mainly bunkered them in Houston, Panama and Singapore.
Chemical Waste
According to Van Eykel, research into contaminated bunkers repeatedly shows that substances have been added that do not naturally occur in fuel oil or distillates. These contaminants are caused by blending fuels. Yet, it is often impossible to find out exactly where this happened and with what the fuels were diluted. Still, all too often chemical substances are found in marine fuels that are classified as chemical waste. Mixing these substances with fuels is much cheaper than any other, more environmentally responsible way of processing this waste.
Investigating Pollution
Chemical pollution can seriously damage ship engines. Shipowners then call in companies such as VPS and Van Ameyde Marine to investigate the pollution to be able to seek damages. Those who expect these kinds of problems to diminish over time are wrong. In 2008 Van Ameyde Marine had 21 such cases against 27 last year. Sometimes a shipowner has no option, but to completely empty the fuel tanks and bunker again, with all the damage resulting from extra cleaning work and the delays that this entails.
No Standards
The problem with the chemical contaminants in marine fuels is that there are no internationally applicable standards and therefore no limits for the presence of suspicious substances. Van Eykel of VPS and Walter Dekkers of Van Ameyde Marine therefore advocate the use of blacklists for substances that may not be contained by marine fuels and the suppliers that supply these polluted fuels. The problem here, however, is the traceability of the bad fuels. ‘For example, we have never seen the contaminants in the fuels that were bunkered in Houston before,’ says Van Eykel.
Sampling Fuel Before Delivery
The advice to shipowners is to choose the right suppliers, using contracts that require the bunkerer to sample the fuel to be delivered before it is pumped on board the ship. This is currently advised by the shipping company's interest group BIMCO, which also uses a model contract for this purpose. Until now, the usual course of events has been that the shipowner must demonstrate the quality of the fuel supplied after delivery. However, extra supervision and better rules have their price, which means that the price of the fuels is expected to rise as well.
Licensing Systems
On the other hand, port authorities can also play an important role by introducing licensing systems for authorised bunkering companies. Singapore already has such a system in place and the port authorities of Amsterdam, Rotterdam and Antwerp are now also working on its introduction. The port authorities are currently in consultation with all stakeholders to see what needs to be included in the port regulation for the introduction of such a bunker licensing system. Of course the aim is greater transparency concerning the quality and quantity of the marine fuels supplied.
Picture by Roberto Venturini.
