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Sophia Themelarou*: Global Sulphur Cap 2020 - The sky is falling?

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Within the scope of work of the International Maritime Organisation to mitigate the environmental impact of the shipping industry activities, a tighter, revised Annex VI to the MARPOL convention was adopted in 2008 aiming to regulate – among others - the sulphur oxide (SOx) emissions from sea going vessels.

The Annex VI first came into force in 2010 and the last and steeper step change in the regulatory requirements was confirmed in October 2016 by the outcome of MEPC 70. Starting with a maximum allowable sulphur content of fuel in use set at 4.50% m/m until 2012, the global sulphur cap is currently at 3.50% m/m and from January 1st 2020, it will drop by a vast 85% to 0.50% m/m marking the beginning of a new era in marine fuel type and quality within the broader regulatory framework that seeks to control airborne emissions from ships.
The global sulphur cap of 0.50% m/m brings a quantum change in the overall oil market as estimates expect approx. 2 mb/d of marine fuel demand – roughly representing 50% of total estimated marine fuel demand - to shift from high sulphur (residual) to low sulphur (distillate) fuel posing a significant interconnected challenge to both the marine and the refining industries. The marine fuel industry, once a very convenient outlet for the residual fuel by-product streams of the refineries is now converted to yet another market claiming a significant portion of the middle distillates pool. Production of middle distillates will need to increase whereas an alternative way out for the residuals needs to be explored. Oil majors lead extensive research projects to assist in setting up a viable strategic plan to cope with the expected shift of the demand. Options examined include investing in new secondary refining units such as cockers to upgrade the fuel oil residues into lighter products, investing in more extensive - and costly - desulphurisation processes or simply switching to use of sweeter crudes with lower sulphur content. Each option comes with its drawbacks; and in absence of an obvious choice, the marine industry is likely to encounter an unprecedented variability in marine fuel quality across the globe.            
Despite the blur over the expected fuel quality, the most prominent compliance option for the dawn of January 1st 2020 is the use of low sulphur fuel - be it distillate or rather a residual and distillate blend product - as the majority of ship operators are expected to opt for the less capital demanding option to begin with. However, the marine industry will then need to successfully cope with multi blended products that are likely to be deprived of adequate stability reserves. Possible instability of the fuels supplied and great restrain in fuel mixing on board to avoid the risk of mixing incompatible fuels (also resulting in unstable fuel mixtures) only account for few of anticipated areas of concern for the ship operator; setting aside the uprising trend of using highly paraffinic fuels which together with excellent combustion and ignition quality come with compromised cold flow properties (high pour points, cold filter plugging points and cloud points).               
The adoption of abatement technologies - i.e. the installation of a scrubber system – is the alternative to coping with multiple low sulphur fuel grades. Scrubber technology has a long history in land based applications and is an arrangement designed to clean the sulphur oxides off the exhaust gases on board the vessel. This will allow ships with fitted scrubbers to continue to use the good old high sulphur residual fuels while complying with the new regulatory requirements. Nevertheless, the capital investment of fitting a new building or retrofitting an existing vessel is not to be overlooked. The return on the investment will principally depend on the trading scheme of the vessel – how much time is anticipated to be spent in Emission Control Areas (ECAs) - as well as on the price differential between the residual fuel and the distillates or the new 0.50% sulphur content fuels. Significant consideration is also given to likely restrictions in the availability of residual fuel across the globe with future refineries production remaining unconfirmed to date. Many are choosing to open channels of communications with suppliers on the matter and collaborate to secure long term residual fuel reserves before proceeding to the scrubber installation.    

With the preparatory period for ship operators to evaluate and establish their fleets’ Annex VI SOx compliance strategy already opened, the most highly weighted factor in the process remains the vessel’s age and operational profile. Within the same scope any technical considerations ought to be given on modifications required on board (fuel loading, storage and handling systems,) that will grant the vessels’ maximum flexibility in dealing with the highly variant expected fuel quality. To address such concerns, the Prevention Pollution and Response (PPR) sub-committee of the International Maritime Organisation (IMO) and other high end industry consortiums such as CIMAC (the International Council on Combustion Engines) and the ISO (International Standardisation Organisation) have assumed work to ensure a structured transition to the new regulatory requirements and leave as little room as possible for misinterpretations and malfunctions of any kind – from the design fuel quality to means of controlling and ensuring compliance.
The high variance expected in the quality and characteristics of the fuels available worldwide will require a model of integrated fuel management from procurement to exhaust to successfully cope with the expected handling requirements. FOBAS can lead and perform a holistic approach to fuel management in this wider context offering tailored testing regimes and coaching using a wide range of tools and controls; sufficiently flexible to react to the continuously changing conditions of the marine fuel quality.

Sophia Themelarou
Sophia holds a degree in Chemical Engineering and is currently undergoing her Masters’ Degree in Marine Engineering from National Technical University of Athens. She is a member of the LRGMT FOBAS team as a marine fuel consultant for Europe and the Americas.

LRGMT FOBAS
Fuel Oil Bunker Analysis and Advisory Service (FOBAS) is a recognised leader in the evaluation of fuel oils used in marine, offshore and land-based industries. Use of sophisticated analytical techniques, together with a wealth of accumulated experience, ensures that FOBAS provides the independent and authoritative technical information essential to the efficient management of the highly variable quality fuels available. FOBAS provides total fuel management solutions, leads technical investigations of fuel related damages and/or claims, as well as organises training seminars on holistic fuel management.

* FOBAS Senior Specialist, Marine Fuels & Environment, Lloyd’s Register

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