Thailand-based James Ashworth of Energy consultancy TRI-ZEN explains to Wendy Laursen how the motivation for Asian emission control areas differs from the situation in Europe.
Environmental concerns feature highly on the Norwegian electorate’s radar. Accompanied by an abundance of gas in Norwegian waters and the escalating price of oil based marine fuels, it made for an easy option to have LNG as a preferred marine fuel. Today, there is a properly established and relatively mature market for LNG bunkers in Norway. Seeing the advantages on offer, other Nordic nations sought and were granted a sulphur emissions control area (SECA) and latterly, emissions control area (ECA) in 2007, covering the Baltic, North Sea and Channel.
Driven by a new administration in Washington and low gas prices in the USA and Canada, the North American ECA came into force from August 2012, covering the east and west coasts and US islands in the Caribbean and Pacific.
So, the drivers for the introduction of ECAs in both cases were environmental and a price differential in favour of LNG over heavy fuel oil (HFO) and marine diesel oil (MDO). Asians, generally, share fewer environmental concerns and have the highest gas prices, especially following the post Fukushima nuclear shutdowns. So the incentive is lower, but there are exceptions.
Straits of Malacca
Singapore remains the world’s leading bunker port, delivering around 40 million tonnes/year. Singapore opened its first LNG import terminal in 2013 and has announced plans for a second terminal. Singapore commissioned a study on LNG bunkering in 2013, but nothing has been heard since then. The likelihood remains that future LNG bunker provision will involve a floating import facility.
Meanwhile, Malaysia could well enter the game. Malaysia opened its new LNG import terminal at Melaka in 2013 and could use this to make LNG bunkers available in Johor. It has also mooted Pangerang, west of Singapore, for a dedicated LNG bunkering site.
Pearl River Delta
Driven by popular protest against high levels of airborne pollution affecting southern China and Hong Kong, the Hong Kong air pollution control (marine light diesel) regulation was gazetted on 17 January 2014. Subject to the approval of the Hong Kong Legislative Council, the regulation takes effect on 1 April 2014. This has also coincided with record airborne pollution levels in Beijing causing public outcry and a government purge on the most polluting industry and power generation (mainly coal fired). The results of the Hong Kong directive are to be monitored closely by Hong Kong neighbours and could lead to additional legislation in and around the Pearl River Delta, if not a Chinese ECA in the near future.
Yangtze River
Given high levels of maritime derived airborne pollution on the busy Yangtze River, the Chinese government has directed a significant conversion of Yangtze river craft and the establishment of a network of LNG bunker stations.
South Korean Coast
South Korea is due to open a carbon trading exchange on 1 January 2015. This is a measure of Korea’s public concern over environmental matters. The problem of airborne pollution has mushroomed on the back of Korea’s phenomenal economic growth and industrial output. With high levels of shipping activity in Korea, it is hard to imagine that the mooted idea of a Korean ECA will not consolidate in the near future.
Japanese Coast
Around 10% of the Port of Kobe’s airborne emissions count is marine-derived. Post-Fukushima, Japan has witnessed the stirring of a latent melting pot of public concerns over matters environmental. While no plans have been tabled, Japan is one of the world’s biggest importers of LNG. Put these things together and the logical corollary is a Japanese ECA in the near future.
Australia and New Zealand
Following the mixed reaction to the introduction of an Australian carbon tax in 2012 and with a government change in 2013, it is unlikely that the new Australian government will choose introduction of further emissions legislation. However, Australia does have an existing mechanism for dealing with the marine emissions problem. Work has already started to identify particularly sensitive sea areas (PSSAs), and this has led to the adoption of new nomenclature, marine environment high risk areas (MEHRAs). IMO guidelines are in use to study and manage selection criteria and we can reasonably conclude that limits will be aligned as well.
MEHRAs are unilateral, faster and easier to introduce than walking the IMO ECA path. A likely outcome will be the widespread adoption of MEHRAs around the Australian coastline such that an ECA would be a small next step.
Although the environment is high on the political agenda, with no LNG infrastructure in place, New Zealand is in no real position today to request ECA status. The planned New Plymouth LNG import terminal has been on and off the table for years. But that could all change fast if Australia adopts LNG bunkers and if supplies are made available from Australia, or if New Zealand manages to commercialise its gas reserves.
