What will happen at ports when global shipping has to switch to low sulphur fuel in 2020? Stevie Knight reports
Even with the long run up, there's a good chance the 2020 sulphur cap will still take people and ports by surprise. But not the Chinese, who have, according to Peter Mollema of the Port of Rotterdam, “been quite clever about taking the new ECAs stepwise”.
When asked for advice, Mr Mollema's recommendation was to “be ambitious but realistic”: China appears to have taken the suggestion seriously, introducing emissions control areas for ships at berth in eleven key ports before rolling it out to all ports in the three zones this year. Only later in 2019 will this expand to ships as they enter the ECAs.
Most importantly for the rest of us, at present it's only dropping the sulphur limit to 0.5%, not to the 0.1% of the US and European emission control areas. But that half-percent still makes for a different beast to either the current, high sulphur fuel oil in general use or distillate marine gasoil (MGO) that's being burned in the other ECAs. So, China should be keenly watched as it is giving the industry a chance to try out these new fuels before the global sulphur cap comes into play.
Come 2020, the world's bunkering ports will suddenly need to meet three criteria: firstly, be competitive - many lines won't want to use the more expensive MGO to meet the 0.50% sulphur limit.
Secondly, be reliable: there's concern than some fuel formulations might have quality issues - and if something seems like a good deal, it might be worth scrutinising what, exactly, is on offer. Unni Einemo of the International Bunker Industry Association explains that though the oil majors and experienced blenders “will be taking a very close look” at their blends, the process isn't always straightforward: mixing heavy fuel oil with distillates and other cutterstocks to produce a low sulphur product “can affect the chemistry of the fuel and may result in an unstable blend... causing sludge formation”.
Thirdly, be there. While the IMO study found that there aren't any huge bottlenecks to capacity, another independent study carried out by EnSys and Navigistics concluded that there may well be issues given the rising draw from other sectors.
Will ports be able to put a toe in the water beforehand and organise a consistent supply chain? Possibly not as refineries are already playing chicken and egg, saying that they will provide the 0.5% fuel when demands grows, but not too many are asking for it yet. There could end up being a nasty scramble at the end of 2019 and as the saying goes, 'buyer beware'.
Further, as Ms Einemo adds: “We don't know yet how big the uptake of scrubbers and alternative fuels will be... owners are still mulling their options.” Therefore, add 0.5% fuel into the equation and both ports and distributors inside ECAs could be looking at making no less than three segregated sets of liquid fuel available - four, if you count those ports that are committed to providing supply of LNG.
Lastly, 'availability' issues could turn it into an upside-down, looking-glass world. According to an IMO availability study, the total demand for HSFO could sink from its present level around 80% to about 11%, “a dramatic fall”, says Ms Einemo. The question then becomes: “If HSFO turns into a niche market, will suppliers continue offering it?”
Mr Mollema is clear that the big ports like Rotterdam will have no trouble getting hold of a broad stream of fuels, and likewise, other larger facilities like Singapore, Shanghai, Busan and in the US, Los Angeles and Panama, will come out on top.
By the same token there's a good chance that smaller ports might have issues. So, although Mr Mollema believes the total volumes of 0.5% fuel will meet demand, “it might not be in the right places”, and though he's a firm advocate of the 2020 limit, he admits he sees “issues here and there”.
Ports' responses will be varied. Some like Helsinki already lie deep inside an ECA: according to chief executive Kimmo Maki the port already has “almost all” of its lines bunkering with 0.1% fuel provided by a Neste barge. This is in contrast to those like Barcelona which are banking on supporting those ships that still want to use HSFO with scrubbers. But Barcelona is also stipulating closed-cycle scrubber systems. For others it will have to “establish specific conditions” and authorise each case. These could throw some toward reliance on reduced sulphur fuel.
Moreover, there may well be regional differences to supply and those ports that have so far sourced fuel from smaller, local refineries might find that they have to look further afield.
As Simon Bennett of the International Chamber of Shipping points out: “There may be geographical areas where local sources of compliant bunkers are not readily available when the global sulphur cap is initially implemented, incurring additional transport costs... and in some ports compliant bunkers may be more expensive than others.” So, he adds: “While compliant fuel will probably be available in most ports, whether they can all give customers a choice between fuels with a sulphur content of 0.1% or 0.5%, and whether the price differential between the two will be significant we will have to wait and see.”
“To be honest, it's quite difficult to forecast the future concerning 0.5 % fuel,” says Mr Maki, but he believes that for some smaller ports, the overall pattern of fuel availability “could be enough to influence calls”. Therefore, while the sulphur cap is necessary for the world's ecology, it could present a more difficult case for competition: 2020 may help large international ports gain an even greater dominance.
Despite these concerns, Mr Mollema remains wary of what will happen if certain areas don't toe the line. For this to work, he says what's required is “enforcement, enforcement... enforcement”.
Some quarters have expressed concern that some areas might be tempted to exploit the loophole around the MARPOL Annex VI rule that states the vessel “shall not be required to deviate from its intended voyage or to delay unduly the voyage in order to achieve compliance”. The idea is that ports could be tempted to put themselves in a position where only HFO is available in order to capture ships that really don't want to play fair.
However, Mr Mollema's answer is this only applies if there's evidence that attempts were made to locate alternative sources and would certainly yield nothing more than a “short term advantage”. In his view, “it's in nobody's long-term interest to distort the playing field... if you do that, the good guys get weaker and the bad guys get stronger”.
MEETING THE WHIMS OF FICKLE FUELS
While ports need to respond to the emission-control driven demands, drivers can completely change course with new research or public opinion, leaving a facility high and rather dry.
“Vuossaari was the biggest harbour project in Finland ever... but the situation now is totally different from when it opened eight years ago,” points out Helsinki chief executive Kimmo Maki.
“For example when we were designing our new West terminal, the assumption was there was no need to bunker LNG, the message was that the ships would first use scrubbers. Then there was a sudden change of plan.”
Moreover, even forward-thinking strategies don't always work out: Helsinki had calls from Viking Line and put in cold ironing to support it, “then Viking changed the route”.
Further, bringing in LNG by truck requires keeping a 30m safety zone around the refuelling area “so it's been quite difficult to organise both the discharge and bunkering from the quay for ferries that are only staying an hour at the port”.
Complexity is added by the changing goalposts. “Of course LNG is not the final solution as it is another fossil fuel,” he adds, and if CO2 calculations were taken into account, it might upset at least some of the environmental case. “But we don't know yet what the future is - what the attitude will be, or what form this solution will take,” he explains. “It seems that issues, opinions about the energy we use is changing... so ports need flexibility to be able to respond.”
In fact his hard won wisdom suggests that any quay or yard area being planned now should be LNG or new-fuel ready with channels and lines already in position. Plus, if possible, at least one quay area with a good margin around it that could be used for 'the fuel of the future'.
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