The IMO (International Maritime Organization) has been working to reduce harmful impacts of shipping on the environment since the 1960s..
The regulations for the Prevention of Air Pollution from Ships (Annex VI) seek to control airborne emissions from ships (sulphur oxides (SOx), nitrogen oxides (NOx), ozone depleting substances (ODS), volatile organic compounds (VOC) and shipboard incineration) and their contribution to local and global air pollution, human health issues and environmental problems..
In April 2018, more than 100 Member States met at the United Nations IMO in London and adopted an initial strategy on the reduction of greenhouse gas emissions from ships by at least 50% by 2050 compared to 2008 levels..
Below is a perspective from Durand Naidoo of Linsen Nambi Bunker Services on the impact of IMO 2020 on the South African maritime landscape..
The current bunker fuel supplied by the South African Refineries is Refined petroleum products RMG 180 cst-marine fuel oil and DMA, which is a Marine Gas Oil.
The current 180 cst-marine fuel oil contains a sulphur content which is higher than 0.50% but lower than the current sulphur cap of 3.5%.
This fuel oil is referred to as High Sulphur Fuel Oil (HSFO) and is a by-product of the refining process.
From 1 January 2020 (a mere 35 days away as of this article), in accordance with the International Maritime Organisation’s (IMO) MARPOL 2020 Annexure 6, the sulphur content of fuel oil used onboard all ships trading outside sulphur Emission Control Areas (ECAs) must not exceed 0.50%.
This fuel oil is referred to as Low Sulphur Fuel Oil (LSFO).
Vessels which still burn HSFO must be fitted with an exhaust gas cleaning system, known as a scrubber.
Vessels may also be powered by Marine Gas Oil (DMA) or alternative fuels such as or Liquefied Natural Gas (LNG) as these fuels do not have a sulphur content of more than 0.50%.
Therefore there are four bunker options.
- HSFO with the use of a scrubber
- DMA (Marine Gas Oil)
- Alternated Fuels, such as Liquefied Natural Gas (LNG)
This product mix represents a logistical challenge for bunker suppliers, as they will need to have sufficient inventory and storage to meet the demand for each product.
Low Sulphur Fuel Oil (LSFO)
Vessel’s which intend to utilise LSFO at 1 January 2020 are required to clean their fuel tanks prior to loading the LSFO, to ensure that they do not contaminate or burn any residual HSFO. This can be done through Tank Cleaning, which takes a few days with the vessel alongside but considering that most vessels are currently utilising HSFO for bunkers, it is likely that shipowners may flush their tanks with DMA until the residual HSFO is diluted out of their tanks.
Shipowners are expected to be cautious about the quality, compatibility, consistency and availability of the new LSFO spec.
South African Refiners have made public statements that they will have sufficient LSFO available in both the Ports of Durban and Cape Town, but have not revealed pricing.
Fuel Oil Non-Availability Report (FONAR)
Vessels which cannot source the LSFO at a port on route must find a port within reasonable proximity which has LSFO and if there are no such ports, the ship owner may then fill in a Fuel Oil Non-Availability Report (FONAR) and lodge it with their Flag State and the port of destination for approval to take HSFO as bunkers.
HSFO with the use of the scrubber
As mentioned, HSFO is a by-product of the refining process therefore this product will exist, but its market will substantially reduce. This decrease in demand will surely result in a decrease in the price of HSFO. This reasoning has led some shipowners toward installing scrubbers.
There is much debate on the use of scrubbers, as it takes up much space, impacting cargo capacity, thus reducing the earning potential for vessels and there are concerns that scrubbers are not environmentally friendly.
Vessel owners which have larger thirsty ships are evaluating installing scrubbers to take advantage of the anticipated lower price of HSFO. The cost of installing a scrubber is upward of $3ml and these shipowners anticipate a ROI of 3 years or less, based on the saving of not paying a higher margin on LSFO.
There are three types of scrubbers, namely Open Loop Scrubbers, Closed Loop Scrubbers and Hybrids between these two types.
The Open Loop Scrubber creates a waste water wash, high in sulphuric acid, which needs to be discharged into the ocean and seemingly is neutralised by the alkalinity in the sea water.
The Closed Loop Scrubber works in a continuous loop and the water wash is filtered, alkaline sea water added to it, then reused. The filtered sulphur waste is retained on board and discharged in a port of disposal ashore, however environmentalists still view this technology with skepticism.
Ports such as Singapore, Antwerp, Fujairah and other ports within India, China, Europe and the US have banned the use of Open Loop Scrubbers.
This means that vessels with Open Loop Scrubbers will have to switch off their scrubbers and switch to burning LSFO, when entering these territorial waters. This would require ship owners to have segregated tanks for HSFO and LSFO.
The South African Maritime Safety Authority (SAMSA) issued Marine Notice No. 8 of 2019 on 4 March 2019, which advised that until further notice South African Ports will accept all types of (IMO) approved scrubbers.
SAMSA recently held a national workshop on the implementation of MARPOL 2020 and undertook to conduct a study on the effects of Open loop Scrubbers on the environment. SAMSA indicated to the workshop that they intend to evaluate the findings of the study to assess whether they will continue to allow Open Loop Scrubbers to be used within South Africa’s territorial waters.
SAMSA are also working with Department of Transport to pass MARPOL 2020 Annexure 6 into legislation, which will give them jurisdiction, as port state control, to enforce compliance and deal with non-compliance.
DMA (Marine Gas Oil)
DMA has been tried and tested in the market, but currently sells at approximately 50% more than the per ton cost of HSFO. A likely scenario for 1 January 2020 is that shipowners will switch to DMA.
This increase in the demand of DMA will drive the price up, thus in the short term shipowners will pay a premium for DMA over LSFO, until they are confident with the quality, compatibility, consistency and availability of the new LSFO spec at which time charterers and owners are expected to switch from DMA to LSFO.
Alternated Fuels, such as Liquefied Natural Gas (LNG)LNG
LNG powered vessels represent a small part of the merchant fleet. LNG emits almost no sulphur and in its liquefied state, it is odourless, colourless, non-toxic, and non-corrosive. LNG powered vessels require specific engines, which are different from fuel oil engines.
Thus existing ships would have to replace all engines, which would be uneconomical. Another challenge to LNG powered vessels is that LNG port infrastructure, storage and bunkering facilities are not widely available. Currently, in South Africa we do not have any LNG storage or bunker facilities, however Transnet has recently announced the signing of a cost-sharing agreement with the World Bank’s International Finance Corporation (IFC) to jointly fund a feasibility study into establishing LNG storage and a regasification terminal at the port of Richards Bay by 2024.
Floating Storage: An Opportunity for South Africa
The excess HSFO which will be produced as a by-product during the refining process will need to find an alternative market. It is likely that the drop in price of HSFO will make it attractive to markets in the East, where HSFO can be used to power boilers and generators, thus reducing the dependency on coal.
The rebalancing of HSFO for export and LSFO into our ports is expected to require floating storage to ease the constrained supply chains within the Liquid Bulk Terminal.
This could represent an opportunity for South Africa, as these vessels could be flagged on the South African ship register, employ South Africans and provide income to Transnet.
About the author : Durand Richard Naidoo FICS is the Managing Director of Linsen Nambi the first 100 percent black-owned ship-owners in South Africa providing bunker supply services in South Africa with their own bunker ships..