Marine Link
Saturday, December 14, 2024

New Maritime Fuel Rules: Industry Frets About Cost, Strategy, Supply

Maritime Activity Reports, Inc.

October 26, 2018

© Igor Groshev/AdobeStock

© Igor Groshev/AdobeStock

There are studies and reports from classification societies, scientific organizations and governmental agencies assuring maritime industries that carbon-heavy fuel is peaking and will be replaced by 2050, if not by 2035, with zero carbon power alternatives. No question, they chorus, shipping can meet the IMO goals of a 50% reduction in 2008 levels of GHS by 2050.

But as the hot breath of various deadlines bear down upon them, with the 2020 sulfur cap in the forefront, ship owners, operators and financiers are starting to worry aloud.

Their unease is driven by several things: regulators’ banking on a belief that there will be as yet unknown discoveries that will provide solutions, a feared lack of infrastructure or supply sufficient to fuel eco-conscious vessels, and the financial burden of making the switch – especially if they choose the wrong strategy and or standards change down the road after they’ve committed to a solution. Oh, and those solutions will have to be geared to meet the demands of specific vessel categories, and increasingly, environmentally-conscious financiers who have requirements of their own in order to secure loans.
Among the complaints that have surfaced:

• Engine Failure: The potential for engine failure in hybrid vessels if fuels get mixed during the switch over.

• Scrubbers: One alternative to expensive low sulfur fuel, they are expensive themselves, don’t necessarily fully resolve or dispose of pollutants, and are seen as a short-term investment solution that will have to be replaced sooner than later.

• Limits: That some options under scrutiny today are limited to certain markets, can only be used in conjunction with another solution, and or are not powerful enough (i.e. batteries and fuel cells) to be used for anything beyond short-sea shipping or specific route-bound passenger vessels (ferries and tour boats).

• Cost: How they are going to pay for these upgrades and changes in fuel? And which solutions will investors and insurers favor - key in an industry running on multi-millionn dollar vessels with multi-decade lifespans that take multiple years to produce. And whose greatest expense currently is fuel.

One alternative to expensive low sulfur fuel, they are expensive themselves, don’t necessarily fully resolve or dispose of pollutants, and are seen as a short-term investment solution that will have to be replaced sooner than later.

• Limits: That some options under scrutiny today are limited to certain markets, can only be used in conjunction with another solution, and or are not powerful enough (i.e. batteries and fuel cells) to be used for anything beyond short-sea shipping or specific route-bound passenger vessels (ferries and tour boats).

• Cost: How they are going to pay for these upgrades and changes in fuel? And which solutions will investors and insurers favor - key in an industry running on multi-million dollar vessels with multi-decade lifespans that take multiple years to produce. And whose greatest expense currently is fuel.

Shipping giant A.P. Moller-Maersk A/S predicts the sulfur emissions cap will explode annual fuel costs industry wide by at least $50 billion. The company expects its share will total $2 billion in 2020, and it’s not willing to shoulder that cost alone. It plans to charge clients separately for fuel for the first time starting in 2020.

ING Bank announced that it will be looking to steer its clients and lending activities toward support for the Paris Climate Agreement’s “well-known below two-degree goal.” It will use a tool called the Terra Approach to measure “the needed shift in technology against the actual technology clients are using today and plan to use in the future.” ING says banks have a responsibility to finance “positive change,” and it plans to do just that, steering clients toward investments in environmentally-driven upgrades and strategies. Shipping, take note.  

And, throwing a possible monkey wrench into the move toward low-sulfur last month was a group of flag states and shipping organizations, including BIMCO, Intertanko, Intercargo, Panama, Liberia and some island states, who joined together to request a “test phase” be established before the implementation of the 0.5% cap on sulfur-carrying fuels for vessels without a scrubber system. They cite fuel safety and quality concerns.



Subscribe for
Maritime Reporter E-News

Maritime Reporter E-News is the maritime industry's largest circulation and most authoritative ENews Service, delivered to your Email five times per week