Global Shipping: IMO2020 & Related

Building a marine supply infrastructure as part of a future hydrogen society

 

As a transport fuel, hydrogen has already become a solution for road transport, powering fuel cells in cars, buses and trucks, and will soon generate electricity in ships. Work is under way to overcome some of the key challenges facing hydrogen as a fuel. DNV GL is involved in various projects and studies that are looking at ways to support the development and resolve some of the safety, regulatory and technical issues.

The potential of hydrogen as a clean fuel

With the push for decarbonization, there is growing interest in hydrogen as an energy carrier, whether as a fuel for residential heating, as an industrial energy source or as a fuel for truck, rail and marine use.

Gerd Petra Haugom, Principal Consultant, Environmental Advisory at DNV GL – Maritime, says that hydrogen as a fuel ticks many of the emission reduction boxes. “It is clean, producing no emissions except water vapour. However,” she points out, “more work is needed to ensure that its production is likewise clean and sustainable, and to build up a sustainable supply infrastructure.”

At the 2017 Davos meeting of the World Economic Forum, leading industrial CEOs formed the Hydrogen Council. Its objective is to promote serious investments in the hydrogen economy. This includes promoting the commercialization and development of hydrogen for fuel cells in particular, and as a significant part of the future energy mix in general. The Hydrogen Council expects hydrogen to cover 18 per cent of energy demand by 2050, equivalent to six Gt of CO2 abatement annually.

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The Hydrogen Council and some governments, such as that of Norway, have committed to helping build a hydrogen supply infrastructure that will benefit road transport, industrial use, heating of homes and an integrated maritime supply chain. As a starting point, DNV GL assessed the status of the use of hydrogen in Norway. The final report for the Norwegian authorities provides a knowledge base for the development of a comprehensive strategy for research, technology development and use of hydrogen as an energy carrier in Norway. These efforts aim to prevent a chicken-and-egg scenario as seen with other alternative ship fuels.

The hydrogen market

There are very few liquefaction facilities at the moment. According to DNV GL’s report, about three per cent of world energy consumption is used to produce hydrogen, and more than 55 million tonnes of hydrogen are consumed annually, most of it by the chemical and petroleum industries. However, some hydrogen-fuel-cell-powered buses, trucks and trains are in use, and a supply chain is beginning to emerge for these vehicles. The increasing demand for hydrogen across industries for purposes such as heating and energy production is expected to boost hydrogen demand and might also contribute to the establishment of new hydrogen supply chains that increase the availability of both compressed and liquid hydrogen as a fuel.

By 2020, smaller vessels using the same technology should begin operating within the scope of projects DNV GL is actively involved in. Eventually, larger ships will depend on hydrogen, and the gas will be produced in larger quantities from renewable energy and converted into fuels for commercial aviation and shipping.

To expand the hydrogen production capacity and availability, substantial investments will be needed, says the Hydrogen Council in its 2017 report: an estimated 110 billion US dollars should be invested in hydrogen production, another 80 billion US dollars in storage, transport and distribution and about 70 billion US dollars in product development and the expansion of manufacturing capacities. The council also points out that an appropriate regulatory framework is needed, and that scaling up production could bring down costs.

In its vision for the future, the Hydrogen Council estimates that a global hydrogen-powered fleet of 400 million cars, 15 to 20 million trucks and five million buses could be in operation by 2050, and that hydrogen could replace five per cent of the world’s aviation and shipping fuel by that year. In addition, ten per cent of global heat and power generation for households and the industrial sector might be covered by hydrogen.

Apart from serving as a fuel for fuel cells, hydrogen is of great interest as a means to store surplus energy from renewable sources, such as offshore wind farms.

A tricky substance to handle

Since hydrogen is highly flammable and challenging to contain due to the very small molecules, there are potential safety and regulatory challenges connected with its widespread use. “It is important to be aware of the specific properties of hydrogen, which are different from the properties of other fuels,” says Gerd Petra Haugom.

Furthermore, she continues, one of the key decisions regarding hydrogen as a fuel is the form in which it will be transported. “If you need to transport large volumes of hydrogen over some distance, it might – similarly to natural gas – make sense to use hydrogen pipelines, but for intermediate transport distances it can be more efficient to convert it into a cryogenic liquid at a temperature of –253 degrees, rather than transporting it as a compressed gas,” says Haugom.

Liquefied hydrogen takes less space than compressed gas. However, the liquefaction process can consume around 30 per cent of the energy content of the gas, and maintaining the low temperature requires energy as well. Therefore liquefaction is most feasible for large quantities of hydrogen.

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Because of the challenges associated with hydrogen gas, converting it into a less hazardous and more convenient form is considered by many experts to be preferable to liquefaction. Conversion to ammonia, synthetic methane or a liquid organic hydrogen carrier (LOHC) such as cycloalkanes or formic acid is being studied.

Starting small

“All the emerging alternative fuels, such as LPG, LNG and biofuels, will need an infrastructure to be developed,” says Haugom. There are advantages and constraints associated with all alternative fuels. Due to the need both to build an infrastructure and to gain operational experience, Haugom believes hydrogen will initially be used mainly by smaller vessels and for vessels operating on fixed routes. As it is costly and potentially risky to be a first mover, the willingness to take such a step depends on the availability of funding sources to cover additional costs, or on government subsidies, as well as on the relative advantages of achieving compliance with stricter emission requirements in ports and heavily populated or environmentally sensitive areas.

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“It will be easy to start with ferries and other vessels which are on set routes where you will have limited infrastructure requirements,” says Haugom, pointing out that currently most of the hydrogen is produced from natural gas, which results in CO2 emissions, but that an increasing share of mix-in hydrogen from renewable sources is expected to become available.

Assuming a growing demand for hydrogen, there will also be a need to develop hydrogen bunker vessels.

“A vessel that has bunker tanks for liquid hydrogen needs a liquified hydrogen supply. On the other hand, a vessel that carries its hydrogen bunker as a compressed gas could be refuelled by a liquid hydrogen bunker vessel equipped with a regasification plant.”

Making hydrogen bigger

Experience gained in hydrogen-fuelled road transport will likely be instrumental in developing larger industrial applications and building up a supply infrastructure for future maritime use. Of all alternative fuels, batteries are most efficient, but their weight and capacity limit their practical use. Hydrogen-based fuel cells could potentially overcome these constraints.

Haugom has worked on development projects for hydrogen-powered buses and public transport in Norway and Europe. “We still need to do risk assessments to make sure the risk levels are acceptable,” she says. The transfer technology for compressed hydrogen fuel has to be developed to ensure safe and fast bunkering since the volumes needed for ships are greater than for a truck or bus. She stresses: “To realize this potential, we need technology that can do this quickly and safely.”
Source: DNV GL (https://www.dnvgl.com/expert-story/maritime-impact/Building-a-marine-supply-infrastructure-as-part-of-a-future-hydrogen-society.html)

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The 2020 Global Sulphur Cap

We refer Members to our previous publications on the 2008 amendments to Annex VI of the IMO’s International Convention for the Prevention of Pollution from Ships 1973 (as modified by the Protocol of 1978) (MARPOL) and which will come into force on 1 January 2020. The amendments will ensure a significant reduction in the sulphur emissions from ships (the 2020 Global Sulphur Cap) and thereby demonstrate that the shipping industry is committed to meeting its environmental obligations.

The 2020 Global Sulphur Cap

On and after 1 January 2020, the MARPOL permitted limit for sulphur content in ships’ bunker fuel oil will be reduced from 3.50% mass by mass (m/m) to 0.50% m/m for ships operating outside designated emission control areas. The MARPOL Emission Control Area (ECA) limit of 0.10% will still apply, as will any applicable local regulations.

The IMO’s Marine Environment Protection Committee (MEPC 73) has approved a prohibition on the carriage of non-compliant bunker fuel which will come into force on 1 March 2020 (Regulation 14 MARPOL Annex VI), with certain caveats. Ships fitted with exhaust gas cleaning systems (scrubbers), which are designed to remove sulphur oxides from the ship’s engine and boiler exhaust gases in order to reduce sulphur emissions to a level not exceeding the required fuel oil sulphur limit, can continue to carry fuel with a sulphur content of more than 0.50%. Members should check before calling at a port if the port has any ban or additional requirements relating to the use of open loop scrubbers or for dealing with wash waters from scrubbers.

The IMO has developed further guidance, including a fuel oil non-availability report (FONAR), which is on the IMO’s website (http://www.imo.org/en/MediaCentre/PressBriefings/Pages/10- MEPC-74-sulphur-2020.aspx). Under Regulation 18 of MARPOL Annex VI, it will be possible to submit a FONAR to State parties recording the steps taken when a ship cannot acquire compliant fuel. It is important to note that a FONAR is not an exemption; it is one of a number of documents to be taken into account by State parties when considering enforcement action against a noncompliant ship and Port State Control (PSC) guidelines have also been published by the IMO to assist in this regard. When facing enforcement action, Members should be able to fully document the efforts which they have taken to comply.

A limited exception to the 2020 Global Sulphur Cap requirements is allowed for any emission necessary to secure the safety of the ship, saving life at sea or any emission resulting from accidental damage to a ship or its equipment (subject to certain conditions).

P&I Club Cover

The International Group Clubs recognise that the 2020 Global Sulphur Cap presents important challenges to the shipping industry and are closely monitoring discussions at the IMO.

Penalties for non-compliance are likely to include fines, detentions and possibly, in extreme cases, PSC banning orders. The 2020 Global Sulphur Cap does not require any amendments to be made to existing Club Rules. As has always been the case, Clubs do not condone breaches of MARPOL. However, liabilities, including fines for purely accidental discharge of non-compliant emissions, are capable of P&I cover subject always to the Rules and any terms and conditions of cover. This would also include the obligation to reimburse liabilities for fines incurred by another party.

Cover in respect of other fines, for example, for breach of documentary or other MARPOL requirements, including inaccurate or inadequate record keeping or carriage or use of noncompliant bunker fuel, is only available at the discretion of a Club’s Board of Directors at the conclusion of a case. Until a decision has been made by the Board on cover on such discretionary cases, Clubs may be unable to provide security and, even if they do, this will only be in exchange for acceptable counter-security, which would usually be in the form of cash or a bank guarantee. The position in this respect is the same as set out in previous International Group circulars issued on the subject of MARPOL breaches.

It is recognised that the 2020 Global Sulphur Cap could result in P&I liabilities not previously seen which may arise in limited circumstances, for example where there is a technical failure of an otherwise approved scrubber undetectable by the exercise of due diligence that causes the accidental discharge of non-compliant emissions or the discharge of polluting wash-water. There have been suggestions that non-compliance with the Sulphur Cap provisions in MARPOL may have the effect of rendering a vessel unseaworthy which in turn would prejudice the availability of cover. Whilst every case will depend on its individual circumstances, the International Group Clubs wish to make clear both that an infringement of the Regulations will not necessarily be characterised as unseaworthiness and, to the extent it were to be, it is not a necessary consequence that it would deprive a Member of cover.

Where there is any doubt, then the circumstances of the case should be discussed with the Club.

