FROM MAGAZINE: Looking beyond IMO’s global sulphur cap

The IMO's move to introduce a 'global sulphur cap' presents a significant regulatory move aimed at reducing greenhouse emissions and making shipping more environmentally responsible and friendly. We probe how shipping lines are preparing for the big move and the alternatives like LNG, hydrogen, and LEO, a blend of lignin and ethanol.

The deadline of January 2020 for the cap on sulphur content in fuel oil for shipping is looming.
The International Martime Organization's (IMO) MARPOL Annex VI, first adopted in 1997, sought to limit the main pollutants contained in ships' exhaust gas, including sulphur oxides (SOx) and nitrous oxides (NOx). Under the revised MARPOL Annex VI, the sulphur content of fuel oil used on board commercial ships trading outside sulphur Emission Control Areas (ECAs) must not exceed 0.50 percent m/m. The current global limit is 3.50 percent m/m which has been in place since 2012.

The IMO's move to introduce a 'global sulphur cap' presents a significant regulatory move aimed at reducing greenhouse emissions and making shipping more environmentally responsible and friendly.

As the last two months close in on shipping companies, container shipping lines have been on their toes to take steps for ‘equivalent’ compliance which include LNG-powered ships, use of expensive fuel with low sulphur content or abatement technology, exhaust gas cleaning systems (ECGS, also known as ‘scrubbers’).

Implications on the environment & shipping business
As operators and ship owners comply in letter and spirit, the latest regulations will significantly bring down the greenhouse emissions, considerably impacting the environment positively. The IMO has committed to reducing greenhouse gas emissions from the world’s shipping fleet by at least 50 percent from 2008 levels by 2050, while anticipating a nearly threefold increase in the number of ships in the industry.

“We welcome the new regulation and fully support the IMO2020, and we especially look forward to having a level playing field for all vessel owners. Regarding the environment, IMO2020 will represent a huge step forward in terms of reducing air pollution and making shipping greener.

Regarding the shipping business, the new regulations will indeed have a huge financial impact.

Although the exact additional costs for low-sulphur fuels are hard to predict, we estimate that there will be additional costs of roughly $250 per tonne of fuel. In total, we estimate that our annual additional costs will be around $1 billion in the first years,” said a Hapag-Lloyd spokesperson. Hapag-Lloyd has a fleet with a total capacity of 1.7 million twenty-foot equivalent unit (TEU), as well as a container stock of approximately 2.6 million TEU.

Maersk said it “fully supports” the regulation regulation which is expected to reduce shipping’s sulfur emissions by more than 80 percent. “IMO 2020 regulations will have a significant benefit to the environment and to health, particularly for populations living close to ports and coasts. Low sulphur fuels are significantly more expensive. External sources estimate additional cost for the global container shipping industry could be up to $15 billion because of the new regulations. The shipping industry cannot absorb this increased cost from the new regulation; it has to be passed on to the end-users of the items shipped in our containers. Our customers should expect the cost of shipping goods to rise to cover the increase,” said Steve Felder, managing director Maersk South Asia.

The preparation
The immediate plan of action for ship owners and operators is to comply with the regulations. The IMO recommended that shipping companies draw up a ship-specific implementation plan for each of their ships as early as possible as they would need to start purchasing and loading compliant fuels several months before the actual transition date.

"The vast majority of all our vessels will comply with the new rules with effect from January 1, 2020 through use of fuels with low sulphur content. Scrubbers form a secondary part of our overall IMO 2020 fuel sourcing strategy to ensure compliance and spread the risk of fuel price uncertainty in 2020 – for the price spread between high and low sulfur fuels and for the price of future 0.5 percent compliant low sulfur fuels," said Felder.

Elaborating on the investments made to ensure compliance, Felder said, "We have announced joint initiatives with Vopak, Koole and PBF Logistics for 0.5 percent compliant fuel storage and processing facilities in Rotterdam (NL) and New Jersey (US). Located in key network hubs for Maersk, the three facilities combined will cater for a significant part of the fuel demand in our fleet. These activities will be an important driver in ensuring stable, reliable services for Maersk’s customers during a potentially volatile period for global shipping. Switching the vast majority of our more than 700 vessels from 3.5 percent high sulfur to compliant 0.5 percent low sulfur fuels within a short timeframe is a complex task which requires thorough preparation. We will do the switchover while the ships are in service, which will ensure very limited disruptions to our network reliability.”

Felder further informed that Maersk has tested switchover methodologies across multiple vessel classes with the objective to opt for the procedure that best delivers compliance while protecting the safety and health of their seafarers and ensuring minimal environmental impact.

For Hapag-Lloyd, three different options have been identified, all of which require investments. "Presently the majority of vessels will be using compliant low-sulphur fuel, so we need to invest in cleaning the tanks and pipes of each vessel we operate, of which there are more than 230.

Installing a single scrubber requires an investment of roughly $7 million. Retrofitting a ship to use LNG propulsion will require an investment in the range of $30 million per vessel," said the Hapag-Lloyd spokesperson.

