The IMO’s 0.5 per cent sulphur cap will enter into force in 15 months’ time. One option for compliance is the use of marine scrubbers with heavy sulphur fuel oil (HSFO).
VPO Global spoke with various industry members about the current scrubber market and the adoption of the technology for 2020 compliance.
What is the current status of the scrubber market?
According to the Exhaust Gas Cleaning System Association (EGCSA), there are 983 scrubbers installed or on order. Despite some criticism that scrubbers are not a long-term solution and the fact they do not reduce the production of emissions, only ‘scrub’ the fuel of its sulphur content, the market is still growing. This month Safe Bulkers announced the plan to install scrubbers on half of its fleet. DHT confirmed this week a US $50 million financial investment for scrubber retrofits and International Seaways said it would install scrubbers across its very large crude carrier (VLCC) fleet.
Christos Chryssakis, senior researcher, DNV GL confirmed to VPO Global that 2017 was a very slow year for scrubber uptake. He attributes this to a surge in installations prior to 2015 when the 0.1 per cent cap on sulphur was implemented in Emission Control Areas (ECAs). Following this, owners and operators “heard about the global sulphur cap and thought to wait and consider what the options are. For a while, there was some reluctance to do that. Even if the IMO said let’s move it to 2025, I don’t think anyone will do too much before 2023 or 2024.”
Stine Mundal, head of section, environmental certification, DNV GL – Maritime agreed and said that most scrubber installations have been driven by 2015 ECAs and largely installed across cruise and ferries, which spend a large quantity of time operating in ECAs. However, she believes that the industry is now experiencing a drastic shift in segments as we near 2020. Scrubbers are now being fitted to all types of ships, and not restricted to just cruises and ferries.
How do you decide if a scrubber is right for your operational profile?
Poul Woodhall, director, environment & sustainability, DFDS has thirty-three ships and eighteen of these fitted with scrubbers. Mr Woodhall told journalists during a press briefing that the decision on whether a ship wold be fitted with a scrubber depends on its age, technical feasibility, and its ownership. On average, DFDS invests between four and nine million euros per scrubber installation but “the crystal ball is the cost between two types of fuel.” While scrubbers are a hefty investment, it will be the cost of HFO versus the cost of LSFO that will determine whether it is a more cost-efficient solution than opting for 0.5 per cent compliant fuel in 2020. “We can make assumptions about this. Some will be right and some will be wrong, but we will not know for definite now.”
Why invest in a scrubber?
One benefit of scrubbers is that operators and crew can use a fuel they know and are used to operating with and engines will be using a fuel they are used to, confirmed Ms Mundal of DNV GL. She suggested that this could potentially be seen as a safer option by operators and may be a way to avoid the chaos.
New York headquartered shipowner International Seaways, which announced this week the retrofit of up to ten scrubbers on its VLCC fleet, confirmed that it for larger vessels scrubbers are the best option for 2020 compliance.
David M. Siever, vice president, chartering and investor relations, International Seaways told VPO Global that for them it makes sense to use scrubbers on their largest ships because the daily fuel consumption is higher than on smaller ships, the vessels tend to have longer voyages and more time at sea versus in port, and the cost is not much higher on a large ship versus a small ship.
Why are some companies hesitant to adopt scrubbers?
Many believe scrubbers are not a long-term solution because they are costly, there are uncertainties regarding the regulation of open-loop discharge water, and the availability of HSFO. Swedish financial group Skandinaviska Enskilda Banken (SEB) estimated earlier this year that in 2020 fewer than 2,000 ships will use scrubbers for 2020 compliance, resulting in a dramatic decrease in demand for HSFO. Shell Marine’s Jens Moeller, technical manager- Europe & Africa also confirmed in September this year that the industry is likely to have 2,000-2,500 ships operating with scrubbers post-2020.
Teus Beek van, general manager market innovation, Wärtsilä Marine Solutions who moderated a Global Maritime Environmental Congress discussion during SMM 2018, said that there is uncertainty around scrubbers’ suitability for long-term compliance. More fuel will be refined to meet the demand for 0.5 per cent blends, so the availability of HSFO may be decreased. Those that have already invested in scrubbers and need HSFO will also be targeted by the bunker suppliers.
Ms Mundal said that some owners are waiting and seeing what their competitors are doing, hence the hesitation. However, this isn’t really going to help them, she warned. There is no one choice for 2020 and owners are becoming nervous now as there is less than 18 months left until the 0.5 per cent is enforced. “If you decide to invest there is no more waiting, you have to do it now.”
Nishant Dhyani, fleet efficiency manager, China Navigation Company confirmed to VPO Global that he personally believes that the most popular option for 2020 compliance will be to switch over to complaint fuel (0.5 per cent) over scrubbers. He said “it is an easy way out. Instead of buying HSFO, companies will start buying low sulphur fuel oil (LSFO). There is no modification or changes required on the vessels.”
He also confirmed that the cost of investing in a scrubber will deter many companies. “Shipping companies have been consistently running in losses since past few years and not many companies are willing to spend that kind of money on scrubber installation.”
Furthermore, the additional fuel bill that shipping companies will receive from using compliant low-sulphur fuel will be directly passed on to the customers. “They have nothing to lose in this situation” he said.
However, Mr Dhyani did stress the importance of acknowledging the compatibility and stability challenges associated with using blended fuel. “I foresee a lot of challenges on the vessels in this regard because of using the blended fuel. The fuel quality will hugely depend on the producers’ quality control procedures, which will be a difficult task for consumers/agencies to control. I am afraid there would be an increase in safety related incidents on board vessels due to use of blended fuel.”
Underwater repair and maintenance services company Hydrex also reported earlier this year the company has carried out significant repair work to scrubbers’ pipes, which can be costly.
The most important thing for 2020 compliance, according to Teus Beek,van, general manager market innovation, Wärtsilä Marine Solutions for 2020, is to select a technology or solution that balances the economics against the extra investment. “If it is not paid back fuel cost, the shipowner is very hesitant to introduce this new technology, even if it is cleaner.”
Will shipyards have the capacity to retrofit scrubbers now for 2020 compliance?
Mr Moeller, Shell Marine, said the that the concern now is those just looking into scrubbers as an option, whether they will be fitted to ships in time for 2020. “If you decide to use a scrubber today you have to wait 18 months or more to install it.” There is a risk that by the time a scrubber is installed, we will be well into 2020 and those carrying or operating with HSFO and without a scrubber may be subject to heavy penalisation for non-compliance.
Furthermore, Mr Moeller said: “There are some unreliable companies on market today offering scrubbers and these issues combined are making some shippers sceptical of scrubbers.”
Mr Chryssakis, DNV GL, agrees that there is a concern with shipyard capacity. “We hear that the scrubbers are filling up and the yards probably are as well. People might pay the price for a bit then fit a scrubber when they can, maybe halfway through 2020 or 2021.”
“Yards are also overrun with installations of ballast water treatment systems (BWTS) so this could be a problem regarding scrubber fittings too.”
Nishant Dhyani, fleet efficiency manager, China Navigation Company will be talking more about the IMO’s sulphur cap and how to manager performance next week in Singapore. View the agenda for VPO Singapore or click here to register.