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Alfa-Laval Oct 2019

Growing market receptivity to scrubbers

Marine Power & Propulsion: October 2018MMP image 1

Faced with the prospect of the international 0.5% sulphur cap becoming mandatory in 2020, orders for scrubber systems have surged as shipowners finally make investment decisions as to emission abatement options.

 

The Exhaust Gas Cleaning System Association (EGCSA) reported that the number of ships with members’ equipment installed or on order had reached 983 by the end of May 2018, entailing a total of 1,561 individual scrubber towers.

 

As the population of vessels at sea with scrubbers, currently less than 500, represents barely 1% of the world fleet, the figures have to be seen in perspective. Nonetheless, there has been a pronounced increase in commitments to the technology since mid-2017, and the accelerating uptake involves a widening range of vessel types.

 

Until comparatively recently, the largest installed exhaust handling capacity had been for engine powers in the region of 25-30MW. However, the latest EGCSA data clearly illustrates the extended field of application, as the references now include a retrofitted hybrid system for a 72MW containership, and newbuild installations of up to 65MW.

 

In 2015, in readiness for the 0.1% sulphur limit in designated Emission Control Areas (ECAs), a number of ro-ro and ro-pax ferry operators led the way in choosing scrubbers as a means of compliance. This was followed by large-scale adoption in the cruiseship sector, for the same reason. With the 0.5% 2020 cap looming, bulk carriers have emerged as the front runners in the adoption of exhaust gas cleaning solutions. The next largest categories investing in the technology are containerships and tankers.

 

Nearly two-thirds of the scrubber towers installed or contracted feature open loop designs, representing the simplest system. “Although many early adopters in the North Sea and Baltic fitted hybrid systems, they are operated for the majority of time in open loop,” affirmed EGCSA. “Open loop scrubbing has also been used for years by coastal power stations and by oil tanker inert gas (IG) systems when in port without environmental issues.”

 

While closed loop and hybrid systems are available for enclosed bodies of water with little water exchange or where discharges are restricted by local regulation, EGCSA suggests the alternative of switching to low-sulphur fuel for the port stay in situations where open loop operation is not possible. “The cost impact is likely to be limited, as over 90% of fuel consumption is during full away at sea, which is where the financial benefits really accrue,” observed the association.

 

With demand having grown quickly, many in the marine community believe that capacity constraints in the shipyards and among equipment suppliers will act as a brake, leading to longer delivery times and rising system prices. However, EGCSA takes the view that yard capacity is not an issue going forward, but that other constraints, such as the availability of laser scanning specialists and experienced installation teams, may create challenges in executing projects within the required timeframe. Some of its members are now taking options on systems as far ahead as 2023 to enable shipowners to secure a position on the installation timetable.

 

In July, ABS issued an updated version of its Advisory on Exhaust Gas Scrubber Systems, providing deeper insights into installation and operational considerations for retrofit projects. The society echoed the trend reported by EGCSA, stating: “As the 2020 compliance deadline nears, we are seeing an uptick in new orders for scrubbers for both new construction and existing vessels.”

 

While scrubbers offer the potential for lower operating costs by permitting the sustained use of less expensive, heavy fuel oil, ABS advocates the need for a comprehensive consideration of outgoings. The overall outlay and disbursements associated with an exhaust gas cleaning system is vessel-specific and includes the capital cost of the scrubber plant, installation expenses and ship modifications, and additional auxiliary equipment. Moreover, the extra fuel consumption required to run the system should be taken into account, along with the cost of treatment consumables (such as caustic soda) where applicable.

 

“These costs should be assessed against the alternatives of operating a ship on low-sulphur fuel, or an alternative low-sulphur fuel, such as LNG. Fuel switching, and operational practice in which higher sulphur fuel is used where permitted and lower sulphur fuel is used where mandated, has its own complications and risks, but should also be considered during an evaluation of fuel compliance options,” affirmed the society.
The trading pattern or service profile of the ship will influence which compliance option, and which scrubber system, offers the best capital expenditure versus operational benefit, and the total cost of ownership for that particular vessel should be determined to help reach a sound decision. By addressing the issue during the project planning or newbuild design phase, companies can be better prepared to cost-effectively manage upcoming regulatory requirements.

 

Uptake across the industry
Wärtsilä announced in July that it had secured a multiple-vessel contract from an unspecified, major European container shipping company for hybrid exhaust gas cleaning equipment and associated retrofit services. The systems will all be at the higher end of the power spectrum, involving 50MW, 60MW and 70MW installations on existing ships.