All Clubs in the International Group have issued similar Circulars.

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The surprising impact of IMO 2020

The impact of the upcoming IMO 2020 regulations on the shipping and refining industries is well understood. And we know that an increase in freight rates for raw materials such as iron ore and coal will likely translate to higher costs for the steel sector.

But if we look a little deeper, there are a few surprises in store.

The IMO’s regulatory changes could push steel costs even higher and have an impact on the nascent electric vehicle (EV) battery industry.

Why?

Because there’s a storm brewing for a relatively niche and little-discussed raw material that is a vital ingredient for both industries: needle coke.

What is needle coke?

It’s a specialist product with two important uses:

1. Making steel: Needle coke produces graphite electrodes to either melt steel scrap or to maintain the temperature of molten steel.

2. Powering electric vehicles: It makes synthetic graphite for use in the anodes of lithium-ion batteries.

Increased competition for low-sulphur crude oil will drive up prices

It’s highly likely that the low-sulphur crude oil that is used to make needle coke could be in short supply when IMO comes into play. And prices are set to rise as more low-sulphur fuel is diverted to the bunker sector, as shippers strive to comply with the regulatory changes.

Come 2020, needle coke producers will either have to contend with increased competition for feedstock, or invest in equipment to allow the use of higher sulphur oils.

Either way, IMO 2020 is likely to mean an increase in needle coke costs.

Rise of EAF steelmaking pushes up needle coke demand

The steel industry is the main user of needle coke, where graphite electrodes are an indispensable industrial component, particularly in electric arc furnace (EAF) steelmaking.

With the clampdown on outdated steel capacity in China, EAF steelmaking is on the rise again. Its popularity is driving needle coke demand at a time when supply is tightening.

EV battery anodes will create huge demand growth

Graphite is the largest input material by volume in lithium-ion batteries. Synthetic graphite, derived from needle coke, is the preferred choice for battery manufacturers for its purity and consistency.

We think electric passenger cars (with a plug) will account for 6% of all sales by 2025. Although this is still small, even 6% of sales would increase needle coke demand by 250 kt from current levels.

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“With demand from steelmaking and lithium-ion batteries expected to see strong growth in the medium term – and question marks over the stability of supply due to the new IMO 2020 restrictions – fundamentals in the needle coke market have the potential to tighten into next year.”

Gavin Montgomery
Research Director, Battery Raw Materials

Can a needle coke supply crunch be avoided?

Demand for needle coke is expected to see strong growth in the medium term.

As a specialised product, there are only around 10 major producers of needle coke globally. And there are no greenfield or large-scale brownfield projects currently planned outside of China – a testament to the high capital intensity and technical challenges involved.

While there is some activity in China, we remain sceptical on when this new wave of needle coke supply will come to market, and whether it can meet the strict quality requirements.

There could well be a perfect storm on the horizon for needle coke. Prepare for a knock-on impact in the steel and the electric vehicle battery industries.
Source: Wood Mackenzie

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How shipping banks’ GHG focus impacts fleets and freight rates

Will a bank provide a loan to a ship owner to build a new vessel, to buy one in the second-hand market, or to refinance existing debt that’s about to come due? The launch of the Poseidon Principles has brought environmental considerations explicitly into the equation.

The consequences for ocean shipping will not be immediate, but over the years ahead – if the Poseidon Principles work as designed, alongside existing regulatory pressures – the global fleet composition could change. Theoretically, the fleet of the future should be younger and greener, with shorter ship lifespans and potentially higher freight costs for cargo shippers.

To understand the shipping and banking consequences of the Poseidon Principles, FreightWaves conducted an exclusive interview with veteran banker Michael Parker, global head of shipping and logistics at Citigroup (NYSE: C). The drafting committee for the new principles was comprised of Citigroup, Société Generale and DNB; Parker was the chairman of the drafting committee.

What do the principles entail?

The signatory banks to the Poseidon Principles will make an annual public disclosure of the carbon intensity of the ships within their loan portfolios, in relation to a baseline.

The carbon intensity for each ship will be determined using data owners are already required to compile (on fuel type, fuel consumption, hours underway, distance traveled and ship specifications). The baseline will be comprised of the decarbonization trajectory of each vessel type necessary to meet the International Maritime Organization (IMO) target of reducing shipping’s annual greenhouse gas (GHG) emissions by at least 50 percent by 2050.

The publication of the participating banks’ portfolio carbon intensities, and transparency on how they are trending over time, should incentivize lenders to adjust portfolios to reduce their published carbon intensities.

How many lenders are onboard and is that enough?

One source of skepticism toward the Poseidon Principles relates to capital sources that are not involved. If enough capital providers don’t sign up, wouldn’t ship owners with high carbon-intensity tonnage just get their capital elsewhere, leaving Poseidon Principles signatory banks with a small share of the pie?

The 11 initial signatory banks account for about $100 billion in senior shipping debt, out of a total of around $450 billion. The signatories are largely European lenders, a funding source for shipping that has been pulling back over the past decade, with owners shifting toward Asian funding sources. The signatory list does not yet include any Asian leasing houses or export credit agencies.

Asked by FreightWaves whether the lenders that have signed on are enough, Parker responded, “Yes, I do think there are already enough now, and I also expect more lenders to join that have indicated the likelihood of signing in the next few months. This [obtaining new signatories] is not something that ever ends.

“What we felt before launching this was that we had a significantly large minority. We’re making every effort to proselytize what we’re doing and there have been quite a lot of inbound inquiries. What we’d like to eventually get to is 90 percent of all lenders and I see no reason why any serious lender would not sign up, other than on some policy grounds.”

Some believe future capital sourcing by ocean shipping is likely to continue trending more toward equity at the expense of debt, but here too, the green agenda is making big waves. Several shipping and financial industry executives highlighted new equity investor pressure at the Marine Money Week (MMW) conference in New York on June 17-19.

According to Andy Dacy, chief executive officer of the global transportation group at JP Morgan Asset Management, “ESG – environmental, social and governance – has become incredibly important. You cannot put institutional capital to work without looking at the ESG aspect.”

According to Hugo de Stoop, CEO of tanker company Euronav (NYSE: EURN), “I’ve never had so many questions from investors related to ESG.” Hew Crooks, chief financial officer of privately held Ridgebury Tankers, said at MMW that today’s ESG focus has “unrecognizably increased” compared to past investor interest.

In other words, the Poseidon Principles on the senior bank debt side of the funding puzzle are merely one aspect of a much broader ESG focus that has implications across the entire capital spectrum.

How borrowing costs will be affected

The number-one question for ship-owning borrowers is how will the Poseidon Principles affect future interest-rate expense? Will owners of low carbon-intensity vessels get a break on their rates, or will those with older, less-efficient ships see their rates increase? To what extent will there be a higher spread between the two?

“The answer is, one should look at shipping no differently from other sectors,” said Parker. “We’ve seen a shift if you look at green bonds. I think we’re beginning to see a tipping point in that investors will give people credit for an environmentally positive investment, and I see shipping as no different.”

He continued, “We use credit risk to determine how we rate companies and that’s what drives [loan] pricing, but I do think environmental compliance behavior will begin to play a part.”

An important aspect of credit risk is charter coverage. The more a borrower’s ships are backed by future charter employment revenues, the lower the credit risk. If charterers start judging owners based on carbon intensity, this would lower the credit risk for good actors and help in terms of borrowing costs.

Dacy agreed. “It’s not only the banks and the institutional capital, it’s the long-term charter companies,” he said. “If someone is going to do a five- or 10- or 15-year charter, they’ll want to make sure they’re leasing the asset from a company that’s very good on the ESG side.”

“I think that good, responsible owners with low emissions will be rewarded by the people that employ their ships,” said Parker. “I think you’ll see that the charterers are working on their own version of the Poseidon Principles and they may well come up with criteria that will give a benefit to environmentally responsible companies.”

How and when will fleet composition be affected?

The signatory banks will immediately take the carbon intensity issue into account when considering new loans, but the effects in the global shipping fleet will take time to manifest.

“The lending decisions we’re making today will include questions about climate change – we wouldn’t have signed up if we hadn’t accepted that – but I think the real impact will become clearer in two or three or four years,” said Parker.

“To be honest, this is something that will take time. There may be knock-on effects from the Poseidon Principles that we can see are likely, others that you could argue are likely but may never happen, and others we can’t foresee that may happen.”

Logically, it would seem that the new banking policy should make it harder for an owner of an older, less efficient vessel to refinance existing mortgage debt and harder for a buyer to finance the acquisition of an older, less efficient vessel. This should lower the value of older ships and encourage more scrapping, decreasing average age and average lifespan.

The principles should also theoretically incentivize newbuildings, but only after new regulations and technologies are in place and owners (and their bankers) understand what kind of ship to build to reduce carbon intensity. Until more is known about which design to use for newbuildings, owners contracting them will face a higher obsolescence risk and thus a greater residual value risk – which is a major reason why newbuilding activity has decreased.

According to Parker, “I think there is a logical argument that this will lead to better managed and more rational investment decisions, because of the likely shorter life of the vessel, which would mean you’d need to ensure the debt would be repaid [in fewer years], which I think is a positive for the industry. Also, the need to finance with more equity will force owners to have more financial discipline to obtain higher returns.

“I think that with the Poseidon Principles, the expectation that owners can trot along to a bank and refinance a 10-year-old ship for another five years is now called into question. I think the likely effect that we may see in a few years’ time is that more ships go to scrap at 15 years [of age, instead of 20 or more years]. What lenders are encouraging through the Poseidon Principles is that less efficient, higher-emitting ships are scrapped earlier than they have been.”

What’s in it for the banks?

Both the shipping and lending industries have been criticized in the past by environmentalists for their relative lack of action on GHG emissions and the climate agenda. The term ‘ESG’ was rarely mentioned at previous years’ MMW events in New York. A skeptic may respond to the Poseidon Principles by asking why now and what’s in it for the banks?

The answer to the timing question is that the ability to compare a loan portfolio’s carbon intensity to a baseline required the creation of the baseline, which was made possible when the IMO announced its 2050 GHG reduction target in April 2018. The months since were spent getting enough banks onboard for the launch of the program with a sufficient critical mass.

On the question of benefits for bankers, the shipping division of a bank competes for capital to lend to borrowers with other divisions of the same bank lending to other industries. In recent years, shipping bank divisions have lost capacity to competing divisions.

Asked whether the Poseidon Principles will give banks’ shipping departments an edge due to the banks’ overall ESG focus, or whether it will be a hindrance due to higher standards for borrowers, Parker responded, “I think the answer is that it’s neutral, because I don’t think anyone’s keeping score, at least not yet.

“I do believe that for all of us who signed up, it does show to our management and the outside world and to our regulators that we are taking the initiative and doing something that is very consistent with what is being encouraged by the United Nations.

“We’re not asking for additional capital because we are doing this. This doesn’t give us some sort of special status. What we are actually saying is that we’re going to make sure that the capital that we do have is allocated responsibly, in line with IMO commitments under the Paris Agreement, but also for lots of other reasons having to do with managing a profitable business.

