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Tanker Shipping & Trade

Scrubbers v LSFO: US$300 fuels differential in 2020; US$87 by 2023

Fri 17 Aug 2018 by Jamey Bergman

Scrubbers v LSFO: US$300 fuels differential in 2020; US$87 by 2023
The report sets the difference in fuel price between low-sulphur fuel oils (LSFO) and heavy fuel oils (HFO) immediately following the onset of 2020 low sulphur regulations at US$300 per tonne

Projections from UK-based shipping consultancy Drewry offer an appealing outlook for tanker owners who opt to install scrubbers early.

The advantage, however, narrows quickly in Drewry’s predictions. The report sets the difference in fuel price between low-sulphur fuel oils (LSFO) and heavy fuel oils (HFO) immediately following the onset of 2020 low sulphur regulations at US$300 per tonne decreasing to US$87 per tonne by 2023 as LSFO supplies increase.

“Accordingly, the savings on bunker cost for a modern eco-VLCC will decrease from $5.7 million to $1.6 million,” the report claimed.  

“This suggests that owners opting for scrubber-fitted vessels in 2020 would recover their cost in the first year alone. However, for those who choose to retrofit a scrubber (or take the delivery of a scrubber-fitted vessel) later, the payback period will be longer,” it said.

In addition to fuels supply and pricing, ship age is a critical factor in the competitive advantage equation, according to the report. Newbuildings offer the fastest return on investments in scrubbers, and younger vessels are better placed to recoup the added cost of retrofitting scrubbers than older vessels.

For VLCCs, Drewry estimates the cost of fitting an open loop scrubber in a newbuild ship to be between US$2.5-3M, while the cost of retrofitting a scrubber on an existing VLCC is likely to run tanker owners US$4-$4.5M.

In 2018, tanker owners have outpaced other sectors in installing scrubbers.

Frontline, which ordered scrubbers for 14 tankers with the option to add 22 more on tankers of unspecified size, are among the shipowners with the most scrubber orders. DHT Holdings is retrofitting scrubbers on 12 of its existing VLCCs and commissioning two newbuild VLCC with scrubbers. Other tanker shipowners outfitting VLCCs and Suezmaxes with scrubbers include Cosmo, Hunter Group, Kyklades Maritime, Maran Tankers, Sentek Marine & Trading and Trafigura.

Trafigura plans to charter up to 32 newbuild tankers of undisclosed size with scrubbers when they are delivered before 2020. Other oil companies that have been looking to secure time-charter of tankers with scrubbers include ExxonMobil, Koch, Total, Statoil, Irving Oil, and GS Caltex, among others.

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