Approaching the biggest fuel switch in marine history, some clarity is emerging about compliance choices. But technical, operational and financial challenges remain unresolved
A look at orders for exhaust gas cleaning systems and LNG-fuelled ships confirms that most shipowners will be complying with IMO’s 2020 sulphur rule by using compliant fuel. According to DNV GL’s Alternative Fuels Insight portal (accessed in early February), just over 2,700 ships will have scrubbers by 2020. Among these are 282 crude oil tankers and 415 product or chemical tankers. The market for gas-fuelled ships is even smaller, with just 238 vessels expected in service next year (excluding gas carriers). Among these are 17 tankers trading today, with a further 33 on order.
Those numbers barely make a dent in the IMO-regulated global fleet of 57,000 vessels (according to 2017 fleet statistics for Equasis). The remainder, close to 95% of the fleet, will rely on compliant fuel. According to S&P Global Platts Analytics head of oil pricing and trade flow analytics Richard Joswick, around three million barrels (or around 200,000 tonnes) of heavy fuel oil a day used in the marine market will need to be replaced with compliant fuel. How this will be achieved is not yet clear, says Mr Joswick.
“It can be done but it is disruptive,” he warns. “It requires big price changes. There will be a lot of volatility and people won’t necessarily know how they will be covered. How much will be covered by marine gas oil and how much by low sulphur blends of residuals and gas oils?”
"The complexities awaiting those using compliant fuels may make the challenges of scrubber installation and operation seem less daunting"
Platts estimates that around half of the initial demand for compliant fuel will be covered by low-sulphur blends. In the short term, until refiners increase coker capacity to convert crude into lighter products, marine gas oil (MGO) will make up much of the shortfall, even beyond 0.1% sulphur emission control areas (ECA).
So while more than nine out of 10 ships will sail on compliant fuel, it is still not clear what that fuel will be in the early days of the low-sulphur regime. Even less clear is where these low-sulphur blends will be available and their exact composition. ExxonMobil is one of the few global fuel suppliers to have listed where its 0.5% sulphur product will be available. But, as ExxonMobil engineering manager for aviation and marine lubricants Iain White notes, in many markets local blenders will supply most of the compliant fuel. That spells potential problems for ship operators as blenders seek to balance cost and compliance.
“With today’s residual and distillate fuels you know what you’re getting,” he says. “In the future, some refiners will blend these fuels to the 0.5% sulphur limit but may pay less attention to density and viscosity. These factors will be well within specification, but they have an impact on ignition characteristics as well as storage and handling.”
As low-sulphur blends rely on cheaper fuel streams, Mr White projects an increase in the occurrence of cat fines, the abrasive residues of catalytic cracking found in cheaper low-sulphur fuel streams. These particles can cause wear and scuffing damage as the piston head pushes them into the cylinder lining. The lower lubricity in low-sulphur fuel offers less protection against these effects, meaning that cat fine incidences may be more severe as well as more prevalent.
There may also be potential for further engine damage from low-sulphur fuels. Major engine developers MAN Energy Solutions and Winterthur Gas & Diesel have opposing views about the role of sulphur in helping to lubricate engines. MAN advises users of low-sulphur fuel to replace piston rings with a ceramic-metal composite version and to occasionally run through cylinder lubricant with a higher basicity. WinGD believes no changes are necessary to its concept.
This discussion is covered in detail in the February/March edition of sister title Marine Propulsion & Auxiliary Machinery. Suffice to say here that the lack of consensus is concerning for ship operators, who must rely on their engine maker’s advice. But the mechanisms of wear are the same for all engine cylinders regardless of who makes them, and one designer must be wrong.
Further uncertainties surround the stability of blended fuel, given the fact that blending paraffinic and aromatic fuel streams causes the asphaltene to drop out of solution in residual oils, leading to sludging. There are also fears about compatibility between fuels, confirms Parker Kittiwake principal chemist Dr David Atkinson. He reports that a recent surge in compatibility ovens – heating units which can indicate if two fuels will play nicely together – suggests that shipowners are beginning to prepare their crews for the new regime.
“I suspect these will be used to test that bunkered fuel is compatible with another fuel onboard while it is kept quarantined in a separate tank,” says Dr Atkinson.
Both to ensure compliance with the strict sulphur limit and to minimise compatibility issues that may lead to engine troubles, cleaning tanks of high-sulphur residue will be essential before the 2020 regime takes effect. It is a practicality that shipowners can easily forget to schedule into the operations of a busy ship and, according to fuel treatment company Aderco’s CEO Olivier Baiwir, planning should begin now.
“Flushing and cleaning of tanks prior to bunkering new fuel is the most imperative of the tasks needed to be tackled,” he says. “Even the slightest amount of high-sulphur fuel remaining in the tank will mean non-compliance. Shipowners, ship managers and operators need to be lining up their treatments in preparation for the end of 2019, when they will be bunkering the new fuels.”
Aderco’s drop-in fuel treatment takes six months to help flush high-sulphur residues out of tanks. As a result, Mr Baiwir suggests that vessel operators should be planning treatments in March in preparation for a June start. Conventional tank cleaning would take a shorter time but would require a drydocking; another complexity for users of compliant fuel, particularly for vessels under charter.