“What is significant is that this is the first industry to actually take steps in the financial sector to help align the industry with global goals, so we are setting an example and I think all of us who are involved are very proud of that,” he said.

Another reason banks may have acted now is that not acting has become increasingly less of an option. “This is not something that’s going to go away. It’s more than about economics. It’s about reputation,” De Stoop told MMW attendees.

He recounted a conversation with an investor who was a long-time skeptic on global warming. When De Stoop recently asked him if his views had changed, the investor responded, “I am still completely skeptical, but one thing has changed – it doesn’t matter whether I’m a skeptic or not because there are enough people who are convinced about it that my business is going to be impacted.”

Peter Livanos, the CEO of GasLog Ltd (NYSE: GLOG), said at MMW, “The environmental issues going forward are not just going to be a game changer, they’re going to be a significant game changer. There’s no question that financial institutions, whether they be private banking institutions lending to corporates or international lending institutions such as the World Bank, need to use their capital to assist and promote ventures that are environmentally aware and are environmental leaders.”

Regarding the decision by Citigroup and the other banks to launch the Poseidon Principles, a move he commended, Livanos maintained that ultimately, “these institutions would be punished by the global community if they did not adopt them.”

 

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limiting air pollution from ships; protecting human health and the environment

New requirements for ships to cut sulphur oxide emissions enter into effect on 1 January 2020, marking a sea change in fuel used by ships, globally, which will significantly reduce air pollution from ships with positive benefits for human health and the environment.

IMO has been preparing ahead of the implementation date. From 1 January 2020, under IMO’s MARPOL convention for the prevention of pollution from ships, the sulphur content of fuel oil used by ships operating outside designated emission control areas shall not exceed 0.50% – representing an 80% cut from the current 3.50% limit.

At a roundtable industry meeting hosted by IMO at its London Headquarters (21 June), participants were updated on the latest guidance, treaty amendments and other instruments emanating from IMO to support the implementation of the “sulphur 2020” rule. All of these have been developed by Member States working through IMO, in collaboration with stakeholders, recognising the need for cooperation in order to develop and deliver technically robust instruments for international shipping.

Participants at the roundtable discussion on the consistent implementation of the 0.50% sulphur limit agreed on the need to continue to raise awareness of the requirement.

Industry participants* from the shipping, oil refinery and bunker industries welcomed with appreciation the effort made by IMO to address concerns and reviewed progress towards implementation.

The IMO Secretariat highlighted the latest decisions emanating from IMO’s Marine Environment Protection Committee (MEPC 74), including adoption of guidelines on consistent implementation, port State control and other guidance; and from the Maritime Safety Committee (MSC 101), including the adoption of Recommended interim measures to enhance the safety of ships relating to the use of oil fuel.

Industry participants reported on their work, including the latest version of the ICS Guidance to Shipping Companies and Crews on Preparing for Compliance with the 2020 ‘Global Sulphur Cap’ which will be published in the first week of July 2019; a Joint Industry Project developing industry guidelines with a focus on safety to support implementation, including training; updated charter clauses developed to address sulphur 2020 and fuel issues; investment by the oil refining industry in new blends of fuel oil to meet the limit; and potentially linking sulphur 2020 provisions with current ship inspection programmes.

Participants recalled that 1 January 2020 is now less than six months away and expressed their commitment to enhancing collaboration, including further information sharing among stakeholders, as appropriate, to make a smooth transition to the 0.50% limit, recognizing the benefits for human health and the environment.

Availability of compliant fuel oil

Views were exchanged on the general availability of fuel to meet the 0.50% limit, with ships expected to begin taking on 0.50% low sulphur blended fuels from October/November onwards, in order to be ready for 1 January 2020. A forecast from the International Energy Agency (IEA), in April 2019 forecasts that the refineries will have capacity to make the compliant fuel oil available. Compliant fuel oil has already been made available for testing by some ships.

The roundtable participants urged the need for the oil refinery and bunker industry to continue, and strengthen where possible, their efforts to provide sufficient compliant fuels as early as possible to allow more ships to test trial for experience gaining. There was also a need for more information on the new fuel products to be made widely available.

Fuel oil safety

Potential safety issues with new blends of fuel oil have been recognised and IMO guidelines provide advice on steps to take to address those risks.

It was noted that the International Organization for Standardization (ISO) has been developing a Publicly Available Specification (PAS) related to the 0.50% limit. The PAS will provide additional guidance on the application of the existing ISO 8217 specification for fuels for use in marine diesel engines and boilers, for example, compatibility and stability of new blends of fuel oil.

The roundtable participants highlighted the need to provide further information on arising safety issues and to enhance crew training in anticipation of the new fuels being made available before the end of 2019, and to highlight the safety aspects in particular.

Enforcement and compliance

Consistent enforcement by port State control was recognised as essential to ensure a level playing field and ensure the shipping market would not become distorted. Participants acknowledged the adoption of relevant 2019 Guidelines for port State control under MARPOL Annex VI chapter 3. The IMO Sub-Committee on Implementation of IMO Instruments (III 6) meets 1-5 July and could provide an opportunity for information sharing by port State control regimes.

Reporting to IMO and information sharing

Participants recognized the need to further improve reporting and information sharing through the IMO Global Integrated Shipping Information system (GISIS). MARPOL Annex VI requires information to be provided, including on fuel oil availability, incidents of non-availability of compliant fuel oil and fuel oil quality. Work is already under way to review the current MARPOL Annex VI module to provide greater scope for data entry and to make the module more user friendly.

Raising awareness

Participants agreed on the need to continue to raise awareness about sulphur 2020.

An open source free to access e-learning course is being developed through the joint industry project, for use by seafarers and others. The course will offer three modules, the first will focus on IMO Guidance on the development of a ship implementation plan for the consistent implementation of the 0.50% sulphur limit under MARPOL Annex VI (MEPC.1/Circ.878).

A new IMO leaflet (download here) outlines the requirement, answers the most frequently asked questions about the rule and provides a list of the instruments supporting implementation, best practice guidance, port State control and sampling guidelines and others.

IMO will publish a compilation of all related guidance, best practices and so on, as a single IMO publication (hard copy and electronic formats) later this year.

IMO conference on 2020 and alternative fuels

IMO plans to hold a conference in October 2019 with wide participation from stakeholders, to provide updates on planning for 2020. The conference will also include a session on the latest developments regarding alternative fuels and low carbon technologies.

*Roundtable discussion on the consistent implementation of the 0.50% sulphur limit, IMO Headquarters, 21 June 2019: The meeting was opened by IMO Secretary-Kitack Lim and was attended by representatives from IMO Secretariat and: International Chamber of Shipping (ICS); BIMCO; Oil Companies International Marine Forum (OCIMF); International Association of Independent Tanker Owners (INTERTANKO); International Association of Dry Cargo Shipowners (INTERCARGO); IPIECA; The Institute of Marine Engineering, Science and Technology (IMarEST); International Bunker Industry Association (IBIA).
Source: IMO

 

 

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Singapore marine gasoil premium hits 2019 high ahead of MFM mandate for distillate delivery

Marine gasoil premium in Singapore jumped to its highest so far in 2019 three days ahead of the mandatory use of mass flow meters for distillate bunker delivery from July.

The premium of Singapore-delivered marine gasoil (0.1%) over the Mean of Platts Singapore 10 PPM gasoil assessments climbed 31 cents/mt day on day to $18.52/mt at Thursday’s close, the highest in 2019, S&P Global Platts data showed. The premium averaged $12/mt in June, up from an average of $4/mt seen in May, the data showed.

“It is more expensive logistically, especially for the delivery of smaller parcels,” a bunker trader in Singapore said.

Some barging companies are considering a lump sum barge charge of $1,500 for marine gasoil volumes between 50mt to 100mt, and a charge of $2,000 for volumes below 50mt.

Singapore has also seen a rise in low sulfur marine gasoil demand ahead of the International Maritime Organization’s new sulfur cap of 0.5% from January 2020, lower from the current 3.5%.

Singapore’s monthly LSMGO sales averaged 212,800mt so far in 2019, compared with 128,200mt in 2018, data from the Maritime and Port Authority of Singapore showed.

Mass flow meters will be mandated by the MPA for distillate bunker delivery starting July 1, 2019, the MPA confirmed Friday.

 

 

 

 

 

 

 

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Oil Refineries Have Been Too Slow on Vital Fuel Change, BIMCO Says

The world’s oil refineries could have done more to be ready in time for new rules governing the kind of fuel that merchant vessels must burn, the president of the world’s biggest shipping association said.

In one of the biggest shifts in recent history for both refining and shipping industries, vessels will need to cut sulfur emissions to below 0.5% from next year, down from 3.5% in most parts of the world today. The main means of compliance will be to use cleaner-burning products, and the responsibility for making them lies with refiners.

“This is the most challenging issue for the industry and it’s not enough for the shipowners only to be ready,” said Sadan Kaptanoglu, president of BIMCO, a 114 year-old organization with members in 120 countries. “I would have preferred to see the refineries acting much faster.”

The difference between compliant and non-compliant fuel next year
With just over five months to go, shipowners are now making decisions on the fuels they’ll use without a clear sense of which products will meet the rules, or whether ports will have sufficient supplies, said Kaptanoglu, who became BIMCO’s first female president in May.

The rules being introduced by the International Maritime Organization are aimed at cutting emissions of a pollutant blamed for causing acid rain and aggravating human health conditions such as asthma.

When the regulatory switch kicks in, demand for higher sulfur fuel is widely expected to plunge at a faster rate than oil refineries are able to eliminate production. Prices for non-compliant fuel in January are trading at almost $200 a ton less than compliant products in Singapore, according to Nymex data.

The International Energy Agency in Paris predicts that about 250 million barrels of non-compliant fuel will be consumed next year.

While start date for the IMO’s rules was finalized in October 2016 after years of deliberation, some refiners still considered the deadline tight, given the substantial investment needed in new processing units that boost production of cleaner fuels at the expense of fuel oil.

“Everybody has to do their part for this to go flawlessly,” Kaptanoglu said by phone from Istanbul, adding she expects enforcement of the regulations to be robust. “I don’t think anyone will want to cheat, but there may be a port where compliant fuel isn’t available, then the IMO will be alerted and that has to be reported in the next port.”

The uncertainty about which fuels to use led to some concern that ships could inadvertently mix products in a way that could be risky. Less than 3% of the global fleet has currently opted to install a scrubber, BIMCO estimates, even if those ships typically tend to be larger carriers accounting for a greater share of consumption.

“Currently shipowners are making decisions about their options,” Kaptanoglu said. “Some will use low-sulfur fuels and some are trying new blend bunkers, but there are a lot of uncertainties.”

A large number of ships will be taken out of service for a few weeks during the fourth quarter of this year for cleaning in preparation for the new fuels, she said.

“This is a major change, responsibility lies on every part of the industry,” she said.
Source: Bloomberg

 

 

 

 

 

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IMO2020 sulfur cap on marine fuel to kick into force starting Jan.