The spokesperson ensured that the container shipping line was "fully in line" to meet the IMO deadline and outlined the two-fold challenge for them. "First, it is challenging in technical terms because the engine needs to be upgraded to operate on the new fuels. The technical set-up needs to be adapted and the tanks cleaned. Furthermore, we will need to see if the fuel is compatible with our engines so as to avoid any damage. On the other hand, it is challenging in logistical terms because our vessels are in operation across the world, which will also be the case on the day that IMO2020 enters into force. This means that the new fuel must be ready on board, and that old, non-compliant fuel will have to be disposed. Moreover, we need to ensure a proper supply of the new fuel. To coordinate the whole process, we set up a project group a year ago to deal with the various issues," said the spokesperson.

Scrubbers in or out?
The use of scrubbers has not found favour with all stakeholders. Ports around the world are banning the use of the scrubber system, saying they simply transfer the pollution from air to water. One of the cheapest options to comply with the new rules, open-loop scrubbers consume sea water in the scrubbing process and pump waste water into the ocean. Singapore and China have banned discharge of “wash water”, while individual ports in Finland, Lithuania, Ireland and Russia have placed reasonable restrictions banning their use.

Hudson Shipping Lines is among the few container lines that has vowed not to use any scrubber-fitted vessels. Hudson is part of the SeaTrade Transport International (STI) group of companies. It tends to have around 70 chartered-in bulk carriers at any given time.

“For us it was an easy decision not to use scrubbers. We are an environmentally conscious organisation. In our preparations for the IMO2020 sulphur cap we simply considered what the right thing for the environment was and what the best long-term approach for our company was. The answer was obvious: Use the right fuel.Since our announcement in June, there have been others that have adopted our position against the use of scrubbers (including shipping companies). Even the Greek Shipowners Association (which represents 27percent of the world’s shipping fleet) has come out against scrubbers,” informed Mathew Taylor, public relations, Hudson Shipping Lines.

When asked if the use of scrubbers violates the spirit and intention of the new rules, Felder said, “We have been making our opinion regarding the scrubber technology clear; we believe reducing SOx-emissions from bunker fuel is best and most effectively achieved at refineries on land, as opposed to installing complex machinery on thousands of vessels at sea – machinery which requires extra energy consumption, additional maintenance, significant investment and the discharging of waste water.”

He informed that while Maersk’s IMO 2020 fuel sourcing strategy focuses on compliant fuels for the vast majority of its fleet, the company had decided to invest in a number of scrubbers to mitigate risk and familiarise with the technology in case it turns out to provide significant cost benefits compared to compliant fuels.

“The easiest option for complying with IMO2020 is using low-sulphur fuels. However, scrubbers are another option being scrutinised and tested and they are fully in line with the IMO2020 regulations because they eliminate sulphur emissions to a sufficient degree. However, there admittedly are some environmental issues related to using scrubbers, such as the fact that they require a higher energy input to operate. For example, scrubbers of our size pump up to 3,000 cubic metres of water through the funnel per hour, which leads to significantly higher energy consumption and thereby CO2 emissions. One can also argue that the wash water still contains particulate matter, but these are also strictly regulated by the IMO. Overall, a scrubber might not be the most preferred option, but it definitely is a compliant option,” said the Hapag-Lloyd spokesperson.

Taylor of Hudson Shipping did not mince any words while denouncing the use of scrubbers. “We have seen someone put it very well recently saying, ‘no one installs scrubbers to clean the environment…’ and I think this sentiment is entirely correct. We have said for months that installing scrubbers violates the spirit of the IMO’s new regulations. The IMO and the scientific community have correctly identified that high sulphur fuels are toxic to the environment and to human health. The sulphur in these fuels causes acid rain and one study has shown that the use of high sulphur fuels in shipping causes 400,000 premature deaths each year. The idea behind limiting the percentage of sulphur in fuels used by the shipping industry is to reduce sulphur pollution and its harmful effects on the environment. It seems obvious to us that if the goal is to prevent the damage from sulphur pollution and the other toxic chemicals contained in high sulphur fuels, the solution is to stop using those fuels altogether. Companies that are committed to scrubbers are taking advantage of a loophole in the system to save a few dollars at the expense of the environment,” said Taylor.

Exploring the alternatives
In September this year, oil company GP Global performed its first low sulphur fuel oil (LSFO) bunkering operation at the Port of Fujairah, enabling it to supply adjoining ports too with compliant standard fuel oil. The maiden delivery was made via its 6,000-tonnes bunker barge.

Anil Keswani, head of bunkering, East of Suez, GP Global, said in a statement, “We are thankful to the authorities of the Port of Fujairah and our partners for their continued trust in us, which has enabled us to undertake the first bunkering of LSFO, just in time as the IMO 2020 takes effect next year. We are committed to supporting our partners and clients in meeting specifications, which will contribute a long way to securing a cleaner marine environment.”

GP Global’s GPB1 is capable of delivering a comprehensive suite of residual and distillate marine fuels, including low-sulphur marine gasoil (LSMGO), LSFO, 180 centistoke (CST) and 380 CST at the UAE ports. The company has three more barges at Fujairah of which the largest GBP2, which will be dedicated exclusively for LSFO to meet the growing requirements in the region.