A simpler solution
These complications could also serve to make MGO more attractive, even for vessels not sailing within ECAs all the time. This would at least dismiss fears about fuel stability, compatibility and availability: MGO is not a blended fuel and so does not separate; its global compatibility is relatively assured and easy to test; and it is already widely available even beyond major bunkering hubs. As it has a lower viscosity than HFO or low-sulphur blends, it also requires no heating of tanks or the fuel supply line, and would require less maintenance of pumps and purifiers.
Platts already believes that around one third of the shipping market’s compliant fuel demand will initially be filled by MGO. Engine designer, Japan Engine Corp (J-Eng), is betting on owners seeing advantages in using the fuel as a compliance option in the longer term. The company recently demonstrated its mono-fuel 5UEC50LSJ engine, which is claimed to reduce fuel consumption by 5% compared to the corresponding conventional engine model.
The designer hopes to reduce the costs of running on MGO by optimising the engine. This is achieved partly by fine-tuning combustion, including atomiser design, fuel injection pressure and scavenge air arrangement. The new model also uses water injection to reduce NOx formation by lowering combustion temperature. It is best suited to vessels below 60,000 dwt, in particular handysize bulk carriers, and will be available for delivery in late 2019.
The complexities awaiting those using compliant fuels may make the challenges of scrubber installation and operation seem less daunting. That may partly explain the surge in scrubber orders from June last year. Then, around 1,300 scrubbers were installed or on order; today, the numbers likely to be in operation by next year are more than double that, at over 2,700. In the report on fuel availability commissioned by IMO as it decided when to implement its global sulphur limit, CE Delft and its partners suggested that around 3,000 scrubbers could be installed by 2020; a prediction that has moved from seeming wildly inaccurate to eminently sensible.
There is another relationship between that projection, used by IMO, and the sulphur cap. According to Ridgebury Tankers CEO Robert Burke, that report was used by IMO as part of its justification for introducing the cap next year. Ridgebury has bought six scrubber systems for its Suezmax tankers from Pacific Green Technologies at a cost of US$17.9M. Speaking in January, Mr Burke explained that calling scrubbers a loophole was disingenuous. Rather, he said that IMO had relied on increasing scrubber numbers to reduce the amount of compliant fuel needed in the market, hence easing the transition to the low-sulphur regime.
“You will need to get to a yard at some stage, but you can put a scrubber in place without drydocking”
Scrubber numbers look set to continue to rise beyond 2020; at least in the short term, orders for retrofits are now extending into 2020 while orders for newbuilds with scrubbers extend into 2023, according to DNV GL’s data. In the longer term, much will depend on the spread between HFO and compliant fuels. According to Mr Joswick of Platts, there is little expectation that HFO will come down in price, with a global tightness in the supply of heavy crude combining with the “IMO effect” to squeeze production and increase price. But that does not necessarily translate to a smaller price spread between HFO compliant fuel.
Restrictions on ship discharges in some ports – most recently Fujairah and Waterford – do not appear to be affecting the appeal of scrubbers. In its most recent earnings call, Wärtsilä’s marine business president Roger Holm described the impact of such restrictions as ‘limited’. With more than 450 scrubbers sold, Wärtsilä is the clear market leader.
Mr Holm notes that the small areas covered by such bans mean that their operational impact on vessels is minimal. That thinking is echoed by tanker company DHT Holdings, which will have open-loop scrubbers on 18 of its VLCCs by 2020. Revealing the company’s Q4 results for 2018 on 7 February, CEO Svein Moxnes Harfjeld explained that the company’s consideration of the business case for scrubbers had factored in the impact of such regulations. Other preparations have also helped protect the company from this contingency, including the ability to segregate fuel grades – including HFO and compliant fuel – thanks to its tank configuration.
Wärtsilä is among those manufacturers to have reported that they have ‘sold out’ of scrubbers ahead of the 2020 regime change. But the good news for shipowners still considering scrubbers is that, even today, it may still be possible to order and install scrubbers before the 1 January deadline.
According to Barry Bednar, CEO of consultancy Avantis Marine, suppliers can still be found who will deliver scrubbers within eight months. Avantis is relatively new to the market but boasts a team that has overseen around 60 scrubber installations. Mr Bednar argues that neither supply nor installation should prevent shipowners from having scrubbers in place before the rule change.
“When it comes to installing, you don’t necessarily need a yard,” he says. “If you need a bigger inlet or outlet than your current sea chest, you can have it cut by a diver. You will need to get to a yard at some stage, but you can put a scrubber in place without drydocking.”
With less than a year to go until the sulphur cap is introduced, uncertainty abounds regarding the technical implications, operational impact and cost of all compliance options. If there is a bright spot, it is the emerging consensus that the sulphur changes will bring only a short term, albeit major, disruption.
Mr Joswick sums it up: “A year or two from now they will have figured it out. There is new refinery capacity coming online and there will be more scrubbers. It’s a big issue in 2020, less so in 2021 and by 2022 or 2023 it will be easy.”