The International Maritime Organization (IMO) will enforce a new 0.5% global sulfur cap on fuel content from 1 January 2020, lowering from the present 3.5% limit. The global fuel sulfur cap is part of the IMO’s response to heightening environmental concerns, contributed in part by harmful emissions from ships.

IMO is an agency of the United Nations which has been formed to promote maritime safety. IMO ship pollution rules are contained in the “International Convention on the Prevention of Pollution from Ships”, known as MARPOL 73/78.

In this regard, Fichte & Co Legal, one of the UAE’s leading law firms, recently held an informative seminar at the JW Marriott Marquis, Business Bay in Dubai, UAE. The session tackled the IMO 2020 mandate and its impact on the world’s leading ports, being Singapore, and the UAE’s Fujairah Port, respectively. With the rapidly approaching regulatory change forcing ship-owners to comply one way or the other, the global marine fleet is set to experience great change in the coming six months.

Fichte & Co’s event featured knowledgeable maritime experts and government officials providing industry insights on how Singapore and the UAE can continue to thrive through this impending change. Jasmine Fichte, Legal Founder and Managing Partner of Fichte & Co, said “The UAE has already established itself as a nation that prioritizes reinforcing a greener footprint and a more sustainable future. The implementation of the UAE 2021 vision, which entails a full pledged sustainable structure for the country’s future, accordingly aligns with the IMO2020 sulfur cap.”

Fichte added: “UAE stakeholders dealing with HSFO (high sulfur fuel oil) should seek out a more sustainable plan to secure their position in the industry before the mandate is initiated and the seminar will enable forward-thinking to proactively plan for this. Alternative methods of vessel power generation and more innovation in wider industrial uses of fuel oil are required for the UAE as part of a secured plan for maritime to continue thriving in the both regionally and globally.” The seminar enabled UAE stakeholders and decision makers to receive strategic methods to tackle the IMO2020 mandate to their best benefit.

Addressing the importance of compliance,. Hessa Al Malik, Executive Director of Maritime Transport Sector at the Federal Transport Authority – Land and Maritime (FTA), emphasized “IMO 2020 will soon be in full effect, with a significant reduction in maximum sulFur content of marine fuel allowed. As a more stringent standard becomes the norm with the sulfur cap shifting from 3.5% to 0. 5% on January 1, 2020, ship-owners and marine vessel operators must be adequately prepared now to avoid any last minute hassles. With less than six months remaining, this timely seminar is a strong reminder, among other initiative done by the UAE, to prepare ship owner to take the necessary measures for the industry now, rather than later.”

She further added “While many may be fretting the mandate, it should BE embraced as it will preserve the region’s natural resources, continue meeting a growing demand, and foster a greater environment for all. Once the regulation is activated, ship-owners can either use IMO2020 compliant marine fuel with a maximum sulfur content of 0.5%, use alternative acceptable marine fuels like LNG, or seek alternative methods like installing of scrubbers to remove sulfur dioxide and dirtier particulates from their bunker fuel. Accordingly, The UAE has already started taking considerable measures for IMO 2020, the Port of Fujairah, which is the largest bunkering port in the Middle East, has banned the discharge of waste water with sulFur from engine exhaust gases.”

Commenting on the regional sulfur forecast, Pawan Sahni, Middle East Business Development Manager for DNV GL – Maritime said, “According to a study by Stillwater, alternative marine fuels, like LNG, will constitute for a very small percentage of vessel fuels by 2020. As a result, the IMO2020 mandate will cause a dramatic demand shift for marine fuels used globally and a larger percentage of the shipping industry will switch to compliant 0.5% sulfur fuel. There will also be an increasing global demand for distillate fuels, like diesel and gas oil, as owners may prefer taking that route instead of opting for compliant fuel.”

Though the IMO has done its part to ensure awareness of the imminent sulfur cap, the question of whether ship owners have taken the necessary steps to appropriately prepare for it remains to be seen. K Murali Pany, Managing Partner at Joseph Tan Jude Benny LLP, Singapore, said “I do not think the maritime industry has adequately prepared for the IMO2020 sulfur cap to kick into force. Many owners or charterers have not fully considered the impact or implications, or have adopted a ‘wait-and-see’ attitude to the regulations. Variables like compliant fuel availability, quality and the cost of such fuel, seem to be factors which the market wants to consider before taking any definitive steps.”

Pany further added that “with the global sulfur cap regulations imposing a definitive set of obligations on ship owners, the Singapore MPA has published guidelines which are quite comprehensive and give ship owners an idea of how Singapore will go about approaching and enforcing these regulations. My advice to all ship owners, regardless of location, is to take necessary steps to prepare. If you have a choice between doing nothing and hoping for the best, or doing something and preparing for the worst, it should always be the latter. By conducting due diligence and putting the appropriate protocols in place, you’ll be prepared for the worst. If the worst doesn’t happen, your processes will still be better than before.”

The seminar was successfully attended by both private and government representatives including Abdulla Al-Mestrih, Acting Head of the International Cooperation Department at the Federal Transport Authority for Maritime and Land (FTA). The speakers shared their insights on how to continue to grow and prosper in the maritime sector in both Singapore and the UAE despite the imminent change of the IMO2020. During his speech, Al-Mestrih elaborated on FTA’s role as it plays an essential part in spreading the necessary awareness about the significance of compliance with international maritime laws. He also emphasized the importance of providing ship owners and engine manufacturers with the significant requirements on how to prepare for the implementation of IMO 2020 regulations by taking all the considerable measures.

Seaborne trade keeps the world going. According to data released last year by the United Nations Conference on Trade and Development (UNCTAD), international seaborne trade expanded by 4 per cent in 2017 — the fastest growth since 2012 — and that year, 10.7 billion tons of goods were loaded worldwide; 1.5 billion tons more than in 2012.

A key beneficiary of the growing global maritime trade has been the UAE, with its hub port in Dubai. It maintained the highest Liner Shipping Connectivity Index (LSCI) in the sub-region — LSCI is an indicator of how accessible a region is to global trade — and container port traffic in the UAE grew from 5.05 million TEU (20-foot equivalent units) in 2001 to an impressive 21.28 million TEU in 2017.

Looking ahead at the next decade, the maritime trade in this region is expected to post healthy growth. “With major investments into its ports’ infrastructure, the UAE is widely recognised as a centre for ports and logistics services globally,” says Peter Richards, Group CEO, Gulftainer.

Here we look at some of the key trends shaping the future of port management, freight and the maritime industry.

Ports and logistics
By 2030, Richards predicts automation would have significantly impacted ports and the logistics industry. “There’s no denying the advent of autonomy in the maritime sector, which means that we need to embrace it and understand how best to navigate the emerging opportunities and challenges,” he says, adding that the trend is catching on, albeit slowly, with less than 5 per cent of container volume reportedly managed by fully automated terminals in the past two years. Automation will also create “unmatched opportunities” in port infrastructure, cargo handling, information processing and communication, and on-ground logistics management. Besides, with timelines becoming extremely crucial to business, services that offer faster turnaround will be in demand.

Future connections
Nabil Ben Soussia, Vice President — Maritime at IEC Telecom Group notes that with 90 per cent of worldwide trade served by the maritime market, vessels at sea rely on broadband connectivity and VSAT to stay in touch. By 2030, connectivity will play an even bigger role in improving operations and efficiencies in the maritime industry. “The need for fast and efficient communications, including video conferencing, tele-medicine, IoT and more, aboard vessels and between land and sea, will drive the usage of VSAT technology,” he says. Soussia adds that more than 50,000 merchant ships ply the oceans every day and, according to the fifith edition of the NSR Maritime SATCOM Markets, more than 14,000 vessels are currently connected via broadband VSAT. This number is projected to rise to more than 37,000 vessels by 2026.

Hyperlooping cargo
Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, has asserted that in the future, it will be possible to transport freight at the speed of flight and at the cost of trucking, using the company’s Cargospeed Hyperloop transportation system, which is capable of ferrying cargo at speeds of up to 1,000 kmph. And, in the coming decade, it is expected to make its way to major ports around the world, transforming not just cargo transportation, but also supply-chain management. The system is all-electric and has zero emission.

Autonomous ships
In the past, large container ships typically had a crew size of over 50. In recent years, that has come down to 20-30. But fast forward to 2030, and that is likely to dwindle to just a handful of support technicians. Or perhaps, ships won’t even have a single crew member onboard. Ben Soussia believes autonomous ships can help eliminate human error, reduce crew costs, enable space efficiencies in ship design and use of fuel.

Jobs of the future

According to Dubai Chamber, the maritime sector here accounts for around 3.3 per cent of the emirate’s jobs — 76,200 people work in maritime-related industries. So will autonomous ships and onshore automation make many of these jobs redundant? Well, the UNCTAD 2018 Review of Maritime Transport refers to a 2017 study done in the Netherlands, which estimated that the number of jobs in the maritime cluster will decrease by at least 25 per cent with the advent of automation. Jobs in the port sector are projected to drop by 8.2 per cent. Other categories at risk are maritime suppliers and inland navigation. However, at a seminar held in Dubai in September 2018, Peter Due, Director Autonomy, Global Sales & Marketing at Kongsberg Maritime, insisted that autonomous vessels would still need a maintenance crew onboard. His company plans to deliver the world’s first fully autonomous container ship by 2020, and Due added that unmanned ships will also need to be monitored by sailors working in onshore centres. In short, the jobs will still be there, but will require different skill sets.

Ships in distress
How ships call for assistance is due for a major upgrade with the addition of Iridium to the Global Maritime Distress and Safety System (GMDSS), an international standard for maritime communications in the event of an emergency. Ben Soussia asserts this is an important development because the current satellite system does not offer global coverage. Iridium’s GMDSS, however, will provide full coverage at even extreme latitudes as well as provide mariners an all-in-one terminal for Distress Alert, Maritime Safety Information and Distress Voice. “This will allow for better communication, therefore enabling more effective search and rescue operations for safer seas in the future,” says Soussia.

Zero-emission vessels
Lloyd’s Register, in its Martime 2030 report, observes that the decade of 2020s-2030s is the most significant in terms of action to reach the global shipping industry’s goal of halving carbon emissions by 2050. And considering that ships typically have operating lives of 20-30 years, zero-emission vessels (ZEVs) need to be entering the world’s fleet by 2030. But to pull this off, it will need collaborative joint ventures involving not only maritime industry participants, but also fuel technology companies, equipment manufacturers and energy developers from other industrial sectors outside of shipping.

The industry is certainly rising to the challenge. Last year, Dubai-based Zaitoun Green Shipping formed an international consortium with industry heavyweights. So while the jury is still out on when ZEVs will actually arrive, we can at least be sure that ships in 2030 will not just be smarter, but also greener.

Dubai, A maritime star
This year, the maritime cluster in Dubai has a great reason to celebrate. The Menon Economics and DNV GL, a global organisation that benchmarks maritime capitals, announced in April that Dubai had moved one spot up from its 2017 ranking as the world’s 10th most important maritime capital. Moreover, it is currently rated as the leading maritime cluster in the Middle East, Africa and India. The chairman of Dubai Maritime City Authority (DMCA), Sultan Bin Sulayem, attributes Dubai’s maritime achievements to “a focus on research and development (R&D) and innovation to develop integrated logistics programs and advanced infrastructure and legislation”.