 

One of the largest Dutch shipping companies, the Spliethoff Group of Amsterdam, opened a further, extensive stage in its strategy of investing in scrubber technology when the retrofitted, 13,400dwt multipurpose cargo ship Floragracht re-entered service at the end of June 2018. The work was carried out at the BLRT yard in Klaipeda, Lithuania. The 2009-built Floragracht became the 24th group-owned vessel to incorporate a scrubber, and the first of 30 more to be so equipped in the period leading up to the 2020 cap.

 

“Thanks to scrubbers and with the support of our customers, Spliethoff Group will lower the impact of shipping on the environment and at the same time cope in a cost-efficient way with the cost increase caused by the stricter sulphur regulations,” said technical director Arne Hubregtse. “As a member of the Trident Alliance, we hope authorities will show the same commitment by enforcing the sulphur rules.”

 

The Blystad Group’s Glasgow-based Songa Shipmanagement has implemented a retrofit programme entailing scrubbers from the US company CR Ocean Engineering for the fleet’s oil/chemical tankers and semi-submersible heavy load vessels. The installation schedule for the CROE systems, distinguished by the compact nature of the design, runs from the late summer of this year through to the beginning of 2020.

 

Endorsement of scrubber technology by one of the world heavyweights in bulk shipping was signalled in the 2018 second quarter financial report from Brazilian mining group Vale. All 48 very large ore carriers (VLOCs) under construction and on order at Hyundai Heavy Industries, for deployment in the Vale import trade, will be equipped with scrubbers. One 400,000dwt Valemax unit plus 47 VLOCs of 325,000dwt have been booked by South Korean, Japanese, Chinese and Taiwanese owners under long-term contracts of affreightment including stipulations as to measures to ensure environmental compliance.

 

Scrubber uncertainty
While statistics indicate a shift in the market, whereby scrubbers look set to become a primary compliance pathway for existing, deepsea vessels, there is clearly still uncertainty among operators over the economics of scrubbers.

 

Hamburg-based Hapag-Lloyd, the world’s fifth-largest container carrier in terms of fleet capacity, has declared low-sulphur fuel to be the ‘simplest’ solution for complying with the 2020 sulphur cap. The company anticipates that low-sulphur fuels will be $150-$200 more expensive per tonne than heavy fuel oil. This is likely to increase global average shipping prices per TEU by around 10%. Hapag considers that serious challenges accompany the alternative options of installing exhaust gas cleaning systems or switching to LNG fuel.

 

As open loop scrubbers discharge sulphur-infused waste water into the open sea, it is felt that this practice may be prohibited at some stage in the future, while the closed loop method is seen as impractical for ships on long voyages, since it requires waste water storage on board. The company also sees logistical limitations as to how many ships can be fitted with a scrubber or converted to LNG within the regulatory timeframe.

 

In some quarters of the industry, there are concerns that a dramatic decline in demand for high-sulphur fuel oil will result in a production scale-back by refiners, with consequent problems for availability and per-tonne cost, impacting on the costs of running scrubber-fitted, HFO engine installations. Refineries need to trim sulphur-rich fuel output before an anticipated collapse in demand. If they do so faster than consumption slides, then fuel-price volatility could increase.

 

Notwithstanding persisting reservations as to acquisition and installation costs and uncertainties about evolving environmental legislation, charterers are reportedly showing strong interest in timecharter tonnage equipped with scrubber technology.

 

A tanker commentary by Gibson Shipbrokers in July noted several recent timecharter deals with oil majors where a “notable premium” had been paid for scrubber-fitted tonnage. The shipbroker recorded that over 30% of the VLCC newbuilds on order have been specified with scrubbers, and another 9% have been designed to be scrubber-ready. Gibson indicated that, in the case of a retrofit on a VLCC, the cost could be repaid in under 18 months if the spread between high sulphur fuel oil and compliant 0.5% sulphur bunker fuel is at $200 per tonne. Longer-term, though, the potential narrowing of the spread would alter the picture.
Within the wider shipping community, the preferred solution to the new regulatory challenge would be to burn compliant fuel and pass the added cost to customers. Through such an approach, the sulphur and particulate matter would be removed from the fuel effectively and on a much larger scale by the refineries.

 

Meanwhile, the IMO Pollution Prevention and Response (PPR) sub-committee has set up a correspondence group to provide guidance in the event of breakdown, instrumentation malfunction or perceived non-compliance of exhaust gas cleaning systems. Part of the group’s brief is to clarify some of the language used in the scrubber guidelines (MEPC.258(68)), including the term PAH (polycyclic aromatic hydrocarbons) monitoring.

 

PAH are a group of compounds found in oil that can be measured in water at parts per billion concentrations. This enables monitoring of the extremely low levels of oil in scrubber wash water, which is well beyond the measurement capability of traditional instruments associated with 15ppm or even 5ppm bilge water separators.

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