Low Sulphur - Advantages and challenges

The advantages and challenges of Sulphur reduction options

Managing the transition to 2020 Low-Sulphur regulations

The advantages and challenges of sulphur reduction options.

There are many options for operating in a low-sulphur world. Here we review the costs, benefits and risks.

Marine gas Oil (MGO)

Advantages 

  • A known fuel; used today in SECAs, generally for shorter periods.
  • Carries 5% more energy per unit volume.
  • Doesn’t require heating or purification, saving cost and maintenance on existing ships and also installation costs on new ships.

 

Challenges 

  • Presents challenges when used for long periods on existing large marine engines designed for IFO 380.
  • Low-sulphur fuels suffer from low lubricity, increasing risk of engine wear and damage.
  • Low viscosity presents challenges with fuel injectors and leakages.
  • Availability and price are risks.

Newly developed fuels

Advantages

  • Most new fuels are blends of existing products, with a larger proportion of low-sulfur distillates to meet sulphur caps.

  

Challenges 

  • Insufficient sweet crude supply to substantially expand volume of heavier grades of existing distillates.
  • Refiners have not invested in the hydro-desulphurisation capacity to remove sulphur from residual fuels. The industry needs a 60-75% increase in desulphurisation capacity, costing billions, with a two-to-four year lead time.
  • Increased blending carries risk of usability problems such as compatibility, stability and sludging, at least initially.
  • Biofuels show future potential but degrade faster in the marine environment.
  • Availability and pricing for these new products is still unclear. We expect that MGO will set the reference price.

Scrubbers

Advantages

  • Well established technology in shore installations, has recently travelled afloat, starting with ships that operate primarily in SECAs.
  • Ships burn existing IFO 380 and scrubbers treat the exhaust gas to reduce sulphur levels.
  • Wet scrubbers spray water into the exhaust gas; at sea, the salt wash water is discharged overboard (open loop), or in port, fresh wash water is neutralized with caustic soda for later discharge (closed loop), or both (hybrid system); sludge removed for disposal ashore.
  • In dry systems, exhaust gas is filtered through hydrated lime beds which absorb sulphur, turning the lime into gypsum, which is removed for disposal ashore.

 

Challenges

  • Retrofits are possible, though required space is considerable. Installation costs can run in the $3-9 million range and extra operating costs (maintenance, energy, neutraliser, sludge disposal) can add 6-8% to the fuel bill. 
  • Investment returns on scrubbers exploit the price differential between existing IFO 380 and low-sulphur alternatives; it is unclear whether IFO 380 will remain widely available in the market after 2020, and at what price. 
  • Increasing limitations on handling of wash water. 

Liquified Natural Gas (LNG)

Advantages

  • Marine engines that can burn either LNG or fuel oil (dual-fuel engines) for supply flexibility have become available in recent years.
  • Eliminates sulphur and significantly reduces emissions of NOx and CO2.
  • LNG pricing is competitive.

 

Challenges 

  • Increases emissions of carbon monoxide and unburnt hydrocarbons (known as ‘methane slip’) which are worse than CO2 from a global warming perspective.
  • Lower energy density than fuel oil, LNG storage requires 75% more storage volume which can reduce cargo capacity.
  • Handling and storage are more complex and expensive to install; fitting one of our large chemical tankers with dual-fuel LNG would cost about $6-8 million extra at the newbuilding stage, depending on storage options (it is not economical to retrofit existing ships with LNG).
  • Availability of LNG as fuel will be limited to a few main ports in 2020; supply infrastructure will expand in time.
  • Supply chains must manage varying compositions of LNG based on source gas and changes over time as lighter components vaporise first.
  • Long-term pricing compared to fuel oils may change.

Methanol

Advantages 

  • Marine engines burning methanol are in use on methanol carriers that consume fuel from the cargo carried, much as LNG carriers burn boil-off from their LNG cargo.
  • We carry methanol as cargo, and as a liquid  - its handling and storage are routine for us.
  • Methanol is widely available; one-third of global methanol production is consumed as fuel/energy, and it is already in the fuel supply chain ashore.
  • Environmentally friendly, with no sulphur and low NOx emissions.

 

Challenges

  • While it is not economical to retrofit existing engines, installation is less costly than for LNG as special insulated storage is not needed (we estimate $3-4 million extra for our larger ships).
  • Methanol has even lower energy density than LNG; it requires 2.25 times the storage volume of fuel oil.
  • The biggest hurdle is price; at today’s price of $450 per tonne, after adjusting for energy density, methanol is 65% more expensive than MGO.

Emerging Technologies

Advantages 

  • Research continues in new technologies such as wind, solar, hydrogen fuel cells and batteries.
  • Some may become viable for limited applications on smaller ships with short voyages.

 

Challenges

Will not be ready in time to impact the 2020 change in fuel regulations.