The shipping industry is increasingly convinced of the business case for installing exhaust gas cleaning equipments — known as scrubbers — to remove sulphur from heavy fuel oil (HFO), Sweden-based marine equipment firm Alfa Laval told Argus.
But the longer shipowners wait to act, the more likely it is that there will be capacity constraints at shipyards to install reliable scrubbers before 2020.
The International Maritime Organisation (IMO) has capped marine sulphur emissions at 0.5pc globally from 2020, down from a current level of 3.5pc. This has left many ship operators and owners uncertain about the best method of compliance. Installing scrubbers on a ship’s funnel to clean exhaust gases is one option to meet the IMO regulation. Shipowners can also use 0.5pc sulphur fuels.
Until recently shipowners were reluctant to commit to the technology, with many vessel owners preferring to wait and see whether low sulphur compliant fuels could form a cheaper and more convenient compliance option.
“While we had a huge spike in interest for our scrubbers after the ratification of the IMO’s sulphur regulations in October 2016, now enquiries are getting more firm and discussions are getting more concrete”, Alfa Laval sales director for exhaust gas cleaning Erik Haveman said.
With the spread between low-sulphur fuels and HFO set to widen, ships with scrubbers installed will have notably lower operating costs, according to Alfa Laval.
The International Chamber of Shipping has previously estimated the low-sulphur fuels-HFO differential could be as wide as $400/t, but Haveman said a spread of just $150/t would see a shipowner who installed a scrubber recoup its investment within 1-3 years, depending on the vessel type.
And there may also be issues surrounding security of supply and availability of low-sulphur fuels, boosting the case for opting to install scrubbers, he said.
Alfa Laval predicts that by 2025 around 5,000 vessels will have scrubbers fitted, although current levels of interest for the technology means that this figure is likely to be revised higher. There are currently only around 370 vessels with scrubbers installed or on order, Haveman said.
But owners are still looking to place orders for the technology at the last minute in order to avoid installing the technology before it is required. This raises the possibility that they will not be able to secure installation space at a shipyard before the start of 2020 if there is a last minute rush in orders.
“From an owner’s perspective, the perfect time to get a scrubber installed is right at the end of 2019, but there are many different factors to consider, depending on whether the vessel is newbuild or retrofit, if dry docking space is available, if the technology is available,” he said.
Alfa Laval is ramping up its capacity to install scrubbers “significantly” to cope with the rise in demand. “There will be a lot of pressure on the whole supply chain, that means docking capacity, but also access to reliable scrubber suppliers.”
Some shipowners are concerned that a slim spread between HFO and low-sulphur fuels will undercut the business case for scrubbers, which is more likely to happen if there is widespread uptake of the technology, bolstering demand for HFO and supporting its price.
There are also concerns that scrubbers take up space for cargo, while some owners are also delaying plans to have scrubbers installed because their ships are on long-term charter.
Source: ArgusPrevious Next