SCRUBBERSpayback…?13th Nov 2018
2[Xclusiv]
Electricity and Heat Production,
25%
Agriculture, Forrestry and
Other Land use , 24%
Buildings, 6%
Transportation, 14%
Industry, 21%
Other Energy, 10%
Greenhouse Gas Emissions by Economic Sector
Source: IPCC (www.epa.gov)
3[Xclusiv]
Source: IPCC (www.epa.gov)
Road transport, 72.80%
Railways, 0.50%
Maritime, 12.80%
Aviation, 13.30%
Greenhouse Gas Emissions of Transportation
Maritime traffic is 2.1% of Global
Ships generate emissions of sulfur oxides (SOx), oxides of nitrogen(NOx), particulate matter (PM) and carbon dioxide (CO2) as a result of the fuel used to power them
All preventive actions in accordance with Annex VI of MARPOL, an international treaty developed through (IMO)
4[Xclusiv]
Source: www.theicct.org
(Mill
ion
met
ric
Ton
s C
o2
Eq
uiv
alen
t)
Containers, 23%
Bulkcarriers, 19%
Tankers, 13%
Other 19 ship types, 45%
CO2 Emissions per Vessel type
Containers Bulkcarriers Tankers Other 19 ship types
5[Xclusiv]
Source: IPCC (www.epa.gov)
0
500
1000
1500
2000
2500
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
GHG Emissions from Transportation, 1990-2017
GHG Emissions from Transportation
(Mill
ion
met
ric
Ton
s C
o2
Eq
uiv
alen
t)
“hitting” an industry that has reduced GHG emissions by 20% over the past 10 years.
6[Xclusiv]
Carbon Dioxide (CO2) Oxides of Nitrogen (Nox) Water vapour (H2O), Contrails and Particulates
• 26,000 planes• 3bil pax per annum
7[Xclusiv]
8[Xclusiv]
MGO, LSF 0.5%, 0.1%
LNG
Scrubbers
3 Ways to COMPLY
• Refinery Capacity• Crude Availability• Refineries investment• Bunkering ?• Standardisation of blends• Is 2020 too soon?
• Space/Retrofit• High Capex• Infrastructure• Range-Routes
• Space and Cost• HFO Available?• Waste disposal
9[Xclusiv]
Consumer
Charterer
Owner
3 who can/will PAY?
The added costs just for the entire container sector will reach USD 12 -18 billion
It is considered the $80 billion dollar question on the road to compliance!
10[Xclusiv]
Open Loop
Closed Loop
Hybrid
• No additional chemicals• Lower Operating Costs• Lower installation time & Cost• Easier to install• High power consumption• Suitable for long voyages
• Needs additional chems• Higher Operating Costs• Higher Unit Cost• Complicated Operation• Need water cleaning unit• Additional tanks needed
• Used as open & closed type• More complex operation• Highest Unit Cost• More modifications needed• Most flexible choice• Open loop at sea & closed loop
in ECA Zones & ports
All above are dependent on waters of operation, lakes rivers, alkalinity of water, and areas that prohibit the discharge of wash water (some in EU and US).
Alfa Laval says that is open-loop PureSOx systems are ready for easy upgrade to hybrid system as there may be possibility of stricter discharge regulations in the future.
11[Xclusiv]
Open Loop
Closed Loop
Hybrid
https://splash247.com/open-loop-scrubbers-face-china-ban/
Sep 20th 2018: China is contemplating banning open-loop scrubbers from operating in the republic’s waters! Director of the Waterborne Transportation Research Institute at China’s Ministry of Transport, was circumspect about authorities allowing open-loop technology when new, stricter Sulphur rules start in China next January, one year ahead of the IMO-mandated global Sulphur cap.
??
Currently banned in California, Massachusetts, Great Lakes, some ports in NY, and along Germany Rhine river, Kiel Canal, Lithuania, Latvia, Belgium.
12[Xclusiv]
Open Loop
Closed Loop
Hybrid
https://shippingwatch.com/secure/suppliers/article10894386.ece
China rejects ban on open loop scrubbers
BY KATRINE GRØNVALD RAUNPublished 25.09.18 at 14:51Speaking to Lloyd's List, China rejects claims that the country is working on an upcoming ban on open loop scrubbers, a technology which has been criticized in several countries.
