A number of additional questions, answers and conclusions.
Questions raised at the IMO and elsewhere over the consequences of INTERTANKO’s proposal to
mandate the global use of low sulphur distillate fuels by all ships refer mainly to:
- availability of sufficient marine distillates and of abatement technology
- cost implications for refineries and for ship owners
- CO2 emissions from refineries related to the production of additional volumes of marine distillate fuels
INTERTANKO has considered these valid issues and has assessed various scenarios.
What is the availability of marine distillates fuels and of abatement technology?
The demand for, and thus the availability of, marine distillates will be dictated by the extent to which the
IMO decides to reduce the global SOx and the PM emissions from ships. The SOx emissions reduction
due to the two existing SECAs is around 5% of the total. Additional SECAs may add to this reduction but,
a significant global SOx and PM emissions reduction will be achieved only by declaring a large number
of SECAs to cover a much larger sea area.
It has been proposed to lower the sulphur cap in SECAs to 1.0% or to 0.5%. The solution for achieving
such low levels through the fuel in future SECAs would mean the use of marine distillates. A significant
SOx and PM emissions reduction would demand an increasing supply of low sulphur marine distillate
fuels. Therefore, the demand for low sulphur marine distillate fuels would be higher than the amount
supplied today.
(The alternative. To achieve a significant reduction of SOx and PM emissions from ships any other way would
require the use of emissions abatement technology, namely scrubbers. Scrubbers would also have to be made
available and installed on ships within the same period of time that low sulphur marine distillate fuels would be
expected to become available. There is insufficient information to fully assess the feasibility of such a solution for all
ships types and all ship sizes).
Feasibility - Information received from one ship operator who considered installing scrubbers onboard a large ship
can be summarised as follows:
a) Scrubbers could be installed on only 50% of the engines onboard (one main engine and 2 auxiliaries)
b) Even so, there was insufficient space in the ship’s funnel and a new funnel would need to be constructed
c) The total energy to be used to run the scrubbers is 260 kW which adds to fuel consumption and to the CO 2
emissions
d) The amount of scrubbing water needed to remove 1.0% sulphur is calculated to be 16 tonnes of seawater
per hour and per MW of engine brake power
One could simply calculate that to comply with a SECA sulphur cap of 1.0%, this ship needs to use a residual
fuel with a sulphur content less than 2.0% and the scrubbers on 50% of the installed engines would require some
14,000 tonnes a day of seawater plus at least a third of that amount for dilution to restore the pH of the water
effluent. ]
INTERTANKO therefore concludes:
Availability is an issue for either alternative solution - low sulphur residual fuel oils or scrubbers.
However, marine distillate fuel is already available with existing capacity augmentable over a number of
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years. Scrubbers for ships’ main engines and ships’ auxiliaries are new installations, still being tested.
Scrubbers are very large installations and retrofitting them on tens of thousands of existing ships will
create many challenges, with different solutions for almost each ship, a time-consuming element with a
high demand for skilled people. Shipyard capacity may also be a problem, with repair yards already tight
on capacity.
INTERTANKO further concludes:
Time-wise and feasibility-wise, a supply of sufficient marine distillate fuels can be obtained in a shorter
period of time than that required for fitting scrubbers to the world fleet. While the supply of such an
increased amount of marine distillate fuels will be a challenge for refineries, we believe that this is
feasible and manageable. For ships, the use of marine distillate fuels is the most rapid, most efficient and
best means for a significant and immediate reduction of SOx and PM emissions.
Even if the scrubbing solution were achievable as promptly as distillates (which it is not), then from a
holistic marine environmental point of view, scrubbers would still have a negative environmental effect,
generating solid and liquid waste and discharging millions of tonnes of sulphur into the sea instead of into
the air, thereby generating extra CO2.
Supply and use of MDO by all ships is at least CO2 emission neutral compared with the alternative us of
HFO with scrubbers.
In view of the above, INTERTANKO suggests that low sulphur marine distillate fuels are used on global
basis.
What are the cost implications to refineries and to ship owners?
Whether MDO/DMB grade or scrubbers are the answer, the alternative solutions to reduce air pollution
from ships both come with a substantial cost to ship owners.
