With new measures to support emissions reductions agreed at MEPC 73 and more on the cards for MEPC 74, is the industry finally readying itself for a post-sulphur cap world?
At the last meeting of the IMO Marine Environment Protection Committee (MEPC 73), held in London in October 2018, the committee adopted a measure prohibiting vessels without scrubbers from carrying fuels containing more than 0.5% sulphur for use on board. The so-called carriage ban amendment is expected to enter into force on 1 March 2020 under IMO's ‘tacit acceptance’ procedure.
A complementary Marpol amendment will prohibit the carriage of non-compliant fuel oil for combustion purposes for propulsion or operation on board a ship – as opposed to cargo – unless the ship has an exhaust gas cleaning system (or scrubber) fitted. Scrubber systems are an accepted means of meeting the sulphur limit requirement.
The carriage ban amendment leaves no ‘wiggle’ room for vessels with high-sulphur fuel on board after 1 March 2020
According to IMO: “The amendment is intended as an additional measure to support consistent implementation and compliance and provide a means for effective enforcement by states, particularly port state control.”
MEPC 73 also considered the next phases of the Energy Efficiency Design Index (EEDI). This centred around the implementation date of EEDI phase 3 for different ship types. EEDI phase 3 requires vessels to meet a 30% reduction in carbon dioxide (CO2) grams per tonne mile, as compared to a baseline average for ships built between 2000 and 2010.
The committee agreed to retain the provisional phase 3 start date of 1 January 2025 for tankers and bulk carriers, and significant support was voiced for moving the phase 3 start date for container ships to 2022.
The committee also considered the issue of the safety aspects for low-sulphur fuel and decided that this was an issue for the IMO Maritime Safety Committee, which meets in London on 3 December 2018.
However, there is nothing in the provision of the IMO 2020 global sulphur cap to prevent an administration implementing an earlier date, which is what Taiwan has done according to the West of England P&I Club correspondents’ Pro-Marine Law Office in Taipei. The West of England P&I Club advised of the publication of further guidance concerning the early implementation of the Marpol sulphur cap in Taiwanese ports from 1 January 2019.
The guidance, issued by the Ministry of Transportation and Communications, advises that from 1 January 2019 vessels entering international commercial port areas in Taiwan, shall utilise either fuel oil with a sulphur content of not more than 0.5% m/m by weight, or equivalent methods of emission reduction in accordance with the Marpol Convention.
Marpol Annex VI allows vessels to comply with the regulations by using either fuel oil with a sulphur content below the prescribed limit, by utilising a “fitting, material, appliance or apparatus” such as exhaust gas cleaning technology, or by “other procedures, alternative fuel oils or compliance methods” such as onboard blending of fuel oil or using liquefied natural gas.
When an alternative means of compliance is used it must be “at least as effective in terms of emission reductions as that required by this Annex”. Any alternative means of compliance with the regulations must be approved by the vessel’s flag administration.
For many owners, this means the fitting of scrubbers to newbuildings. To that end, the Hunter Group ASA of Norway has been appointed senior technical advisor for the four Hartree Maritime Partners LLC VLCC tankers to be constructed at Daewoo Shipbuilding & Marine Engineering.
Altogether, there are 11 identical specification VLCCs on order at Daewoo, four for Hartree and seven for the account of Hunter Group. The specification includes scrubbers and ballast water treatment systems, with deliveries taking place between October 2018 and August 2020.
“It is Hartree and Hunter’s intention to form a new scrubber-fitted pool to operate this fleet of 11 eco VLCC vessels," said Hartree managing director Guy Merison. "By combining Hartree’s global trading and chartering experience and Hunter’s technical knowledge, this pool will serve to minimise operational costs whilst maximising earnings. We will be working with other scrubber-fitted VLCC operators to expand this pool,” he added.
Other tanker company initiatives involving scrubbers include that of Torm, which has announced a joint venture which sees it taking a 27.5% stake in ME Production, alongside Guangzhou Shipyard International (GSI), part of the China State Shipbuilding Corporation group. The size of the GSI stake in ME Production is not reported.
Torm has ordered 16 scrubbers with ME Production and signed a letter of intent for an additional 18 scrubbers with the new joint venture.
With these orders, Torm has committed to installing scrubbers on 21 vessels and potentially up to 39 vessels, or roughly half of its fleet.
“Our long-standing relationships with GSI and ME Production helped to facilitate this joint venture at a time when demand for scrubbers is expected to increase significantly,” said Torm executive director Jacob Meldgaard. “This strategic move provides us with a substantial economic interest in a venture that has the potential to be a large-scale international scrubber manufacturer. It will also result in Torm obtaining attractive prices for the scrubber investments that already have a short payback time.”
On one level, investing in a key supplier could reduce the capex on a major item; according to Torm, the capex on the confirmed scrubber orders was estimated to be, on average, below US$2M per unit, including installation costs.
