ΙΜΟ 2020: The new beginning for maritime industry

Posted by economia 24/03/2020 0 Comment(s) Greek Business File,

 

Greek Business File, January-February-March 2020, No 124

 

By Antonis Karamalegkos

 

The ΙΜΟ 2020 new regulations have caused several concerns for the maritime industry. The imposition of new environmental standards challenges shipping companies, testing their readiness and reflexes as the new sulphur limits became effective from January 1, 2020, Professor Dinos Arcoumanis explains speaking to GBF.

 

To begin with the crucial decision, it is important to say that the basic aim of IMO is, obviously, the reduction of sulphur emissions. Specifically, they must be reduced by over 80% for the whole maritime sector. Therefore, shipping companies have to find ways to drastically reduce the suphur emissions of their ships.

 

“From January 01, 2020 the limit for sulphur in fuel oil used on board ships operating outside designated emission control areas is reduced to 0.50% m/m (mass by mass),” according to IMO statement. “This will signifi cantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefi ts for the world, particularly for populations living close to ports and coasts.”

 

Professor Dinos Arcoumanis, in a conversation with Antonis Karamalegkos, explains that IMO new regulations actually push sulphur emissions down from 35,000 parts/million to 5,000 parts/ million. “It’s a huge reduction, but if we observe the global market, we can notice that low sulphur fuels in the maritime sector contain much more sulphur than the low sulphur fuels of other industries, like diesel in the automotive industry,” Prof. Arcoumanis notices.

 

In any case, as sulphur oxides (SOx) are harmful to human health, causing respiratory symptoms and lung disease, and have serious atmospheric consequences, leading to acid rain, the decision seems necessary and logical.

 

Automotive industry example

 

In the last few years, more and more industries are taking considerable steps in order to become eco-friendlier and ensure their long-term sustainability. At this point, Prof. Arcoumanis highlights that automotive industry implemented similar regulations for sulphur emissions’ reduction over 20 years ago. “Although maritime and automotive are very different markets and we should not make straight comparisons between these two industries, it is something worth mentioning that people should be aware of”, Prof. Arcoumanis notes.

 

IMO “foul”

 

The next comment by Prof. Arcoumanis is about IMO’s “mistake” regarding the new maritime standards. As there are Emission Control Area zones, like the Baltic Sea, where sulphur limit is 0,1% (1,000 parts/million), Prof. Arcoumanis believes that this should have been the global maximum sulphur limit instead of 0.5%.

 

The major reason of his opinion is the way fuels are produced. On the one hand, 0,1% sulphur fuel is a distillate fuel produced directly in refi neries. On the other hand, 0,5% sulphur fuels require blending of diff erent fuels which is responsible for the observed problems of compatibility between low sulphur fuels, available in diff erent ports around the world, which have even resulted in mechanical engine failures.

 

The choices of maritime companies

 

Below we will see the two main methods that shipping companies should utilise in order to comply with the IMO 2020 new regulations.

 

1. Installation of scrubbers

 

A scrubber is a large piece of equipment fi tted to the engine exhaust system of a ship, similar in principle to the catalytic convertor fi tted to a car exhaust. Scrubber systems reduce sulphur oxides. The problem is that whatever open-loop scrubbers “clean” is discharged into the sea with consequences for the marine environment. The main reason for their use is that the maritime companies which install scrubber systems, to comply with IMO standards, are allowed to burn cheap and still readily available heavy fuel oil.

 

2. Use of the new 0.5% sulphur fuel

 

The other option is the use of the new cleaner fuel. Companies should take some measures however such as introducing a few minor changes in their ships’ engine systems to counterbalance the fact that the new low sulphur fuel is less lubricant than heavy fuel oil. Moreover, companies must carefully clean the tanks of their ships in order to completely remove the remains of the old heavy fuel oil which can aff ect the sulphur content in the replacement low sulphur fuel.

 

Maritime “civil war”

 

Here we come to the latest robust competition between the maritime companies. While the great majority of the industry (at present some 95% of ships) has chosen the new fuel option, there are some companies (about 5% of ships) which have gone for the scrubber option. “Ships with scrubbers use 15% - 18% of the heavy fuel oil that companies were using before the IMO 2020 regulations” according to Prof. Arcoumanis. “This is the result of the fact that scrubbers are preferentially installed in new, largesize vessels which burn more fuel.”

 

As he explains, the choice of scrubbers is more of a business case than an environmental case. Although there is a significant cost in scrubbers installation (total cost up to now may be $10-12 billions), companies select them because they predict short-term profits associated with the low cost of heavy fuel oil compared to the very high initial cost of the 0.5% sulphur fuel. This large price difference is expected to become much smaller by the end of 2020.

 

LNG - An alternative option

 

Liquefied natural gas (LNG) enjoys great eco-benefits, partly due to the fact that it contains only one carbon atom in its chemical structure compared to fuel oil which contains more than 10 carbon atoms. As a result, LNG’s CO2 emissions are about 25% less than the corresponding CO2 emissions of heavy fuel oil. In addition to that, LNG does not harm the environment with sulphur oxides and particles, thus complying fully with IMO 2020 regulations. However, leakage of unburned methane can cause more damage to the atmosphere than CO2 emissions.

 

However, the vast majority of shipping companies does not support LNG utilization since dual fuel engines are necessary. These engines are capable of burning both LNG and heavy fuel oils, but companies will have to manage the very high additional cost and it is reasonable to expect that most vessels are not properly equipped. An additional reason for the necessity of dual engines is that very few ports in the world have the necessary infrastructure in order to be able to welcome LNG-vessels. That means that if a ship burns only LNG, it may not be able to find fuel in many parts of the world.

 

New IMO 2050

Professor Arcoumanis has made very interesting remarks about not only the recently introduced maritime sulphur standards, but also about the next ecosteps for the whole world.

 

“Evidently, there are ongoing discussions about new regulations in the future and, in particular, the need for the 2050 greenhouse gas emissions being at least 50% less than the 2008 equivalent emissions,” Prof. Arcoumanis says. “The reason for that necessary measure is the unavoidable increase in the global temperature,” he explains. “If the global temperature increases by more than 1.5 degrees Celsius, it could be a disaster for our whole ecosystem with unprecedented consequences”.

 

At the end of the discussion, Prof. Arcoumanis endeavored to forecast the moves of global industries including shipping in the next 30 years. “There is no doubt that industries will be forced to have zero CO2 emissions, as 2050 is approached”, he stated. “European Union has already indicated steps in that direction and others will follow. Zero-level CO2 emissions will bring huge changes in the global macroeconomics and will have a major impact on the maritime sector adding to the already increased capital and operating costs of the global fleet”.

 

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