- MDO/DMB grade (specification suggested by INTERTANKO)
Although refineries have indicated that large investments are needed to increase the supply of low
sulphur marine MDO/DMB grade (estimated at $120 billion), they will get this back through product sales
to the ship owners – the ship owner pays. INTERTANKO has assessed that, based on a 10 year return
on capital costs, the total additional costs to the refining industry (including operation and distribution
costs) would be significantly less than the premium paid today by ship owners for marine distillate fuels.
INTERTANKO believes that the total costs to the refining industry would be USD 60-80 per tonne, while
the premium for MDO today is atUSD 300 per tonne or more. Surely this is good business for the
refiners?
INTERTANKO has noted the large number of refinery upgrades and new refinery construction projects
due to be finalised before 2012. According to information provided by the oil industry, all these upgrades
will enable refineries to further process the bottom of the barrel residues. New refineries are not set up to
produce/sell residues but to squeeze out every last drop of product. The refining industry is becoming
more efficient by increasing the amount of products per tonne of crude oil processed. Recent statements
from the oil industry may in fact indicate a possible overcapacity created by these new units. All these
elements do not appear to have been taken into account when the oil industry assessed its additional
costs to provide MDO for all ships.
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Historical data indicates that between 1973 and 2005, the total supply of heavy residual oils has been
decreasing at a rate of 1.85% per annum. This decrease in supply has accelerated over the last few
years. It is predicted that due to upgrades and new technologies, the efficiency of refineries will increase
(as much as 20% to 40%). Consequently, it is economically more attractive to produce more profitmaking products and less HFO selling at a price below the price of the crude oil. Therefore a significant
part of the assumed USD 120 billion for investment specifically required to supply more MDO to ships is
actually expense that the refiners would have incurred anyway, following the trend of reduced residual oil
sales. Faced with an increase in demand for marine fuels coming at the same time as a continued
decrease in supply, ships will sooner rather than later encounter problems finding sufficient HFO supply and the price will inevitably go up.
- Scrubbers.
The alternative solution is for ships to fit/retrofit scrubbers – once again the ship owner pays. To
maintain their commercial flexibility, ships would need scrubbers. Based on information received from
ship operators, the price would be between USD 2 million and USD 10 million per ship, depending on the
size and the type of the ship. Therefore, the aggregate capital cost for ship owners to install scrubbers
on all existing ships would be somewhere between USD 200 billion and USD 250 billion.
INTERTANKO concludes:
If the use of low sulphur marine distillate is mandated by IMO, it would generate a safe and stable
demand with refineries able to reap a safe return on their investment. INTERTANKO does not believe
that ship owners could recover the significant investments needed to retrofit scrubbers, a recovery which
becomes more difficult the greater a ship’s age.
How are CO2 emissions from refineries related to the production of additional volumes of marine
distillate fuels?
INTERTANKO does not agree with the assertion that the additional supply of marine distillate fuels would
increase CO2 emissions overall.
INTERTANKO has however addressed this issue in conjunction with the CO2 emissions from the use of
scrubbers and from the “do nothing” approach when transiting outside SECAs.
Scientific evidence shows that sulphur reacts with sea water and, as a result of chemical reactions
(buffering) sulphur entering sea water generates a significant release of CO2 emissions. Every tonne of
sulphur disposed into the seawater (either from scrubbing or precipitated from un-scrubbed exhaust
emissions) would generate 2.7 tonnes of CO2.
The use of scrubbers (and thus the use of residual fuels) entails the following energy-consuming
operations (and therefore CO2 emissions) onboard ships:
- heating residual fuel at 80°C while the fuel is in the settling tank;
- heating residual fuel at 95°C before entry into the purifier/clarifier;
- further heating residual fuel at 130°C in the service tank to reduce the viscosity to 12 - 15
cSt for efficient combustion
- fuel consumption to run centrifuges/filtration plants
- fuel consumption to run scrubber pumps
- fuel consumption for running seawater to restore the pH scrubbing water effluent
- air emissions from incinerating a larger amount of sludge
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INTERTANKO concludes:
The aggregate amount of CO2 emissions from all existing ships that use residual fuels is significant. This
would be almost eliminated if all ships were to burn low sulphur marine distillate fuels.
The savings of CO2 emissions from eliminating most of the operations above, together with the savings
of CO2 emissions from a significantly reduced sulphur discharge into the marine environment, would at
least balance the CO2 emissions from refineries from extra marine distillate fuel production.
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