However, there is another side to the story, hinted at in a Torm statement that explains “it expects to be able to obtain financing for a significant portion of this investment”. Taking a stake in another company is an investment which is treated differently in the accounts compared to a sizable one-off outgoing to fit a fleet with scrubbers. As an investment there is the potential to sell on the stake later and, if there is a rush for scrubbers, this could produce a healthy return on investment.
“Let’s take our responsibility to make sure our industry is heading towards a sustainable future for ourselves and the next generations, in line with the expectations of our global stakeholders”
Following its announcement on fitting ballast water management systems to its fleet, Scorpio Tankers has now also committed to fitting exhaust gas cleaning systems to approximately 90 tankers in its fleet.
In the latest announcement, Scorpio Tankers reported an agreement to retrofit 15 of its LR2s with scrubbers.
Scorpio has agreed letters of intent with suppliers, engineering firms, and ship repair facilities to cover the purchase and installation of scrubbers on most of its remaining owned and leased LR2, LR1, and MR tanker vessels (approximately 75 vessels) between Q2 2019 and Q2 2020.
The scrubbers and their installation are expected to cost between US$1.5M and US$2.2M per vessel, and the company anticipates that between 60-70% of these costs will be financed.
Scorpio Tankers chairman and chief executive officer Emanuele Lauro commented: “We have long maintained that the IMO 2020 regulations are both disruptive to the shipping industry generally as well as a powerful demand catalyst for product tankers. Although many well-capitalised and publicly-listed shipowners can source capital and publicise their intentions to pursue scrubbers, most of our industry cannot, and will rely on cleaner fuels to the benefit of tonne-mile demand for product tankers. Irrespective, our focus remains on operating the most competitive fleet in our marketplace, and this has led us to carefully evaluate and ultimately opt for the benefits of fitting hybrid-ready scrubbers on approximately 90 ships in our fleet.”
Are there enough scrubbers?
The fleet of scrubber-equipped VLCCs is growing, although it is hard to pin an exact number on how many will be available when the global sulphur cap is introduced. Estimates range up to 2,000 vessels, and there has been talk that should the industry rush to comply in 2019, this would create a shortage of scrubbers.
Wärtsilä Moss general manager Stian Aakre told delegates at Riviera’s Asian Sulphur Cap 2020 Conference in Singapore that there were no technical, operational or regulatory barriers to adoption, with time being the main hurdle.
“There are fewer problems with subsystems – the emissions monitoring is working. Clumsily-framed IMO legislation around pH discharge has now been resolved, and IMO is working on a solution for uniformly addressing temporary non-compliance issues. Sludge handling issues linked with closed-loop systems are being addressed; port reception facilities are being developed and we are getting there,” he said. “Operational knowledge and experience is growing and the soundings from the IMO MEPC meeting is that the 2020 deadline is firmer than ever from IMO and EU perspectives.”
Referencing a DNV GL study, he said there are now more than 1,600 vessels with confirmed scrubber projects and he urged owners to plan ahead.
But not all tanker owners are convinced that scrubbers are the answer to the global sulphur cap conundrum.
The not-for-profit group Global Maritime Forum involves 34 chief executives and industry stakeholders who believe the maritime industry needs to accelerate both technological and business-model innovation, improve operational and technical energy efficiency, and transition to zero-carbon fuels and new propulsion systems (see Key Points at end of article).
Among the 34 industry leaders who have signed a call for action in this regard are AP Moller–Maersk vice chief executive Claus Hemmingsen, Cargill Ocean Transportation president Jan Dieleman, Lloyd's Register chief executive Alastair Marsh, Trafigura chief executive Jeremy Weir, MISC president and group chief executive Yee Yang Chien, Maritime Strategies International managing director Adam Kent and Euronav chief executive Paddy Rodgers.
“Shipping has so far been exempt from regulations to address the issues around greenhouse gas (GHG) emissions from fuels for ships, but IMO has, after consultation, laid a pathway which requires a fundamental change in the way we fuel our ships”, explained Mr Rodgers. “Shipping must embrace these targets so let’s take our responsibility to make sure our industry is heading towards a sustainable future for ourselves and the next generations, in line with the expectations of our global stakeholders.”
In an emotive opening address at Riviera’s Asian Sulphur Cap 2020 conference, Aurora Tankers managing director Kenny Rogers castigated the global shipowning community for its complacent attitude towards pending sulphur cap regulations.
Sparing no one's sensitivities, Mr Rogers told more than 150 delegates to “do what's right and get it done”. There was a “higher purpose” at stake he said, referring to the more than 14M children globally suffering from asthma and breathing difficulties.
As well as cajoling the industry to act, he offered an insight into the hard-headed pragmatism that guided Aurora Tankers’ adoption of scrubber technology: “We see a two-tier system developing where charterers pay a premium for ships with scrubbers through to 2021. For anyone taking delivery of a vessel in 2023-2024, I would not advise installing scrubbers.”
Mr Rogers said Aurora Tankers had gone for open-loop scrubbers as they are “less sophisticated and offer easier maintenance versus the closed-loop variety.”
He acknowledged that open-loop scrubbers might have a limited shelf life, pointing out their use was banned in Chinese, Californian and German territorial waters.