According to data from the DMCA, the maritime cluster here is home to more than 7,400 active companies involved in over 13,000 activities, and contributes 7 per cent to Dubai’s GDP. DMCA also states that Dubai has emerged as a destination for leading maritime events, and a place for leaders from the shipping industry to converge, interact and transfer knowledge. By 2024, DMCA projects Dubai would have become one of the top five maritime hubs of the world, competing with the likes of Hong Kong and other major European maritime centres. And by 2030? Well, chances are Dubai might be the maritime capital of the world.

Gulftainer enhances operational efficiencies
Gulftainer has been at the forefront of transforming port and logistics operations globally, innovating constantly and upgrading its offerings to meet the gaps in the industry.

“With a strong digital approach, its strategy is driven towards enhancing its operational efficiency and optimising capacity of its existing ports as well as investing in key partnerships around the world,” says Fred Castonguay II, Chief Operating Officer, Gulftainer Group.

“Gulftainer’s newly-enhanced digital strategy provides a real-time computing power to help operators keep up with the large amount of cargo entering and leaving ports on mega ships, while making sure that the containers are unloaded and loaded without a hitch, in the shortest turnaround time.

Gulftainer has taken a customer-centric approach to offer its clients the best value in the market. For example, its new sea cargo clearance service, Sharjah Port of Trade (S.P.O.T.), substantially improves time and cost-saving for customers by offering unmatched inland connectivity within the UAE.

Within a month of the launch, the company secured four customers for S.P.O.T. that serves as an inland extension of the Gulftainer-operated Khorfakkan Container Terminal (KCT). The GALEX service (GLX), offered jointly by Emirates Shipping Line (ESL) and Korea Marine Transport Co. (KMTC), was the first to benefit from this value-added offering, and successfully completed its first direct call at Gulftainer operated Khorfakkan Container Terminal (KCT) in a record 3.4 hours.

“Gulftainer is committed to developing its port facilities in the UAE – Sharjah Container Terminal (SCT), Khorfakkan Container Terminal and Hamriya Port. With recent terminal upgrades, including the expansion of SCT’s full container storage yard by over 17 per cent and the ability to operate bigger vessels, Gulftainer continues to enhance its capabilities to meet the evolving needs and expectations of its customers,” says Castonguay II.

 

 

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Shipping Sector Comes Under Increasing Pressure To Cut Its Carbon Footprint

The shipping industry burns the world’s dirtiest fuel to move cargoes and passengers around the world. It is one of the biggest contributors to climate change yet for years it dodged any responsibility because of its international nature.

Shipping accounts for up to 3% of global emissions and 10% of transport emissions – roughly the same as aviation – and is an integral part of the global economy, transporting around 80% of the world’s trade in physical goods. Marine freight is the least emissions intensive way of moving cargo, but freight demand is on the rise, and “emissions will rise by between 50% and 250% by 2050 if nothing improves,” according to the Organization for Economic Co-operation and Development. “And yet, maritime transport was excluded from the Paris Climate Agreement.”

However, the spotlight is now firmly on the industry, with regulators and investors pressuring shipping groups to step up their ambitions on cutting their emissions. The International Maritime Organization, the sector’s governing body, has introduced targets to cut GHG emissions by half by 2050, but is widely seen as having dragged its feet on the issue for years and the companies in the sector have displayed a similar lack of urgency, with ageing and polluting ships set to remain in the fleet for years to come.

A new report from environmental non-profit CDP, A Sea Change, says that shipping companies are failing to push for the critical technologies that are needed to reduce their carbon footprints, such as emission-free ships. The report ranks 18 of the largest publicly listed shipping companies, representing US$62 billion of market capitalization, on business readiness for a low-carbon transition.

Companies can cut emissions immediately, by up to 30%, simply by sailing more slowly, and 13 of the 18 shipping lines the report analysed have slow steaming policies, but this is not always commercially viable, it could result in more voyages and it is only a short-term solution.

The report says that Denmark’s Maersk and Norden, along with South Korean group HMM, are leading the way in setting targets to reduce their impact in line with the IMO targets, but on the whole, there is a gap between the carbon-neutral technologies that are available and what companies are actually doing.

“Shipping’s decarbonization will require unparalleled innovation,” said Søren Toft, chief operating officer of AP Møller-Mærsk, the world’s largest container shipping company. “A modern ship is a highly capital-intensive asset with a typical life span of 25-30 years. To deliver on ambitious climate targets, zero-emission vessels will need to enter the fleet by 2030. This leaves us only 10 years to develop the new marine fuels, propulsion technologies and infrastructures that will be required.”

Only three companies, Maersk, Norden and Japan’s NYK, are developing technologies that could transform the industry. NYK is looking to develop zero-emission vessels by 2050, while the Danish groups are working on second-generation biofuels produced from waste such as cooking oil. Other companies are generally looking at technologies and fuels that deliver only marginal improvements, CDP says.

The increased scrutiny affects container companies and bulk and tanker shippers differently – container companies that carry consumer goods such as clothing and food are facing pressure from their customers, who are looking to reduce the emissions from their supply chains. For bulk and tanker groups, which transport fossil fuels and other carbon-intensive commodities, the risks are much greater – they face a loss of demand as the wider global economy decarbonizes.

“Shipping companies are facing a sea change on the horizon,” said Carole Ferguson, head of Investor Research at CDP. “Based on current technologies, marine freight is one of the least emissions intensive modes of transport, and therefore critical to the low-carbon transition. But as the global economy grows, the industry could account for 17% of global emissions by 2050, if nothing is done.

“Against the backdrop of the IMO’s targets, the industry needs to drive collaboration with the manufacturers of vessels and shipping technologies to develop the step change innovations needed to have any chance of meeting these goals,” she added.

In the short term, retrofitting existing ships could be the most effective option with technologies such as derated engines, which can be run at lower speeds, and new propellers to improve efficiency and cut emissions while waiting for truly transformative technologies to come onto the market.

Low-carbon fuels, including biofuels, hydrogen and ammonia, could cut emissions significantly, but only Norden and Maersk are supporting their development at the moment. LNG could also be important as a transition fuel to wean the industry off the dirty bunker fuel that they currently use.

One of the industry’s key issues is that transparency on its climate change efforts is very low – only five of the companies in the study disclose emissions information to CDP and only four support the Task Force on Climate-related Financial Disclosure (TCFD). Board level oversight of climate issues is also very low compared to other sectors.

CDP’s report follows the recent launch by 11 banks with a combined shipping finance portfolio of $100bn of the Poseidon Principles, an initiative to increase transparency and speed up the decarbonization of the sector.

The banks, including Citi, SocGen, DNB, ABN Amro and ING, represent around a fifth of global shipping finance and will for the first time integrate climate considerations into their lending to the sector and disclose the alignment of their shipping portfolios with the IMO’s 2050 emissions reduction target.

“ Shipping will shortly undertake a rapid technology and fleet change as it inevitably shifts away from fossil fuels in order to decarbonize ,” said Dr Tristan Smith, reader in Energy and Shipping at the UCL Energy Institute. “That change exposes many in the shipping industry, but particularly the banks, to risk. If banks discover too late they have invested in ships that will become undesirable or even obsolete because of this change, they could see valuation write-downs or even defaults in their portfolio. The Poseidon Principles are a tool to demonstrate that these key stakeholders are acting responsibly and allow them to compare climate risk with each other, but also a tool that will allow them to manage critical investment risks.”

There is hope that investors may be able to raise the pace of decarbonization in shipping, just as they have in other sectors such as automotive and oil and gas, where regulators and policymakers have failed.
Source: Forbes

 

 

 

 

 

 

 

 

 

 

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On 6/30/2019 at 10:53 PM, ceo_energemsier said:

The surprising impact of IMO 2020

 

The impact of the upcoming IMO 2020 regulations on the shipping and refining industries is well understood. And we know that an increase in freight rates for raw materials such as iron ore and coal will likely translate to higher costs for the steel sector.

 

But if we look a little deeper, there are a few surprises in store.

 

The IMO’s regulatory changes could push steel costs even higher and have an impact on the nascent electric vehicle (EV) battery industry.

 

Why?

 

Because there’s a storm brewing for a relatively niche and little-discussed raw material that is a vital ingredient for both industries: needle coke.

 

What is needle coke?

 

It’s a specialist product with two important uses:

 

1. Making steel: Needle coke produces graphite electrodes to either melt steel scrap or to maintain the temperature of molten steel.

 

2. Powering electric vehicles: It makes synthetic graphite for use in the anodes of lithium-ion batteries.

 

Increased competition for low-sulphur crude oil will drive up prices

 

It’s highly likely that the low-sulphur crude oil that is used to make needle coke could be in short supply when IMO comes into play. And prices are set to rise as more low-sulphur fuel is diverted to the bunker sector, as shippers strive to comply with the regulatory changes.

 

Come 2020, needle coke producers will either have to contend with increased competition for feedstock, or invest in equipment to allow the use of higher sulphur oils.

 

Either way, IMO 2020 is likely to mean an increase in needle coke costs.

 

Rise of EAF steelmaking pushes up needle coke demand

 

The steel industry is the main user of needle coke, where graphite electrodes are an indispensable industrial component, particularly in electric arc furnace (EAF) steelmaking.

 

With the clampdown on outdated steel capacity in China, EAF steelmaking is on the rise again. Its popularity is driving needle coke demand at a time when supply is tightening.

 

EV battery anodes will create huge demand growth

 

Graphite is the largest input material by volume in lithium-ion batteries. Synthetic graphite, derived from needle coke, is the preferred choice for battery manufacturers for its purity and consistency.

 

We think electric passenger cars (with a plug) will account for 6% of all sales by 2025. Although this is still small, even 6% of sales would increase needle coke demand by 250 kt from current levels.

 

 

 

image.png.20b2edd24f96aac052db4556a4b66351.png

“With demand from steelmaking and lithium-ion batteries expected to see strong growth in the medium term – and question marks over the stability of supply due to the new IMO 2020 restrictions – fundamentals in the needle coke market have the potential to tighten into next year.”

 

Gavin Montgomery
Research Director, Battery Raw Materials

 

Can a needle coke supply crunch be avoided?

 

Demand for needle coke is expected to see strong growth in the medium term.

 

As a specialised product, there are only around 10 major producers of needle coke globally. And there are no greenfield or large-scale brownfield projects currently planned outside of China – a testament to the high capital intensity and technical challenges involved.

 

While there is some activity in China, we remain sceptical on when this new wave of needle coke supply will come to market, and whether it can meet the strict quality requirements.

 

There could well be a perfect storm on the horizon for needle coke. Prepare for a knock-on impact in the steel and the electric vehicle battery industries.
Source: Wood Mackenzie

 

Sweden's effort to produce steel without any carbon makes more sense now.  There's also research in the US on how to accomplish this. 