On the shipping front, The CMA CGM Group will introduce to its fleet the world's largest containership of 23,000 TEUs, powered by liquefied natural gas (LNG). The milestone was reached at the Shanghai Jiangnan-Changxing Shipyard. Called the CMA CGM Jacques Saade, after CMA CGM's founder Jacques Saade, the LNG containership will help to reduce emissions of sulphur oxide and fine particles by 99 percent and nitrogen oxide emissions by up to 85 percent.

“LNG powered ships will likely be a growing part of the shipping industry in the near future. As more ports, canals, and countries move to ban scrubbers and their discharge, companies are going to be forced to take LNG more seriously than it has so far. While there has not been significant focus on building LNG powered vessels currently, we think more and more shipyards will see orders for LNG powered ships,” said Taylor.

Maersk is also exploring the possible use of LNG fuel and technology with energy suppliers, ship yards and infrastructure and technology suppliers. “We have evaluated both as application on newbuild vessels as well as retrofit to existing vessels.We continue to monitor the development of technology and infrastructure in this area. The space is developing; however, to date we have not found economically viable LNG solution for our vessels. We are in discussion with LNG suppliers and welcome technology partners for solutions that can materially improve the economics of LNG solutions,” said Felder.

Pointing out the issue of potential Methane slip before the industry moves large scale towards LNG, Felder made it clear that with the technology at hand today, LNG does not provide the step change necessary to reach our zero CO2 target for 2050. Net zero CO2 reductions requires alternatives to fossil fuels, he said.

Even as the merits of LNG are debated, Hapag-Lloyd has become the first carrier in the world to be piloting a LNG retrofit of a 15,000 TEU vessel.

“As part of this effort, we are investing about EUR 30 million to convert our vessel ‘Sajir’ to LNG propulsion, and it should be ready to sail by the end of 2020. In doing so, we want to prove that LNG can be an economically viable option on our path to greener shipping, and that it is possible to adapt the existing fleet without necessarily having to build new vessels. Apart from the ‘Sajir’, we have 16 so-called LNG-ready vessels, which are also technically prepared for retrofitting. For Hapag-Lloyd, LNG is a technology that goes far beyond the IMO2020 requirements and that is more focused on the IMO2050 goals, which aim to reduce not only sulphur emissions, but also carbon-dioxide emissions. LNG is at this point of time certainly not the solution for net-zero emissions. But, for the ultra large container vessels (ULCVs), it is a bridge technology to reduce emissions significantly,” said the Hapag-Lloyd spokesperson.

Maersk and shipping company Wallenius Wilhelmsen have teamed up with Copenhagen University and major customers including BMW Group, H&M Group, Levi Strauss & Co. and Marks & Spencer to form the LEO Coalition, which will explore the environmental and commercial viability of LEO fuel for shipping. LEO - a blend of lignin and ethanol - is a structural bio-polymer which contributes to the rigidity of plants.

Copenhagen University is currently running the laboratory-scale development of this potential marine fuel. The project aims to move into phase II – testing the fuel on actual vessel engines – in the second quarter of 2020. Phase III will involve the scaling up of LEO fuel production.

Is slow steaming an option?
Slow steaming is one of the easier solutions for reducing emissions. It essentially involves slowing ships down, optimising a vessel’s speed to match the arrivaltime to a slot opening at the port.

According to a study conducted by the environmental group Seas at Risk, a 10 percent reduction in the speed of the world fleet would result in a 19 percent reduction in CO2 emissions.

“Hudson has been focused on environmentally friendly methods, including slow steaming, for years. In fact, Hudson was a pioneer in slow steaming methodology, which we implemented in the late 1990s. Furthermore, our methodology includes utilising favourable currents, swells, winds and optimising shipping routes using satellite technology and weather routing companies, all in an effort to reduce the fuel consumption of our ships. Slow steaming and careful route planning are the core of our efforts to lower our CO2 emissions footprint, but we are always working to develop new methods and programmes to reduce Hudson’s emissions,” said Taylor.

Maersk is of the opinion that slow steaming cannot help in ensuring compliance with the IMO 2020 regulations. “Mandatory speed reductions will favour old, inefficient ships in service and remove the incentive to engage in efficiency improving innovation.Decarbonisation can only be achieved through a strong R&D effort and for that matter there are only two ways to achieve it, either through related prescriptions or economic incentivisation penalising GHG emissions.”

Hapag-Lloyd, which claimed to have reduced its specific CO2 emissions by 50 percent by slow steaming, says it does not believe additional speed limits are useful. It proposes ‘smart steaming’ as an option, which is “about reducing speed by intelligently optimising our sailing schedules by reducing waiting times in front of ports.” Smart steaming involves improving collaboration between lines, vessels, ports, terminals and all other involved parties.

Hapag-Lloyd informed it was involved in a number of related initiatives, such as the Port of Los Angeles Vessel Speed Reduction Program, whose objective is to reduce diesel particulate matter, NOx and greenhouse gases emissions from vessels by slowing their speeds as they approach or depart the Port, at 20 or 40 nautical miles from Point Fermin.

This story was originally published in Indian Transport & Logistics News' November - December 2019 issue.