“Do what's right and get it done; there [is] a higher purpose at stake - more than 14M children globally suffer from asthma and breathing difficulties”
Powered by cooking oil
However, things may be moving faster than even Mr Rogers anticipated. At the end of November 2018, the outgoing Maritime and Port Authority of Singapore chief executive Andrew Tan announced that open-loop scrubbers will be prohibited from use in its waters from 1 January 2020. The aim is to prevent the discharge of washwater from open-loop scrubbers. Those vessels approaching the highly congested waters of Singapore will have to switch to compliant fuels or switch their hybrid scrubbers to closed-loop well in advance of entering Singapore waters.
Singapore is one of the most frequented ports in Asia: the open-loop scrubber ban will hit some owners hard
The announcement is a huge blow to the scrubber industry and to those owners that have already fitted open-loop scrubbers. However, on the same day, Tanker operator Norden and biofuel supplier GoodFuels of Rotterdam announced the successful trial of a CO2-neutral biofuel used as an alternative to low-sulphur fossil fuel.
During the trial, Norden’s product tanker Nord Highlander sailed from Antwerp, burning standard fossil fuel. The main engine was inspected to create a baseline reference, then the rest of the voyage to Estonia was conducted burning a low-sulphur alternative biofuel produced from recycled cooking oil by GoodFuels of Rotterdam.
During the voyage the engine was operated at different loads for sufficiently long periods to establish stable performance. After the test, a final visual inspection of the engine was conducted, which confirmed the engine had not been negatively affected by the biofuel.
The test documented that second-generation CO2-neutral biofuel supplied by GoodFuels is technically and economically suitable and thereby a realistic alternative to comparable fossil fuels.
The test on board the Norden vessel documented that engine performance is not affected, meaning the full performance envelope can be delivered without restrictions. The initiative is in line with Norden’s efforts to reduce its carbon footprint.
“Norden has come a long way in increasing fuel efficiency and has reduced CO2 emissions per tonne cargo transported on owned tanker vessels by 25% between 2007 and 2017. With the newly introduced IMO targets on CO2 reductions, however, it is evident that increased fuel efficiency alone is not enough. We need alternative solutions and with this test, Norden has shown a viable method towards reaching these targets,” said Norden chief executive Jan Rindbo.
The fuel meets the criteria to be classed as CO2 neutral: CO2 -neutral biofuel is defined as tank-to-wake 100% reduction, well-to-wake 85-89% reduction. Ecological Council senior adviser Kåre Press-Kristensen said: “We appreciate that Norden is investigating specific solutions to the climate challenge. We need actions here and now to meet the climate goals of IMO and we are proud that Norden takes action, taking a leading role in biofuels, and look forward to following the development.”
Beyond CO2 neutral fuels, the industry is also exploring carbon-neutral shipping.
For example, compared to current vessels, the NYK Super Eco Ship 2050 will reduce CO2 emissions by 100%. Elomatic was responsible for the concept’s creation and visualisation. The development of NYK Super Eco Ship 2050 is part of NYK Group’s innovations in its 'Staying Ahead 2022 with Digitalization and Green' medium-term management plan.
In the NYK Super Eco Ship 2050, Elomatic and NKY have produced a radical concept for carbon-neutral shipping
The resistance of the vessel was reduced by 35% by remodelling the hull to decrease water friction, by reducing the weight of the hull and by minimising air resistance. The improvements were validated with computational fluid dynamics calculations. Further improvements were made by introducing fuel cells for electric propulsion, relying on other highly efficient propulsion devices and generating renewable energy on board the vessel.
The energy demand of the vessel was cut by approximately 70% by eliminating energy and operational waste. The reduced energy demand enables truly emissions-free operation. Instead of fossil fuels, the ship is powered by hydrogen produced from renewable energy sources. Other elements in the concept include lightweight bionic designs found in nature, 3D printing for building materials, a digital twin of the vessel and flapping foils inspired by dolphins to replace less efficient traditional propellers.
Global Maritime Forum’s call for action – key points
The core principles of the Global Maritime Forum’s call for action are as follows. The group says the strategy should be consistently in line with the Paris agreement’s temperature goals.
- Predictable: regulations should provide long-term certainty for financiers, builders, owners and charterers to make the required investments in low-carbon technologies.
- Market-oriented: emissions reduction objectives should be met at the lowest possible cost, and the industry should explore the use of carbon pricing and other mechanisms that can create economic value from GHG emission reductions.
- Technology-enabling: the strategy should accelerate the use of low-carbon technologies and fuels by encouraging significant funding flows for research and development.
- Urgent: certain mid- and long-term measures will require work to commence prior to 2023, including developing zero-emission fuels to enable implementation of decarbonisation solutions by 2030.
- Coherent: solutions implemented should build on and reinforce existing technical, operational, and energy efficiency measures while maintaining or enhancing safety standards. In this context it is critical that all IMO environmental regulations be compatible with future 2050 regulations.
- Enforceable: legally binding, enforceable actions set by IMO and enforced by member countries are required to compel the industry to shift.