Needle coke can also be produced from coal, which could aid the struggling US coal industry.  Makes me wonder what other products are currently made from oil but may have to be made from coal in the future. 

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Final countdown to sulphur 2020 begins

 

International Maritime Organisation’s (IMO) global 0.50 per cent sulphur cap regulation will come into effect on January 1, 2020. The limit for sulphur content in fuel oil used in ships operating outside the designated emission control areas will be reduced to 0.50 per cent m/m (mass by mass) from the current 3.50 per cent m/m, which has been in effect since 2012.

According to IMO, this new regulation will significantly reduce the amount of sulphur oxides emanating from ships and should have major health and environmental benefits for the world, particularly for people living close to ports and coasts.

A study on the human health impacts of sulphur oxide (SOx) emissions from ships, submitted to IMO’s Marine Environment Protection Committee (MEPC) in 2016 by Finland, estimated that by not reducing the SOx limit for ships from 2020, the air pollution from ships would contribute to more than 570,000 additional premature deaths worldwide between 2020 and 2025.

Is the industry ready?
While the new regulation is projected to have far reaching consequences on the environment, it is also set to impact the global economy, requiring companies in commercial shipping, bunkering and refining industries to implement significant operational changes.

Johnny Stewart, Principal Analyst EMEARC, Wood Mackenzie, a leading research and consultancy firm, tells GN Focus, “IMO’s upcoming sulphur cap will cause a major shake-up in the fuel mix used by the shipping industry. “The new legislation not only affects the end-user shipping community but also the supply side including refiners, storage and blending companies, and traders.”

Shipowners would need to adopt one or a combination of solutions to achieve compliance. They could install scrubber technology and continue to use high sulfur fuel oil (HSFO), or switch to either a lower sulfur complaint fuel or to alternative fuel sources such as LNG.

While shipowners have started taking measures to adhere to the cap, the industry grapples with questions and uncertainties, ranging from the availability of compliant fuel to how the sector could stay commercially sustainable in the long term.

MSC Mediterranean Shipping Company, one of the leading global transportation and logistics companies, has been preparing for several years for the upcoming change in the IMO’s low-sulphur fuel cap. Giles Broom, Global PR & Internal Communications Manager, MSC Mediterranean Shipping Company, tells GN Focus, “MSC expects to use a large quantity of compliant, low-sulphur fuel and has also invested in exhaust-gas cleaning systems for a significant portion of its fleet to maintain services across 200 trade routes worldwide beyond the IMO’s January 1, 2020 threshold.”

Another leading global liner shipping company, Hapag-Lloyd – with 235 modern ships and 398 offices in 128 countries – expects the new regulation to have a major financial impact on the shipping industry. “It’s a very good decision which will help to make our industry greener. Hapag-Lloyd expects additional costs per year of about $1 billion (Dh 3.6billiom),” says Nils Haupt, Senior Director, Corporate Communications, Hapag-Lloyd.

“We are currently converting a 15,000 TEU ship to LNG, which will be done in the second or third quarter of 2020. Additionally, we will have our Hamburg Express Class ships — 10 vessels of 13,200 TEU each — equipped with exhaust cleaning systems (scrubbers),” says Haupt.

Will the 0.50 per cent sulphur cap lead to a significant increase in freight rates in shipping?

“We expect freight rates to increase due to IMO implementation as the majority of shippers will have to switch from using cheaper HSFO to a lower sulfur more expensive fuel source,” says Steward, adding, “Those deciding to utilise scrubbing technology will have to swallow the upfront CAPEX installation cost.”

The question remains whether ship operators and owners globally will be able meet the deadline. “We expect around 90 per cent compliance in 2020, while we do not expect full compliance until 2025,” says Stewart.

Major preparations need to be made by the global vessel fleet prior to switching to compliant fuels, requiring a much more proactive approach to bunker fuel management. “It is recommended that all vessels develop a Ship Implementation Plan, covering issues such as fuel oil system modifications and tank cleaning, fuel oil capacity and segregation capability, and a fuel oil changeover plan,” says Stewart.

“Full compliance will be achieved by 2025 as sufficient compliant fuels become available in all ports globally and scrubber penetration increases.”

Switchover challenges

Johnny Stewart, Principal Analyst EMEARC, Wood Mackenzie, looks at some of the key issues that may concern the shipping industry

Fuel tank cleaning
The cleaning of fuel tanks will generally be required for all tanks previously using HSFO that are switching to low sulphur fuels, but this will be a major undertaking, taking several weeks to complete. However, vessel owners will be reluctant to clean fuel tanks if there is continued uncertainty regarding the availability of low sulphur fuels at specific bunkering ports, compounding the “wait and see” approach to implementation.

Fuel compatibility
The compatibility of VLSFO fuels remains a key concern for many shippers. While VLSFO fuels will be covered by the ISO 8127 standard, many of these new fuels may not be compatible, depending on their paraffinic and aromatic content.

In addition, switching to MGO may present some operational issues for vessels, due to its much lower viscosity compared to fuel oil.

Scrubber challenges
Due to the recent strong uptick in scrubber orders, some bottlenecks are developing in relation to the installation of scrubber systems. However, this is mainly related to specialist areas such as 3D laser scanning of a vessel prior to retrofitting, or the availability of the very high quality steel used in scrubber manufacturing, rather than dry docking capacity.

Key bunkering hubs, Singapore, Antwerp and Fujairah have now banned open loop scrubbers, as well as other ports in India, China, Europe and the US. China has also restricted the use of open loop systems in coastal waters with high levels of marine pollution. The European Union Water Framework Directive will also restrict the use of open loop scrubbers if water quality starts to fall below agreed levels. While most scrubber systems are open loop, the focus has shifted to hybrid-ready systems, which can have a closed loop system installed at a later date.

Fine enforcement
The IMO is not an enforcement body, so it is up to individual member states to enforce the regulation. Fines and penalties will vary between member states and there is no consistency between different countries in terms of the scale of potential fines. The enforcement regime was made more robust with the adoption of the carriage ban of HSFO, which will be in place from March 2020 onwards. As a result, port states will be able to prosecute vessels that are suspected of using HSFO in international waters, rather than just reporting their concerns to the respective flag state.

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When we think about transport, planes, trains and automobiles are the three modes that most readily spring to mind. In reality, no method shapes our world more than shipping. It is the foundation of the global economy, with more than 90% of trade carried via the sea. It remains, according to the International Maritime Organisation (IMO), “by far the most cost-effective way to move en masse goods and raw materials around the world.”

However, it is also one of the world’s most polluting sectors. The more than 90,000 ships that criss-crossed the world last year burnt nearly two billion barrels of heavy fuels usually banned or heavily regulated onshore due to their effects. If left unchecked, maritime pollution could produce 17% of all emissions by 2050.

Marine pollution is a ticking time bomb that policymakers and shipping operators must address. Unfortunately, the technology does not yet exist that will allow vessels to run entirely off renewable or sustainable energy for anything more than a very short hop. Long voyages and large vessels require an immense amount of power, and its more than an onboard battery can supply.

Yet, while the challenge can’t be eradicated, it can be mitigated against and significantly reduced. The first step is to identify where ships pollute needlessly, or rather where they burn fossil fuels and produce harmful gasses when cleaner alternatives are available. Sustainable onshore power is a reality, but many ports lack the infrastructure to supply it, forcing shipping operators to run their engines and pollute even while their vessels are at berth. With wider awareness, funding and support it’s possible to reverse this situation without endangering trade or the livelihoods of those who depend on the industry.

The regulatory backdrop

From January 2020, the International Maritime Organisation will introduce a shipping sulphur cap to reduce the industry’s emissions by at least 50% by 2050 compared to 2008 levels. The regulation will ban ships from using fuels with a sulphur content above 0.5%, compared with the 3.5% allowed now. It should be noted that in the North Sea and the Baltic Sea there is already an emissions control area in place which limits SOx, NOx and/or particulate matter. Only ships fitted with sulphur-cleaning devices known as scrubbers will be allowed to continue burning high-sulphur fuel. Ship owners can also opt for other sources of cleaner fuel such as liquefied natural gas.

The cap, while welcome, doesn’t go far enough. Despite years of warning, many companies aren’t ready to comply. While some refineries have made improvements, a huge percentage of oil producers will be left exposed by the cost of producing new fuels, which emit lower levels of sulphur and can be 50% more expensive.

A greater worry still is compliance, which is dependent on the ability of governments to monitor and enforce adoption. Analysts at Goldman Sachs estimate that compliance rates will be around 80% next year and unlikely to reach 100%, ever. This is at least partially because the cap is almost impossible to enforce. While it is illegal for a ship to have non-compliant fuel on board, many ports simply lack the capabilities to test them.

Lastly, the solution is not guaranteed to work and is not future-proof. Millions, if not billions, of dollars will be spent retrofitting ships but, ultimately, there is no concrete evidence it will be enough. Moreover, there is a real concern that this target will push companies to introduce measures, namely sulphur scrubbers, which help in the short-term but do nothing to actually solve the issue for good.

While the new regulations are important, they come 12 years after a draft agreement was reached and decades after the worst effects of these emissions have been realised. The IMO must negotiate with 174 member nations, meaning that any significant progress is unlikely in the short-term. At this stage, it is clear that regulation alone is not enough, there also needs to be consideration for how these regulations will be enforced and funded.

Ultimately, the sulphur cap only tackles one pollutant and to put things into context even low sulphur (0.1%) fuel can have 100 times the sulphur content of road diesel. And, it does not reduce or eliminate other sources of pollution (and global warming) such as particulates, NOx gases or CO2 emissions, for that more Emissions Control Areas are required.

The Answers

Education

Vehicle pollution captures our attention because it is so visible in our everyday lives. The smell of exhaust fumes and the smog that blankets many of our largest cities is difficult to ignore. Shipping, by contrast, is not nearly so prominent. Unfortunately, it’s a case of out of sight, out of mind.

A first step must be to educate the public on the dangers of marine pollution. A 2018 study found that pollution from shipping causes about 14 million cases of childhood asthma and 400,000 premature deaths a year. That is more than 1,000 deaths a day.

These impacts are shocking too many, yet they remain a footnote in our political discourse. Trade consistently dominates discussions, yet the transport that supports it is so frequently ignored.

Policy makers and shipping authorities must do more to publicise the impacts of unconstrained shipping emissions. Another study cited by the IMO says over 570,000 premature deaths could be prevented between 2020 and 2025 by the introduction of the tighter guidelines in shipping.

Businesses respond to regulations, while governing bodies respond to societal pressure. To cause real change, more must be done to educate and involve the public in a field that is all too often marginalised in the climate change debate. With greater public awareness, the benefits of even a partial reduction will be hard for policymakers and operators to ignore.

Technology

Regulations must also support technology that drives sustainability and energy efficiency. Onshore power remains an often overlooked but vital opportunity. Ships at berth are responsible for 2.6% of total transport emissions and 1.3% of all air pollution. When docked, ships require power to support activities like loading, unloading, heating, lighting and other crucial functions.