13[Xclusiv]
Open Loop
Closed Loop
Hybrid
• Cost of VLCC NB $2-$3m• Retrofit on VLCC $3-$4.5m
• Cost of VLCC NB $2.8-$3.8m• Retrofit on VLCC $4.2-$5m
• Cost of VLCC NB $3-$4m• Retrofit on VLCC $4.6-$5.4m
• Annual OPEX $250,000 • Annual OPEX $520,000 • Annual OPEX $390,000
14[Xclusiv]
• As of 15th Oct 2018, from data published by DNV GL, there are now 1850 vessels with installed or confirmed orders for scrubbers, up from 817 in May 2018.
• This number is likely to reach 2500 vessels by 2020 - IMO had estimated 3800 vessels, Goldman Sachs on 5th Sep 2018, 3125 vsls and on 23rd Oct 2018 GS revised this estimate, however still stick to this figure as orders now have accelerated. But orders may be capped by the inability to deliver.
• Wartsila, Alfa Laval and Yara presently hold 50% of market share and this % is now reduced as many orders have gone to smaller manufacturers.
• There are abt 30 makers as of today• 2/3 of makers have already secured orders.• 9 of the top makers may not able to deliver new orders (scrubber material) prior 1/1/2020
• 38% BULKERS• 20% PRODUCT/CHEMICAL TANKERS• 16% CRUDE OIL TANKERS• 12% CONTAINERS• 8% CRUISE• 5% RORO
38%
20%
16%
12%8% 5%
Scrubbers fitted
Bulkers Prod/Chem Cruse Oil Cont Cruise RoRo/Pax
15[Xclusiv]
Goldman Sachs: We have seen a significant acceleration in scrubber orders since our report was published, with over 400 announced since the beginning of September (that’s over 20% of the current orderbook in under two months).
This run rate of 200+/month is impressive, but we note that it includes some largeorders from Scorpio Tankers, Scorpio Bulkers, and Star Bulk., and we expect the order rate to slow somewhat from here. However, at a rate of 125/month, well below the recent rate but in line with our current annual manufacturing capacity estimate of ~1,500 (see next section), we would see 3,125 scrubbers ordered by the end of 2019, allowing for six months for manufacturing/installation before mid-2020.
We are therefore still comfortable that 3,125 scrubber installations are likely by mid-2020
16[Xclusiv]
Some shipping companies - notably Star Bulk and Eagle Bulk - have said thatall or part of each of their scrubber installations will occur at sea, whichreduces the off-hire time for each installation as well as the required port/drydockspace for installation.
Chinese scrubber manufacturers are gaining orders . Companies like Bluesoul and Weihai Puyi Marine Environmental Technology (Puyier)
Best estimate is for 100-125 scrubber per month.
On this capacity 1200-1500 vsls per annum may be accommodated with scrubbers.How can the entire fleet be catered for?
17[Xclusiv]
• Vessel structure• Does vessel’s structural design and the availability of space may prohibit or limit the type of
exhaust gas scrubbers you intend to install. In many cases, the funnel is modified extensively for a tailor-made exhaust gas scrubber. For newbuildings, the shipowner can select "scrubber ready" notation for easy retrofit in future.
• Vessel Age and size• Older vessels there is less useful life to allow for payback of the EGCS installation. Larger sized
ships with heavy consumption also allow for a quicker payback. A simple calculation can be carried out based on spread between cost of LSFO and high-sulfur marine fuel (HSFO), cost of exhaust gas scrubber including operating cost, annual fuel consumption, and residual ship life to justify your decision.
• Vessel type• High public profile vessels, especially cruise and passenger types, are more scrutinized than
others for Green credentials. Such vessels spend more time in the Emission Control Area (ECA) Zone, so use of exhaust gas scrubbers would provide immediate payback even before 1 January 2020. Much of the installation work in passenger vessels can be accomplished during regular commercial operations as the vessel can accommodate many workers during voyage.
• Market Conditions• If the vessel is not commercially active, return of investment for the installation of EGCS may
not be achieved.
18[Xclusiv]
• Support and maintenance• Manufacturer, global presence and strong support providing customer and technical proximity
at least in trading areas.
• Modification Works• The retrofitting project is complicated and work must be started well in advance. Shipyards
currently lack retrofit experience, so a good project manager is recommended.• A turnkey solution may also be considered. A typical exhaust scrubber retrofit can take 4-6
weeks in shipyard – excluding the pre-planning design and engineering stages. However, very good project management and preparation is required to achieve this.
• A complete exhaust gas scrubber installation takes about one year from selection to designing to engineering to procurement to docking and finally commissioning.
• Other Considerations• Additional Electric Power required. Are Gens adequate? BWTS & Scrubber simultaneous
operation might not be feasible “powerwise”. Materials used in the scrubber must withlastcorrosion at high temperatures. Also hazardous chemicals proper handling storing, and disposal of residues.
