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Tanker Shipping & Trade

Tanker Shipping & Trade

New tool simplifies evaluating the cost of tanker compliance

Thu 07 Jun 2018

New tool simplifies evaluating the cost of tanker compliance
Arinjit Roy (ABS): The Techno-Economic Evaluation tool can be changed to evaluate different assumptions

The solutions for achieving 2020 sulphur cap compliance are varied , and owners must consider a multitude of options before taking the plunge. The process is made harder for owners of small chemical tankers, which are tight on space, adding complexity when it comes to fitting scrubbers. Here, Mr Arinjit Roy of ABS Global Marine provides an overview of the available routes to compliance and explains how a new tool can make the decision easier

The upcoming global sulphur cap presents a major compliance challenge for shipowners, who much choose carefully between various solutions; a wrong decision could have a significant impact on the bottomline further down the road.

While achieving compliance with the global cap might seem a straightforward matter of switching to low sulphur fuel, there are issues of cost, availability and potentially of fuel quality to consider in the short term. For vessels with an expected trading life of 20 years or more, installation of an exhaust gas cleaning system (EGCS) or use of LNG as fuel are also viable considerations.

In addition to the global requirements, owners must also consider compliance with reference to the amount of time their vessels will spend inside an emission control area. Newbuildings that need to comply with IMO NOx Tier III emission requirements while operating inside a NOx ECA must use a NOx abatement technology, such as exhaust gas recirculation (EGR) or selective catalytic reduction (SCR) systems, or install gas or dual-fuel Otto cycle (low pressure) engines with LNG as fuel.

Tight Spaces

The small size of chemical carriers creates challenges in terms of installing additional large equipment, such as scrubbers and regasification skids for LNG fuel, as well as ballast water management systems. Asset valuation versus the cost of any modifications is an important consideration when deciding whether to modify or scrap a vessel.

With these considerations in mind, ABS undertook an analysis of the options available for compliance on a 13,000 dwt chemical tanker, including a comparison of the anticipated costs of retrofitting an open and hybrid loop EGCS against LNG and compliant fuel.

The actual costs for compliance with the global sulphur cap and ECA regulations will vary significantly, based on a vessel’s characteristics, trading patterns and the options chosen to achieve compliance. However, the results suggest a considerably shorter payback period for this type and size of vessel by using an open-loop or hybrid EGCS, compared to using LNG as fuel, or the base scenario of switching to compliant low sulphur fuel.

TABLE 1: Sulphur cap cost comparisons

Type

Capex

Scrubber

US$1M-US$1.3M

Hybrid scrubber

US$1.8M

LNG as fuel

US$5M

For the analysis, capex levels for an open-loop scrubber were assumed to range from US$1M-US$1.3M, depending on whether the installation was for a main engine, a main and auxiliary engine, or a main and auxiliary engine and the auxiliary boiler. For a hybrid system, the typical capex cost increases to around US$1.8M.

Assuming installation costs of US$200,000 for a newbuilding, ABS estimated 100%-140% of this capex for a retrofit, with design and associated costs of US$125,000 for an open loop and US$150,000 for a hybrid scrubber. Total capex estimates include installation, design and class costs and a cost for the initial NaOH to fill the tank.

Assumptions

The EGCS was assumed to have a life expectancy of 20 years, with the calculation based on an estimated fuel cost in 2020 of HFO at US$320/tonne, LSFO at US$490/tonne and MGO at US$540/tonne. Additional consumption was included, due to increased back pressure and additional electrical load. Additional costs in the calculation include system consumables, maintenance, service engineer and crew training and cost of lost cargo, due to the additional weight of the EGCS.

TABLE 2: Payback period of different alternatives

Type

Discounted payback period

Scrubber

1 year

Hybrid scrubber

1-2 years

LNG as fuel

4-5 years

In terms of discounted payback, the analysis of compliant fuel versus an open-loop EGCS gave a return of one year for a main engine, auxiliary engine and auxiliary boiler, two to three years for a main and auxiliary and one to two years for a main engine only. For a hybrid scrubber, the equivalent for a main engine, auxiliary engine and auxiliary boiler is one to two years and three to four years for a main and auxiliary engine.

By contrast, the total capex for an LNG fuel solution, including machinery, storage and outfitting, is estimated at US$5M. The discounted payback for the LNG as fuel installation covering a main engine, auxiliary engine and auxiliary boiler is estimated at four to five years.

Unique considerations

Commenting on the findings, Mr Roy said: “The results of the study are not surprising, as we have seen similar payback periods for scrubbers on other sizes of tankers. But a key point is that each fleet profile has its own unique considerations and there is no blanket answer for every ship.”

While the study primarily considered the costs of compliance, it is important to remember that other factors must be considered. These include the impact of future regulatory changes, the operational reliability of the equipment and the availability of the supporting infrastructure.

Ultimately, the owner must make the final decision on which compliance solution best fits its requirements, but an understanding of the available technical options and economics of each alternative is critical.

ABS believes that such analysis is key to supporting owners during the transition to low sulphur shipping, which is why ABS developed its Techno-Economic Evaluation solution. This is a unique decision-support process that identifies technical feasibility and key parameters, such as lifecycle costs, net savings, payback period and rate of return on investment.

“The ABS Techno-Economic Evaluation approach requires extensive analysis for each ship and fleet, based on criteria such as operational characteristics, machinery configurations and economic considerations. Once the model has been made though, inputs and variables can be easily changed to evaluate results from different approaches and assumptions,” said Mr Roy.

Evaluating the alternatives

The evaluation considers ship design, equipment details, trading routes, fuel-cost trends and fleet analysis to establish a base trading case and alternative technology and fuel scenarios. This information can help owners make a meaningful comparison of the options and select their preferred solution for retrofitting, or new construction projects.

ABS has published guidance to help owners understand the steps they will need to take to implement exhaust gas scrubbers on board, as well as an advisory paper on the 2020 sulphur cap itself. In addition, ABS offers the LNG Fuel Ready and the SOx Scrubber Ready notation concept for newbuilds, which allows an owner to prepare a vessel for the implementation of LNG as fuel or SOx scrubber options at a later date.

 

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