With the IMO imposed global deadline, under MARPOL Annex VI, of 1st January 2020 for 0.5% sulphur content of fuels drawing nearer, the importance of determining the optimum commercial and technical compliance solution for any given vessel is never higher. With scrubbers costing often in excess of $5million to retrofit, the low investment option of switching to low sulphur fuels is certainly attractive to many owners and operators.
However, whilst there may be up to 300 million barrels per day of Heavy Fuel Oil (HFO) lined up for replacement, many stakeholders are concerned about the ability of the refining industry, bunker operators, and other downstream industries, to meet these demands.
In addition, whilst the price differential between HFO and distillates is currently comparatively low, with an anticipated increase in oil prices, and high demand for low sulphur fuels, many owners and operators are worried about the potential for the price differential to increase dramatically.
This article aims to provide some key distinctions on the challenges of low sulphur fuel as a compliance option and the ability of the industry as a whole to cope with the demands of the 2020 MARPOL deadline.
Background to the Requirement
At the 70th meeting of the Marine Environmental Protection Committee (MEPC), in October 2016, the decision on the implementation of the global 0.5% sulphur content was finalised as being 1st January 2020. Under the legislation as written, the IMO had the option of postponing this implementation until 2025, but decided against this option, electing instead for 2020.
A legislative requirement to use low sulphur content fuels is not a new initiative, and indeed there are a number of existing requirements for this, including:
- Sulphur Emission Control Areas (SECA’s), which currently include North America and North West Europe, requiring 0.1% sulphur content fuels be used, and
- EU ports, governed under separate EU legislation, requiring 0.1% whilst in port
However, the impact of this legislation on charter rates and profit/loss will now be felt by owners and operators globally, and not simply by those unfortunate enough to be trading into more environmentally sensitive areas.
Technical Challenges of Low Sulphur Fuel
Industry experience of consistently running marine engines and generators on low sulphur fuel oils is generally fairly sparse. There are a number of critical considerations when employing low sulphur fuel onboard, and a number of aspects that will be affected onboard as a result.
Cylinder Liner Corrosion & Wear
One of the main issues facing shipboard engineers is the potential for accelerated cylinder liner wear or corrosion though the use of low sulphur fuels. Whilst the corrosion of the liner is inherently linked to the fact that sulphur is present in the fuel used, and as such low sulphur fuel should intuitively cause less corrosion, the deciding factor is the BN number of the cylinder oil used.
Correct matching between the BN number of the cylinder oil, and the sulphur content of the fuel is of prime importance, as most cylinder oils include alkaline substances to neutralise the acidity of the sulphur in the fuel. Incorrect matching could result in either polishing of the liner (due to over neutralisation of the acidity), or corrosion (due to insufficient neutralisation).
Owners and operators are advised to work closely with the engine manufacturer to ensure correct matching of cylinder oil to fuel sulphur content.
The viscosity of the fuel whilst onboard is governed by its temperature, which in hand is generally driven by the fuel system installed. On most vessels currently operating on HFO, the fuel system has likely been designed to achieve a fairly high fuel temperature, and hence practical viscosity, of the HFO.
For low sulphur fuels, a low temperature is generally desired to maintain an optimum viscosity. This can be challenging for existing fuel systems, and it is generally an important consideration for the crew onboard to consistently test the fuel temperatures to gauge the impact on viscosity.
In some cases, owners and operators may be faced with retrofitting additional equipment to the existing fuel systems onboard in order to lower the fuel temperature of the low sulphur fuels. This could include the installation of chiller or cooler units.
Impact on Fuel Pumps
Low viscosity viscosity of fuels can have a number of adverse effects on all pumps within the vessel’s fuel system – including transfer pumps, circulating pumps and feed pumps. These unwanted effects can include increase wear of pump components, due to lack of lubricity, as well as insufficient injection pressure. With these issues in mind, it is critically important to ensure the optimum fuel temperature is maintained onboard.
Fuel Price Differentials
The price differential between low sulphur fuels, and the currently preferred fuel choice, HFO, has always been a contentious issue with regards to low sulphur legislation. As with all oil related products, bunker prices fluctuate wildly, and as demand for HFO dwindles as 2020 draws closer, many believe this price differential can only go one direction – up.
At the time of writing, the differential price between HFO and low sulphur marine gas oil (LSMGO) is circa $200 per tonne. Taking a typical Very Large Crude Carrier (VLCC) as an example, which burns around 100 tonnes per day of fuel fully laden. At an annual utilisation of even just 50%, this results in an increase in fuel costs of circa $3.65million per annum. Across a fleet of vessels, this increase in fuel cost is significant, particularly in a market with challenging charter rates as it is.
But just how extreme could this price differential become? With alternative compliance options available, including scrubbers and LNG, the industry is not yet entirely confident in its estimations. Some experts are suggesting that the price differential may not rise significantly above its current rate of $200 per tonne, whilst a number of others are suggesting it could increase by as much as 100% or more once 2020 arrives.
Low Sulphur Fuel Availability
Availability of sufficient and suitable low sulphur fuels has been an ongoing and often heated debate within the marine industry. Many industry bunker and refinery bodies have consistently reiterated their belief that the industry will be adequately prepared, however, many in the shipowning community remain unconvinced.
Setting aside global availability of adequate fuels of 0.5% sulphur content or below, which is generally believed to be achievable, the main concern amongst owners and operators is the quality and type of fuel available in various locations around the world.
With a number of products available offering less than 0.5% sulphur content, including LSMGO, and ultra low sulphur fuel oil (ULSFO), owners and operators are understandably anxious that they may end up having to mix different low sulphur fuel products, through lack of availability of one or the other in various locations.
With the technical issues highlighted in this article surrounding the use of low sulphur fuels onboard, particularly those of viscosity and lubricity, these concerns may be well founded.
Ultimately, compliance with the global sulphur cap under MARPOL Annex VI through use of low sulphur fuels may seem like the simplest solution, however, it is not without its difficulties – both commercially and technically.
With so much uncertainty still surrounding the availability and quality of low sulphur fuels globally, not to mention the volatile price differential between these fuels and HFO, alternative technologies such as scrubbers or LNG may offer comparatively more stable compliance solutions. Indeed, it is certainly worth investigating the costs and payback periods if nothing else.
What is for certain is that compliance through the use of low sulphur fuels is likely to be an unpredictable endeavour.