19[Xclusiv]
• Fuel Oils• ULSFO – max 0.10% sulphur• VLSFO – max 0.50% sulphur• LSFO – max 1.00% sulphur• HSFO – above 1.00% suphur
• Marine Gas Oil• LS MGO max 0.10% suphur• HS MGO above 0.10% sulphur
HFO heaviest and cheaper crude distillate.HFO – demand falls price fallsBlended hybrid LSFO’s unstable, degrade with time, not mixed.
MGO better option for older vessels.
20[Xclusiv]
• HFO (IFO380) today (9 Nov18) $433.5/ton• ULSFO price is today (9 Nov18) $602.5/ton
Δ = $169/tn
$100
$200
$300
$400
$500
$600
$700
A-1
7
S-17
S-17
O-1
7
O-1
7
N-1
7
N-1
7
D-1
7
D-1
7
J-18
J-18
F-18
F-18
M-1
8
M-1
8
A-1
8
A-1
8
M-1
8
M-1
8
J-18
J-18
J-18
J-18
A-1
8
A-1
8
S-18
S-18
O-1
8
O-1
8
N-1
8
Bunker Price comparison IFO380 vs ULSFO (Rotterdam)
ULSFO IFO 380 Δ ULSFO/IFO380 Linear (Δ ULSFO/IFO380)
Source: shipandbunker.com
21[Xclusiv]
• HFO (IFO380) today (9 Nov18) $433.5/ton• LSMGO price is today (9 Nov18) $625.5/ton
Δ = $192/tn
$100
$200
$300
$400
$500
$600
$700
A-1
7
S-17
S-17
O-1
7
O-1
7
N-1
7
N-1
7
D-1
7
D-1
7
J-18
J-18
F-18
F-18
M-1
8
M-1
8
A-1
8
A-1
8
M-1
8
M-1
8
J-18
J-18
J-18
J-18
A-1
8
A-1
8
S-18
S-18
O-1
8
O-1
8
N-1
8
Bunker Price comparison IFO380 vs LSMGO (Rotterdam)
LSMGO IFO 380 Δ LSMGO/IFO380 Linear (Δ LSMGO/IFO380)
Source: shipandbunker.com
22[Xclusiv]
• HFO (IFO380) today (9 Nov18) $433.5/ton• ULSFO price is today (9 Nov18) $602.5/ton Δ = $169/tn
President of a long-time scrubber manufacturer claimed in a recent conference that the differential of $250 of today is not even close to what it will be in 2020.
Same person claimed that the $420 “Δ – difference” that he attributed to a Wall Street Journal Report was “conservative”!
He thinks we’re going to be in a $600 differential by 2020…
He adds “There will be fuel,” he said. “It’s not an issue of whether there will be, it’s an issue of how much it will cost.”
https://www.mpropulsion.com/news/view,cr-ocean-engineering-president-us600-fuels-differential-by-2020_51470.htm
• HFO (IFO380) today (9 Nov18) $433.5/ton• LSMGO price is today (9 Nov18) $625.5/ton
Δ = $192/tn
Source: shipandbunker.com
23[Xclusiv]
• The dilemma for ship owners is therefore about the price differential between LSFO and HSFO, as it will decide the attractiveness of fitting a scrubber to comply with forthcoming IMO regulations which limits the amount of sulphur in bunkers.
• Age of ship is also a key factor as younger vessels will have more time to recover the investment in a scrubber.
• Newbuild ships will also have an advantage, as they will not only have a longer trading life to recover the cost of the scrubber, but also the cost of fitting a scrubber to a newbuild will be less than an existing ship, as customisation is required to retrofit a scrubber in existing deck space
• Also younger ships have greater present value and make the investment of a scrubber more considerable as opposed to a ship valued close to her residual/scrap price.
• Vast majority of vessels are still expected to switch to burning low Sulphur distillate fuel or VLSFO bunkers for compliance.
24[Xclusiv]
• CAPEX (scrubber price + installation costs)• Weighted Average Cost of Capital/Depreciation rate • Daily fuel consumption • Total days at sea/year • Fuel consumption for cargo discharge• Number of discharges in ECAs• Days at sea in ECAs/year (as percentage of the total days at sea/year)• Price of regular residual fuel• MGO daily consumption is suggested to be considered 95% of daily HFO
consumption to discount the higher calorific value of the MGO, the higher consumption of HFO for running scrubbers and the less MGO needed as there is no need for fuel treatment/heating (there are additional savings in using MGO which were not included for the simplicity of the calculation).
• The model does not take into account operating and maintenance costs of scrubbers, which are also considered important.
