A year when efficiency became the focus
2013 may well go down as the year in which the shipping world in general really woke up to the fact that serious changes will have to be made.
Alternative fuels were the first area of progress. What seemed a rather far-fetched and over-specialised idea even three or four years ago – and that is an instant in the slow moving conservative world of maritime transport – moved several steps further towards reality. The impetus seemed not so much the fact that 2015 is now very close. That, after all, only concerns ECAs and most large ships spend most of their time outside ECAs. One driver behind change seems to be the cost of fuel. And the double whammy of legislation – i.e. IMO Tier III emissions limits and the 0.5% global sulphur cap – provided another reason to think outside the box. However, the real problem for ship owners and operators is the over-capacity in most parts of the industry which means falling income, and when this is combined with steeply rising costs, a rethink of how things are done seems inevitable.
Looking at the wider world of shipbuilding, the Chinese bubble seems close to bursting. We heard predictions during 2013 that rather than continuing its march towards becoming by far the world’s biggest shipbuilding nation, in a few years time only something between about 8% and 30% of Chinese yards will still be in business. Gone are the days when building ships was a low-technology, low cost operation, when owners were forced to go for the cheapest, simplest ships and anything more sophisticated had to take its place at the back of the queue. Now, nobody wants old designs. Yards have to listen to what owners really want. And with no new orders for old technology once the current backlog is finally delivered, if yards want to stay in business they have to encompass the idea of the efficient ship.
2013 is the year when efficiency became the watchword. Engines and propulsion systems have been improving year on year for a long time, and there is little else that can be done in this area. It is accepted that slow steaming is mostly here to stay. Ships now have to look to more ways of saving fuel, and thus cost. Well designed hull forms built, and finished, to precision measurements and high standards are one must-have for today’s and tomorrow’s ships. And cutting power requirements onboard is another essential focus – even simple things like LED lighting can make a big difference, let alone more radical steps like waste heat recovery, and hybrid power systems for cranes, cargo equipment and auxiliary power. All of these measures evelvate shipbuilding several steps up the technology ladder, from merely welding plates of steel together well enough to make sure the result stays afloat, to an integrated, high-tech, sustainable machine, that will still be efficient and competitive through its 25-30 year life.
It’s the quest for higher efficiency that has forced owners and classification societies to do their sums, which have come up with the interesting conclusion that it’s a toss-up between retrofitting the existing fleet to become more efficient, or simply scrapping vessels which may not be old in terms of years, but are built to yesterday’s technology, and replacing them with new eco-ships. Environmental issues are a big factor in these equations. Regardless of what future fuel will be burned by the current fleet – more of that later – there is the ballast water question to consider. Nearly all ships will need some extensive alterations to comply with the ballast water convention, whenever that actually comes in. And that won’t be long – it looks like the first drydocking after the beginning of 2016 is when the major work will be needed. Although the principle behind the ballast water convention was laudable enough, there are still voices in the wilderness questioning whether or not it will make any difference overall to maintaining the delicate ecological balance. And, with all due respects to IMO, it has provided an object lesson in how not to frame and implement important legislation. IMO is of course in the unenviable position of having responsibility for maritime safety and environmental issues, but to actually implement and enforce its rules it can only rely on the individual flag states. And when several major flag states and shipowning nations cannot agree, as continues to be the case with the ballast water convention, chaos and uncertainty are inevitable.
So, accepting that almost all of the current fleet will need major work to install ballast water treatment systems, what must be done to comply with the upcoming emissions legislation? Most owners are, understandably, still adopting a ‘wait and see’ position. This means they will be forced down the distillate fuels path to meet the 2015 0.1% ECA limit and the 2020, or more likely 2025, 0.5% global fuel sulphur limit. Although this may mean installing extra equipment to allow the changeover between different fuel oils, major changes will not be needed until IMO Tier III and the equivalent US limits enter into force, and then most ships will need to add SCR (selective catalytic reduction) or EGR (exhaust gas recirculation) equipment. The proposed 2016 date for IMO Tier III could well be extended until 2021 – yet another area of uncertainty existing at the close of 2013.
This leaves the dilemma of how to ensure new ships can operate economically and best meet the upcoming legislation. Apart from fuel saving measures incorporated into the design, the big difference is the choice of fuel to burn in the future. It’s still a three-way option, but that may change in the future.
The simple, ‘wait and see’ answer is to burn distillate fuel. The down side is the price differential between distillate and residual fuels, which is expected to increase sharply in 2015 when the ECA limits come in and to carry on increasing, at least until (or if) refinery capacity and technology can be extended to meet the increased demand for distillates. The second option is the exhaust gas scrubber which allows ships to meet the low sulphur standards while still burning heavy fuel oils. A short time ago this looked like the obvious answer, and a number of companies have already ordered scrubbers to be retrofitted to existing ships or made provision in new designs. But scrubbers are bulky, costly and some regard the technology as still not sufficiently proven in the maritime environment on large engines. But it is the third option, which even three or four years ago looked like a non-starter outside certain specialised sectors, that currently seems to be a favourite for the future, and that is a switch to gaseous fuels, particularly LNG. The technology, not to mention the infrastructure, is fast catching up with maritime demands and, taking everything into account, the cost of running on LNG is looking as if it will be considerably less than distillate fuels and maybe even on a par with HFO.
2013 saw the two-stroke marine dual fuel (i.e. fuel oil or LNG) engine become reality. MAN’s high-pressure gas engine has been around for a while, in fact it is based on technology used most notably many years ago in a Japanese power station. It has picked up some orders, notably from the USA where low cost LNG is already certain. It was joined during the year by Wärtsilä’s low pressure gas dual-fuel two stroke engine, which did not take long after launch to achieve its first orders. The two approaches are quite different. Both claim fuel flexibility, the low pressure system is simpler and thus cheaper, and meets Tier III without after-treatment. The high pressure system, however, claims near-zero methane slip, and the capability of being more easily retrofitted to existing engines, plus it runs on the diesel cycle regardless of the fuel used. But despite the low methane slip of the high pressure system, it is claimed that overall greenhouse gas emissions are similar for both technologies, and both are lower than pure diesel engines.
So the future solution remains far from clear cut. Eventual fuel price differentials, the availability of gaseous fuels, and the relative amounts of time spent in ECAs and other low emission zones will no doubt be the major influences behind future choice.
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