Today, this power is generally provided by auxiliary engines that emit carbon dioxide (CO2) and air pollutants, affecting local air quality and ultimately the health of both port workers and nearby residents. Yet, it isn’t just humans who are in danger. When a ship is at berth and running off an onboard generator, the noise can severely disrupt the behaviour of nearby wildlife, with larger ramifications for the local ecosystem.

Globally, it’s been proven that introducing electric shoreside connections in port can make a real difference. The partnership between the Port of Seattle and the shipping industry has seen annual CO2 emissions cut by up to 29%. Meanwhile, shipping firm La Meridionale achieved a 95% reduction in its berthside emissions by introducing new shore connection technology. Danish ferry group Scandlines, meanwhile, has seen an overall energy saving of between 10-14% in its equipped vessels.

With help from Schneider Electric, NorthLink’s MV Hamnavoe ferry, connecting Scotland to Orkney, has recently made the switch to locally produced ‘green’ electrical power through an innovative shore connection project at Stromness. This large shore-to-ship connection, the first of its kind in the UK, will cut the ferry’s carbon footprint, reducing fuel consumption by at least 500 tonnes a year and the cost of maintenance by £160,000.

There is no doubt that we need to consider the whole transport journey when it comes to reducing pollution and tackling emissions. Caps on toxic polluting fuels are necessary and should be legislated for. But we also need to look at how implementation can be encouraged.

We have the technology to reduce emissions in the short term, we only need to implement it. It is time to adopt a new way of thinking and embrace the benefits that shore connections and portside electricity can bring. The success of the Stromness project can and should be repeated at ports across the UK and Europe. If ships were plugged into the power grid with 100% renewable electricity across the UK, the reduction in emissions would be the equivalent to removing 84,000 to 166,000 diesel buses from the roads. To put that in context, there are roughly 110,000 buses and coaches in the UK in total.

Funding

But even where legislation exists, a lack of funding is hampering adoption. The EU Directive on the Deployment of Alternative Fuel Infrastructures states that Member States shall install shoreside electricity supply in ports by 31st December 2025. However, there is currently no funding to help facilitate the directive. With many ports across Europe operated as not for profit trusts, it’s difficult to see how they will comply or find the money to invest in the infrastructure required, despite the long-term savings this technology would provide in terms of cost and most importantly emissions.

The final verdict

Maritime activity has a crucial role to play in trade and economic opportunities across the world. Yet we cannot ignore its environmental impact as merely collateral damage. Policymakers, businesses and people must take action to campaign and implement positive change and greater efficiency. The work does not have to be difficult or disruptive – great progress can be made simply by addressing portside emissions using technology – but it does need to happen soon.
Source: Forbes

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Singapore Shipping Association Issues IMO Sulphur Cap 2020 Readiness Plan

The Singapore Shipping Association (SSA)—the industry voice of Singapore’s maritime community—today issued the “IMO Sulphur Cap 2020 Readiness Plan” for Singapore’s shipping community.

The document provides an overview of the key requirements of the IMO 2020 global sulphur cap, outlines the major preparatory milestones in the lead up to January 2020, and presents key compliance measures.

 

The Singapore Shipping Association has been conducting a series of dialogues, workshops, and seminars to help the maritime community in Singapore anticipate and prepare for changes stemming from the IMO 2020 cap on sulphur oxides emissions from ships. The readiness plan has been designed as a handy tip sheet that presents the key information in an accessible and practical way tailored to the shipping community. SSA will continue to work with partners and regulators to prepare the industry for these and other policy changes from IMO,” said Ms. Caroline Yang, President of SSA.
Source: Singapore Shipping Association

 

https://www.ssa.org.sg/images/ssa/pdf/SSA IMO 2020 Brochure (SSA Website).pdf

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Bloomberg) -- They may still be six months away, but new rules on marine fuels are already sending shock-waves through the little-known world of refinery feedstocks.

The price of these low-sulfur, heavier oils -- that refineries make and then reprocess into transport fuels like gasoline and diesel -- has jumped in Europe in recent weeks because the shipping industry is starting to drive up demand for the products. The surge benefits some refineries while hurting others.

"We’re moving from an old norm to a new norm," said Steve Sawyer, senior analyst at energy consultant Facts Global Energy. "The market is paying a higher premium for low-sulfur material than it did before because people are looking to stockpile low-sulfur bunker fuel."

Refiners typically run feedstocks -- in particular straight-run fuel oil and vacuum gasoil -- through upgrading units, converting them into more valuable transport fuels. That means there’s historically been a link with prices for the finished fuels. That relationship is now being disrupted by the need to produce cleaner marine fuels before a 0.5% sulfur cap stipulated by the International Maritime Organization that starts in January.

Straight run fuel oil with 0.5% sulfur recently turned more expensive than Brent crude in northwest Europe for the first time in five years, according to Jan-Jaap Verschoor, director of Oil Analytics, a firm that tracks margins across the global refining industry. The price hike for the feedstock makes sense as refiners buy up the product in preparation for ramping up production of next year’s marine fuel, he said.

The market for very low sulfur fuel oil, or VLSFO, is already heating up in Europe. Along with Italy’s Saras SpA, Israel’s ORL Refineries Ltd. has already sold its first cargoes while tanker owner Euronav NV has been buying up 0.5% product for storage in the Mediterranean Sea on one of the world’s biggest vessels. At least one company has also switched its holding tanks to low-sulfur fuel oil from high sulfur.

"The strength in secondary feedstock will last for as long as refiners are in VLSFO production mode," said Eugene Lindell, senior oil market analyst at JBC Energy GmbH. With around 35 million barrels of 0.5% fuel already in storage, there’s potential for roughly the same amount to stockpiled over the coming months, he estimates.

For refiners, the impact depends on the individual plant’s configuration. More basic, or simple, facilities will typically have a higher yield of feedstocks that are useful for IMO 2020 if the crude they process is low in sulfur and heavy. Those would benefit from the price jump. More-sophisticated operations that are reliant on feedstocks would feel a squeeze when prices rise.

At the moment, buying of 0.5% bunker fuel remains relatively small, but Sawyer says he expects it to increase to over 1 million barrels a day as shippers move away from non-compliant fuel. The International Energy Agency, Energy Aspects, ClipperData and Rystad are all expecting similar demand hikes.

"There’s just going to be a run on low-sulfur materials, from whatever angle, wherever they can get it," Verschoor said.

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I could see hydrogen used in marine applications but not for road travel. It just cannot match the efficiency of a battery even as batteries continue to improve at a rapid pace.

A second application for hydrogen could be seasonal energy storage.

but outside of these. I don’t see hydrogen winning out except for niche applications.

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On 7/3/2019 at 9:12 PM, Bill the Science Nerd said:

I could see hydrogen used in marine applications but not for road travel. It just cannot match the efficiency of a battery even as batteries continue to improve at a rapid pace.

A second application for hydrogen could be seasonal energy storage.

but outside of these. I don’t see hydrogen winning out except for niche applications.

Batteries are more efficient than fuel cells, but they're also heavier.  Batteries are set to consume most of the road transport market, including short/medium haul heavy trucking.  As batteries improve, their market share will increase.  However, battery weight and charging time are as yet a problem for long-haul trucking.  That's why Nikola and Toyota are pursuing hydrogen fuel cell trucks.  Resource constraints may also play into this, but I'm skeptical that they'll remain a long-term issue, so I rest my case on issues with battery weight & charging time. 

Aviation could be an interesting market for hydrogen for three reasons:
1)  Fuel cells are more efficient than jet engines.
2)  Hydrogen fuel has the highest specific energy, nuclear excluded. 
3)  Electric motors (fuel cells are just sources of electricity) allow more efficient aircraft designs.
All that adds up to significant weight savings in long-haul aircraft, and weight is king in aviation.  There may be some technical issue I'm not aware of, but I wouldn't be surprised if the aviation community suddenly discovered the wonders of hydrogen. 

I don't see hydrogen in long-haul shipping because the weight advantage matters less there. 

Hydrogen could be stored in caverns the same way natural gas is, but how much storage is available? 

A certain percentage of hydrogen can be incorporated into natural gas and used in any natural gas application, just as ethanol is added to gasoline.  The Germans studied what infrastructure would need to be changed at certain percentages of hydrogen.  I don't remember the details, but the results looked promising.  Basically, natural gas distribution/consumption infrastructure could be slowly converted to hydrogen.  That could have interesting implications for energy markets. 

Most of this hinges on hydrogen prices.  We aren't going to produce vast quantities of hydrogen from renewables because renewables can't deliver high capacity factors.  The enabling technology will be advanced nuclear reactors, which can provide 24/7 electricity at rock-bottom prices to any annual base load.  Hydrogen for transportation, cooking, and industry would be such a load. 

One problem with switching from NG to hydrogen is transport.  LH2 is more expensive to produce & transport than LNG.  Thus, it's unlikely there would be an an international market for LH2 with tankers moving product around the globe.  On the other hand, you can build a nuclear reactor nearly anywhere, so production and demand would simply co-locate.  Advanced nations with the intelligence/discipline/stability to manage nuclear could switch to hydrogen.  Everyone else would be stuck with fossil fuels.  That would have interesting geopolitical implications. 

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1 hour ago, BenFranklin'sSpectacles said:

Batteries are more efficient than fuel cells, but they're also heavier.  Batteries are set to consume most of the road transport market, including short/medium haul heavy trucking.  As batteries improve, their market share will increase.  However, battery weight and charging time are as yet a problem for long-haul trucking.  That's why Nikola and Toyota are pursuing hydrogen fuel cell trucks.  Resource constraints may also play into this, but I'm skeptical that they'll remain a long-term issue, so I rest my case on issues with battery weight & charging time. 

Aviation could be an interesting market for hydrogen for three reasons:
1)  Fuel cells are more efficient than jet engines.
2)  Hydrogen fuel has the highest specific energy, nuclear excluded. 
3)  Electric motors (fuel cells are just sources of electricity) allow more efficient aircraft designs.
All that adds up to significant weight savings in long-haul aircraft, and weight is king in aviation.  There may be some technical issue I'm not aware of, but I wouldn't be surprised if the aviation community suddenly discovered the wonders of hydrogen. 

I don't see hydrogen in long-haul shipping because the weight advantage matters less there. 

Hydrogen could be stored in caverns the same way natural gas is, but how much storage is available? 

A certain percentage of hydrogen can be incorporated into natural gas and used in any natural gas application, just as ethanol is added to gasoline.  The Germans studied what infrastructure would need to be changed at certain percentages of hydrogen.  I don't remember the details, but the results looked promising.  Basically, natural gas distribution/consumption infrastructure could be slowly converted to hydrogen.  That could have interesting implications for energy markets. 

Most of this hinges on hydrogen prices.  We aren't going to produce vast quantities of hydrogen from renewables because renewables can't deliver high capacity factors.  The enabling technology will be advanced nuclear reactors, which can provide 24/7 electricity at rock-bottom prices to any annual base load.  Hydrogen for transportation, cooking, and industry would be such a load. 