25[Xclusiv]
Above chart shows the estimated payback period under two scenarios:1) Fitting an open loop scrubber on a Newbuild VLCC2) Retro-Fitting an open loop scrubber on a VLCC in service3) In both option the investment cost is charted in comparison with the price difference between
compliant low Sulphur fuel and normal Sulphur IFO.
0
1
2
3
4
5
6
50 100 150 200 250 300 350 400
YEA
RS
Δ – FUEL PRICE DIFFERENTIAL
Scrubber Payback Period
NB eco VLCC Retrofit eco VLCC
26[Xclusiv]
Handysize SupramaxPanamax/
Kamsarmax Capesize
Speed 12.5 12.5 12.5 12.5
Consumption tons/dayAt sea 20tns/day 24tns/day 27tns/day 45tns/day
Port 3tns/day 3tns/day 3tns/day 3tns/day
Sea days 190 195 230 260
Port days 175 170 135 105
Consumption per annum in tonsIFO+DO
4,325 5,190 6,615 12,015
Fuel Cost difference $0.91mil $1.09mil $1.39mil $2.52mil
Cost of Scrubber (equipment+ installation cost)
$2.2mil $2.4mil $2.6mil $2.9mil
Repayment in years 2.4 years 2.2 years 1.9 years 1.15 years
For calculation purposes
Δ in fuel price = $210/ton
27[Xclusiv]
Handysize SupramaxPanamax/
Kamsarmax Capesize
Speed 12.5 12.5 12.5 12.5
Consumption tons/dayAt sea 20tns/day 24tns/day 27tns/day 45tns/day
Port 3tns/day 3tns/day 3tns/day 3tns/day
Sea days 190 195 230 260
Port days 175 170 135 105
Consumption per annum in tonsIFO+DO
4,325 5,190 6,615 12,015
Fuel Cost difference $0.45mil $0.55mil $0.69mil $1.26mil
Cost of Scrubber (equipment+ installation cost)
$2.2mil $2.4mil $2.6mil $2.9mil
Repayment in years 4.8 years 4.4 years 3.75 years 2.3 years
For calculation purposes
Δ in fuel price = $105/ton
28[Xclusiv]
Handysize SupramaxPanamax/
Kamsarmax Capesize
Speed 12.5 12.5 12.5 12.5
Consumption tons/dayAt sea 20tns/day 24tns/day 27tns/day 45tns/day
Port 3tns/day 3tns/day 3tns/day 3tns/day
Sea days 190 195 230 260
Port days 175 170 135 105
Consumption per annum in tonsIFO+DO
4,325 5,190 6,615 12,015
Fuel Cost difference $1.5mil $1.8mil $2.3mil $4.2mil
Cost of Scrubber (equipment+ installation cost)
$2.2mil $2.4mil $2.6mil $2.9mil
Repayment in years 1.4 years 1.3 years 1.12 years 0.7 years
For calculation purposes
Δ in fuel price = $350/ton
29[Xclusiv]
MR2 Aframax Suezmax VLCC
Speed 12.5 12.5 12.5 12.5
Consumption tons/dayAt sea 25tns/day 44tns/day 48tns/day 67tns/day
Port 4tns/day 6tns/day 7tns/day 10tns/day
Sea days 190 230 250 260
Port days 175 135 115 105
Consumption per annum in tonsIFO+DO
5,450 10,930 12,805 18,470
Fuel Cost difference $1.14mil $2.3mil $2.7mil $3.9mil
Cost of Scrubber (equipment+ installation cost)
$2.4mil $2.6mil $2.9mil $3.2mil
Repayment in years 2.1 years 1.13 years 1.07 years 0.8 years
For calculation purposes
Δ in fuel price = $210/ton
30[Xclusiv]
MR2 Aframax Suezmax VLCC
Speed 12.5 12.5 12.5 12.5
Consumption tons/dayAt sea 25tns/day 44tns/day 48tns/day 67tns/day
Port 4tns/day 6tns/day 7tns/day 10tns/day
Sea days 190 230 250 260
Port days 175 135 115 105
Consumption per annum in tonsIFO+DO
5,450 10,930 12,805 18,470
Fuel Cost difference $1.14mil $2.3mil $2.7mil $3.9mil
Cost of Scrubber (equipment+ installation cost)
$2.4mil $2.6mil $2.9mil $3.2mil
Repayment in years 4.2 years 2.3 years 2.2 years 1.7 years
For calculation purposes
Δ in fuel price = $105/ton
31[Xclusiv]
• SINOPEC, Asia’s largest refiner, is poised to provide shipowners with straight-run, low-sulphur bunker fuel in the run-up to the International Maritime Organization’s 2020 emission regulations.
