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There can be no question that top of shipping’s environmental agenda is the regulatory challenge of the IMO Global Sulphur Limit of 0.5% from 1 January 2020.

Here in Greece and across the globe, shipowners are engaged in conversations to determine strategies to make the transition to low Sulphur shipping. These are critical conversations regarding shorter term options for existing fleets and longer term views for future new buildings. They involve in depth studies and analysis of the technical and economic impacts of the options. They are defining current and future shipping operations and will ultimately determine a path or several paths to a future of cleaner shipping.

All of us working in the shipping sector are very familiar with the current compliance options for 2020 covering: Distillate fuels, Blended fuels, High sulphur fuels with scrubbers (EGCS), Alternative fuels including LNG, Methanol, LPG, Ethane and New low sulphur fuels from residual or distillate sources. But we are perhaps not so familiar with the less frequently mentioned possible future fuel options such as Gas to Liquids (GTL), biofuels, biomethanol, biomethane or hydrogen.

Although the immediate options are clear, the choice is not straightforward. It will depend on the vessel type, operational profile, fuel availability and mostly on the expected fuel cost differential. Before shipowners can choose their 2020 compliance solution, they must understand the available options for their fleet, their trading patterns and future operations. This is relevant for new construction projects as well as for all ships in operation.

We’re seeing a number of owners considering adopting low sulfur fuel, and some who have opted for LNG as fuel, or scrubbers. ABS is actively working with clients to provide in depth techno-economic analysis specific to their fleet and operational profile. Those studies include considering options such as LPG as a fuel which we have recently undertaken for Dorian LPG. Some owners are looking at Methanol as a 2020 fuel solution due to its zero Sulphur content.

There are questions regarding its practicality and scale which may limit its viability for many owners, but it is on the evaluation list for some and critical to the decision-making is an evaluation that considers the available technical options and economics.

Between 2014-2019, we will see nearly 150 LNG-Fuelled Vessels (Excluding Gas Carrier) delivered and more than 100 LNG Ready vessels delivered; Current data shows there will be 28 LNG fueled new builds, and 10 LNG ready new builds in 2020 (as of January 2018)

We see increasing interest for scrubbers particularly for new buildings. According to industry estimates roughly 200 to 300 scrubber systems that have been ordered or are already in operation are mainly for ferries and cruise ships, which operate a high percentage of their time in an Emissions Control Area, where sulfur limits are even lower. (More precise scrubber figures? - 170 new builds from 2014 to 2019 are/to be installed with scrubbers. Current data shows there will be 15 new builds in 2020 to be installed with scrubber (as of 10 January 2018). Hence the majority of the 50-60,000 ships that will be subject to the global cap will likely have to bunker LSFO before January 1, 2020.

Although we have seen an increase in interest and new orders for SOx scrubbers and LNG as fuel, we can still expect a significant change in fuel demand profile from 1 January 2020 on. Questions remain on the global availability and quality of the compliant and alternative fuels, and even the future availability of heavy fuel oils in bunkering ports around the world.

Those opting to install scrubbers will have to make the choice of the type of scrubber that will balance both the CAPEX, OPEX and future compliance. The simplest option, open loop type, operates with seawater scrubbing, but there are concerns about future changes in discharge water criteria that may restrict its use. The alternative is closed loop type using fresh water scrubbing, which requires treatment to control washwater alkalinity. This creates additional complexity and problems with handling and storage of hazardous chemicals. Hybrid type, with increasing complexity, offers an alternative that allows operation in both open and closed modes.

Furthermore, the regional, national and local regulations on SOx Exhaust Gas Cleaning Systems add to the complexity of compliance. The EU Sulphur Directive applies IMO EGCS Guidelines, but there is no consistent policy within EU member states for acceptance of EGCS discharge water within territorial waters.

The USCG requires an additional review of the EGCS equivalency (to the sulphur limit in the fuel) approval based on the IMO regulations. And the US Vessel General Permit (VGP) adds additional discharge criteria - and requirements for sampling and monitoring for those ships operating within VGP waters 3nm from the US coastline.

Electric propulsion offers an alternative to diesel propulsion, but the transition to fully electric ships will require significant further developments in battery technology. Hybrid solutions can offer interim benefits, for short sea applications in particular, but also perhaps for limited zero emissions capability (in sensitive areas) for deep sea shipping.

Putting all the installation issues, fuel availability, and regulatory uncertainties aside, the larger the fuel cost differential between 2020 compliant fuels and heavy fuel oil, the shorter the payback period for the scrubber. But a number of other factors influence the choice including company policy, new building versus existing vessel, charter requirements, to name a few.