Monday, 24 February 2020

Debate over scrubbers continues to split shipping
By Simin Ngai, IHS Maritime

Scrubber technology has drawn its fair share of criticism, but it is firmly entrenched in the dichotomous debate about complying with the International Maritime Organization’s (IMO’s) 2020 global sulphur cap on marine fuels.

With about 15 months to go, the shipping industry is broadly split into two camps – either to burn low-sulphur fuel or install a scrubber system.

More major shipowners have come out in favour of scrubber technology in the past three months, said Andrew Hoare, managing director at Navig8 Asia, at the Marine Money Asia conference held in Singapore this week.

Navig8 is one of the earlier advocates of scrubber technology, having opted for scrubber-fitted newbuildings. To this, Hoare gave his vote of confidence. “Not only do [scrubbers] work, they’ve also exceeded performance requirements expected of scrubbers.”

“We back scrubbers because we recognise that the IMO 2020 regulations are a very disruptive event to our industry. We can see clearly today from the pricing differentials that there will be a huge opportunity, but there will also be a huge amount of disruption down the supply chain.”

Because of yard capacity constraints, however, it would be impossible for the entire global fleet to be fitted with scrubbers by 2020, even if they chose to, said Sadan Kaptanoglu, president designate of BIMCO and managing director of HI Kaptanoglu Shipping.

Scrubber technology also requires expertise and training on the part of the crew. According to Mario Moretti, senior director of marine and energy at RINA, the type of scrubber system to be employed and how to dispose of resulting sludge are key issues that shipowners must address.

One of the drawbacks of opting for scrubbers is the high capital cost upfront. This has also been compounded not just by a liquidity crunch, but also by the uncertainty of the business landscape ahead.

From a banker’s perspective, this presents both risk and opportunity, said Nicolas Parrot, head of transportation at BNP Paribas. As a financial institute, BNP Paribas’ role is not to influence decisions, but rather to support their clients’ decision.

For shipowners that opt for scrubbers, the bank can help with the financing aspect, Parrot said. Those who decide not to go with scrubbers may be exposed to the price of fuel. They have the option of hedging, and this can provide visibility on the costs for at least the first few years.

“Overall, we see this as a good opportunity for a dialogue with the client,” said Parrot.

“The 2020 sulphur cap is probably one of the industry’s most defining moments since we moved from coal to oil over a hundred years ago,” said Michael Phoon, executive director of the Singapore Shipping Association (SSA).

Intertanko's regional manager of Asia-Pacific and environment director Tim Wilkins offers a systematic approach to addressing the regulation, by considering all the known and unknown factors that need to be addressed.

One of the known factors is that IMO will accept that shipowners may face situations where they do not have fuel oil availability, and this should give shipowners some respite.

On the other hand, some unknown factors include how port state control will tackle sampling of marine fuels on board and what the tolerance levels will be. Furthermore, there are questions about how port state control will manage a situation, for example, where the scrubber breaks down.

Other things that need to be worked out include safety concerns and what to do with non-compliant fuel, as debunkering can be a costly and challenging exercise.

In a separate session at the same conference, BW Group chairman Andreas Sohmen-Pao said regulation was a good thing. “It represents progress and response to a changing environment, although there can be good and bad legislation.”
IMO’s 2020 sulphur cap should be looked upon positively, he said. “It was signalled very early, so nobody can complain they didn’t see it coming.”
Although BW LPG recently announced its choice to burn LPG as a marine fuel, Sohmen-Pao is of the opinion that there is no one-size-fits-all solution. “For scrubbers specifically, it’s horses for courses. It depends on what size of ship you have, what the payback is, what your assumptions are for how long the price differential is going to blow out, whether you’ve got the capital to invest, and a whole host of things.”

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