• The fuel on offer is a residue from distillation of higher quality crude oil, including sweet crude, according to the manager. It requires no blending and could be used directly as a marine fuel to meet the IMO’s 0.5% sulphur cap.
• “It has better stability and compatibility compared with the blends,”• “It wants commitment from owners, especially those with a big fleet that can commit
1m tonnes a year and can take the fuel at three or four strategic ports in China.”• producing the straight-run, low-sulphur fuel was “quite costly” as company will have
to forego proceeds from processing the fuel into other oil products, such as gasoil.• Only a few of Sinopec’s 32 plants can produce this type of low-sulphur fuel.• Expected Price for the straight-run fuel to be in-between heavy bunker oil and MGO.• Recently, the former was traded in Rotterdam at $476.5 per tonne while the later was
priced at $712 per tonne.
https://lloydslist.maritimeintelligence.informa.com/LL1124525/Sinopec-offers-owners-straightrun-compliant-fuel-sources-say
32[Xclusiv]
• INTERTANKO believes the best solution is a global mandate for a specifically defined low sulphur marine distillate fuel to achieve significant reductions in air emissions. This will, at the same time, open up opportunities for engine manufacturers to find innovative, simple and efficient solutions for further reductions of air emissions from ships, including CO2 emissions.
• Using low-sulphur marine distillate fuels reduces SOx (70% to 80%), PM emissions (> 80%) and NOx emissions (10 to 15%) with no other measures required.
• However there is much talk from very important shipowners that support the “slow steaming” solution. Also they claim that the slow steaming idea is not lobbied properly. We should tackle pollution from its root, and that is a solution that if used in a correct manner may show benefits in the freight rates also as when a vessel travels at a slower speed it extends its utilization days and the vessels demand increases. It is a fact, that whenever slow steaming was introduced there were immediate benefits in the daily freight earned. A ship capable of steaming at 11 knots will burn less fuel and the total emissions will be in percentage with its consumption.
33[Xclusiv]
• John Fredriksen in Aug 2018 in a public statement in Tradewinds, labeled scrubbers as “Nonsense”• He said: “I think there would be other, presumably better options for dealing with
the upcoming IMO 2020 rule”• This is somewhat surprising as Fredriksen firms Golden Ocean Group and Frontline have
this summer invested in the Technology. Frontline have taken a 20% stake in exhaust gas system maker “Feen Marine Scrubbers Inc.” (FMSI)
• Sep 2018, the Clean Shipping Alliance 2020 (CSA2020) was launched.• Exhaust Gas Cleaning Systems Association (EGCSA)
The ‘Bimco bunker fuel sulphur content clause for time charter parties 2005' to be incorporated, into this cp charterers shall supply fuels of such specifications and grades to permit the vessel, at all times, to comply with the maximum sulphur content requirements of any emission control zone when the vessel is ordered to trade within that zone.
34[Xclusiv]
• Summing up:
Alternative and compliant fuels are likely to be utilized in smaller and of lower value vessels, whereas scrubbers on board larger vessels.
Given also that scrubbers penetration can not exceed levels we already mentioned it appears that LS blends will be the immediate solution of the marine fuel market. (here we have to address fuel quality and blend consistency as well as physical availability in quantities and localities)
There is Volatility and Uncertainty in both Supply and Demand for fuel.
Some public statements say: “We believe that ships should switch fuels rather than install scrubbers. It is better to produce cleaner fuel rather than clean up the fuel in the ships”
For many companies, with specific strategies/profile, the scrubber solution is not an option and they will therefore have to burn the compliant fuel, however, harmonized fuel quality standards will be needed due to the predicted non-uniformity in the bunker market and large differences in the quality of fuel.
35[Xclusiv]
• Summing up:
What should be a fuel problem becomes a ship/shipowners problem!- Instead of imposing to refineries to produce the required fuel in a conformed ISO8217
standard and in adequate quantities - They impose the burden on Shipowner to modify his ship- 59,000 ships in the world active fleet over 500tns DWT, - 32,000 ships with Dwt over 10,000 tons- 15,000 ships with DWT over 50,000 tons- Likely that from these 15,000 ships, majority will have fuel consumptions that could
justify scrubber installation. Assuming ability to install approx. 125 scrubbers per month (1500/annum as per Goldman Sachs estimate), it may take more than 10 years to have scrubbers installed. By that time some ships will be Overaged… and some will be scrapped in the meantime, and also R&D technology (in all aspects) will have advanced…
Thank You!