One problem with switching from NG to hydrogen is transport.  LH2 is more expensive to produce & transport than LNG.  Thus, it's unlikely there would be an an international market for LH2 with tankers moving product around the globe.  On the other hand, you can build a nuclear reactor nearly anywhere, so production and demand would simply co-locate.  Advanced nations with the intelligence/discipline/stability to manage nuclear could switch to hydrogen.  Everyone else would be stuck with fossil fuels.  That would have interesting geopolitical implications. 

Impressive analysis.

I think batteries will win out for long haul trucking on cost of hydrogen and lack of supporting infrastructure, but hydrogen could be interesting for air transport certainly.

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32 minutes ago, Bill the Science Nerd said:

Impressive analysis.

I think batteries will win out for long haul trucking on cost of hydrogen and lack of supporting infrastructure, but hydrogen could be interesting for air transport certainly.

Neptune Energy selected for pioneering hydrogen plant in Dutch North Sea

 

Neptune Energy has been selected to help create the first offshore hydrogen plant in the Dutch sector of the North Sea.

The firm’s Q13a platform, located eight miles from the coastal town of Scheveningen, will be installed with a megawatt electrolyser.

Hydrogen produced by the electrolyser will then be transported via pipeline to a nearby Taqa-operated platform, which will use it to produce electricity to power their platform.

Part of the reason Q13a was chosen was because it was the first platform in the Dutch sector to become fully electrified.

The pilot scheme is due to begin next year, allowing participants to develop experience in producing hydrogen offshore and acting as a testing ground for new technologies.

It has been commissioned by NexStep, the Dutch Association for Decommissioning and Re-Use, and TNO, the Netherlands Organisation for applied scientific research.

Neptune’s managing director for the Netherlands, Lex de Groot, said: “This pilot demonstrates the valuable role gas has to play in the integration of various energy systems, and underlines our commitment to adopting innovative technologies and supporting a sustainable future for our business.

“The North Sea, where both wind and natural gas are abundantly available, is the perfect testing ground and we are proud that our Q13a platform has been selected.

“The platform was the first in the Netherlands to be fully electrified, making it an excellent fit for this important pilot.”

 

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36 minutes ago, Bill the Science Nerd said:

Impressive analysis.

I think batteries will win out for long haul trucking on cost of hydrogen and lack of supporting infrastructure, but hydrogen could be interesting for air transport certainly.

 

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39 minutes ago, Bill the Science Nerd said:

Impressive analysis.

I think batteries will win out for long haul trucking on cost of hydrogen and lack of supporting infrastructure, but hydrogen could be interesting for air transport certainly.

 

 

 

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On 7/5/2019 at 2:28 PM, ceo_energemsier said:

 

The problem for hydrogen is that it’s one big advantage, charge time, doesn’t matter at all for ranges or less than 250 miles and that is 2/3 of the us truck freight market. You can fully recharge in the time it takes to unload the truck, and the warehouse will be the preferred place to charge because of lower electricity costs. Only for long haul does there really seem to be an advantage but given the at a minimum double cost of hydrogen vs electricity per mile, as well as the shrinking charge times, and lack of supporting infrastructure (the chicken or the egg problem), the advantages seem shaky at best.

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On 7/5/2019 at 2:31 PM, ceo_energemsier said:

 

 

 

The minerals for the cells are not that rare. Lithium is fairly abundant, as is carbon, aluminum, magnesium, and cobalt (but this one is going away.

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As the shipping industry is in the home straight towards 2020, discussions are concentrated more and more around scrubbers, as it looks like the industry has acknowledged the reality of the regulation looming and the inevitability of industry-wide adoption. As one can imagine, the opinions are quite polarised on the relative merits of scrubbers; either by adopting a pro or against scrubber mentality, with very few individuals sitting on the fence.

First of all, a decision to install scrubbers (or not to install scrubbers) should not aim to label the shipowner as either “good” or “bad”. As I had stated in my article of last year, “installing scrubbers, is a decision against the natural position (of a traditional shipowner)”. Shipowners are long on ships and are subject to the shipping market risk, being the equilibrium of supply and demand for tonnage and the underlying money-making ability of the owned assets expressed in TCE. Although bunkers are the most significant cost for shipowners, they are not subject to the risk of the crude oil market.

The freight rates and their daily equilibrium (short lived as it is) compensates the shipowners for both: (a) the supply and demand for tonnage; and (b) the bunker price environment. This is not clearly visible because these two elements may move towards the same or opposite direction. I appreciate that, it is even harder to separate out these discrete elements since shipowners do, literally, pay for bunkers. That does not mean, by any way, that shipowners undertake crude oil market risk. Whether the bunker prices are $100 or $1,000 per metric tonne, owners are going to get compensated, by an increase in freight rates, (as much as required) in order to maintain, all things being equal, the same TCE. Therefore, post 2020, it is reasonable to expect that freight rates in a healthy environment will rise to mostly* cover the higher fuel costs given the inability of the entire global fleet to install scrubbers. Of course, the extent of the increase will depend on the ability of shipowners (and subsequently the shippers/consignees) to pass on the additional cost (due to the increased bunker prices), down the chain to the end consumer. The ability to pass on this cost as described is also dependent on the elasticity of the shipping market during the transition period.

Consequently, the decision of any shipowner not to install a scrubber is, and should be, respected. The same way that shipowners do not speculate on bunker prices, if they wish not to take on an additional risk, it is very reasonable that they should not be wanting to install a scrubber and speculate on a spread between fuel prices. It is important to highlight the fact that a shipowner, by installing a scrubber, is converting the spread -and the spread only, between HSFO and the compliant fuel into a systemic risk of the shipping business along with FX and interest rate risk. It is very prudent as a shipowner not to want to inherit another risk, isn’t it?

I will answer my own question above with a yes, from the shipowner’s perspective. However, it would be very hard to say the same from a businessman’s perspective, and shipowners are naturally businessmen. A prudent businessman would try to understand the degree of risk that his business would inherit by installing a scrubber on his asset. Quoting Howard Marks from his book The Most Important Thing, “Here’s the key to understanding risk: it’s largely a matter of opinion…” and there is nothing wrong with having different opinions, as a matter of fact, it can often lead to healthy and meaningful discussions.

The scrubbers are followed by two risks in addition to fuel availability and technical performance. Firstly, the fiscal risk, i.e. the spread between the fuel prices and secondly, the regulatory risk that being the likelihood of the prohibition on the use of (open-loop) scrubbers in international waters. Banning open-loop scrubbers within port limits, even on a worldwide scale, does not harm the attractiveness of the investment, as the annual port consumption hardly exceeds 5-7% of the total annual consumption of the medium to large sized merchant ships.

Seemingly, the industry concentrates too much around how big the spread is going to be and how much the spread volatility could impact the scrubber payback. In reality, the question that needs to be answered is how narrow the spread could potentially be. One should try to understand the mechanism driving the fuel prices and how will this impact the price spread in 2020 and beyond. Within a reasonable time depth, whether the spread is, for example, $150 or $500/ton (and logic dictates that there should always be a minimum spread, unless someone believes that VLSFO is ubiquitous and prices the same as HSFO!), should not have a bearing on whether to install a scrubber or not, as long as the expected return from the scrubber investment itself (on one’s assumptions in regards to time depth and spread) exceeds the return generated by the underlying asset. The answer to that question therefore lies within whether the $150 spread mentioned above could potentially be $50 (or $0) and not whether it could go as high as $500. Getting the lower end of the spectrum right, after proper consideration and analysis of the fuel mechanisms, is much more important for the scrubber exercise (no one was ever blamed for generating more return than expected).

A prudent interpretation of the amount of risk present in the levers that can affect scrubber return is the most important exercise that must be undertaken before making the decision to install a scrubber. Not accounting properly for risk, can lead to significant losses whereas overestimating can lead to missing out on big profits.

Hopefully, the shipowners who installed scrubbers on their fleet made an informed business decision after taking everything into account and paying due consideration to the appropriate amount of risk within their business recipe. Contrastingly, the shipowners who do not install scrubbers run the risk of the scrubber installation materialising into a prudent business decision. As such, in the future these shipowners may well face being marginalised when trading. The only way out would be to install scrubbers at a later stage in order to maintain a competitive edge vis-à-vis with their industry peers.

* The use of word “mostly” in this sentence plays a significant role because it implies that the more ships fitted with scrubbers offered on the freight market, the lesser the increase in the freight rate with the HSFO-Compliant fuel spread remaining constant.

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Delivery of first vessel with Wärtsilä HY hybrid technology marks new era in shipping

 

The technology group Wärtsilä’s hybrid power module solution, the Wärtsilä HY, is now fully operational on the ‘Vilja’, an escort tug owned by the Swedish port of Luleå. The tug was built at Gondan Shipbuilders in Asturias, Spain and was delivered in the end of June 2019 following successful completion of the commissioning and sea trials. The Wärtsilä HY is the first hybrid power module in the marine industry, and its operational application onboard the ‘Vilja’ marks a new era in shipping.

The solution has been specially developed to meet the specific needs of the tug market. It features operating characteristics that include ‘green mode’, with zero emissions and no noise, a ‘power boost’ that delivers a higher bollard pull than any other conventional solution of comparable size, and ‘smokeless operation’ whereby no smoke is produced even during start-up of the main engines. These features have all been successfully tested and demonstrated.

The Energy Management System (EMS), representing the ‘brain’ of the Wärtsilä HY, has been specifically tuned based on actual data acquired during one year of field operations. Its functionalities have been fully tested at the Wärtsilä Hybrid Centre. The EMS is designed to efficiently cope with drastically changing operating conditions. In Luleå, the vessel will alternate between normal summer time operations, and working in one metre thick ice during the winter months. Having an adapting EMS ensures the tug’s ability to maintain the highest efficiency performance in both situations.

 

“This vessel is the most powerful tug operating with hybrid propulsion and it can be considered as creating a benchmark in the new era of modern shipping,” says Giulio Tirelli, Director, Sales & Business Intelligence, Wärtsilä Marine. “The implementation of the Wärtsilä HY and the process followed for reaching this milestone, represents a practical application of Wärtsilä’s Data Driven Design principles, and it effectively transforms our Smart Marine vision into practice.”

“The ‘Vilja’ represents the most technologically advanced tug currently in operation. The selection of the Wärtsilä hybrid power module will ensure a drastic reduction in emissions, setting new, higher, standards for our service, and for the quality of life in the Luleå region”, says Henrik Vuorinen, CEO, Luleå Hamn AB. “Our deep cooperation with Wärtsilä will also ensure additional potential achievements during the vessel’s lifecycle.”

The innovative ‘Wärtsilä HY for Tug’ solution enables significant benefits in terms of environmental performance, and a significant reduction in fuel and maintenance costs. During trials, the icebreaking tug achieved a 100-tonne bollard pull, while producing approximately 20 percent fewer emissions than a comparable conventional vessel.

Image caption: The ‘Vilja’, an escort tug operated by the Port of Luleå in Sweden, is the first vessel of its kind operating with the Wärtsilä HY hybrid power module. Copyright: Port of Luleå.
Source Wärtsilä

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