The base case figure for projected uptake of exhaust gas cleaning systems (EGCS), or scrubbers, in the official availability study presented to the International Maritime Organization in 2016 may be too optimistic, the study’s lead author told a forum hosted by IBIA during London International Shipping Week (LISW).
Jasper Faber of CE Delft said the base case in the study regarding how many ships will have EGCS installed by 2020 may not be happening because current orders are slow. He said the prediction was based in part on the anticipated “excellent” economic argument for installing abatement technology to allow continued operations on high sulphur fuel oil (HSFO) in 2020, when HSFO demand and its value relative to crude is set to drop sharply.
Only around 400 ships have been fitted with or placed orders for the technology to date, well shy of the CE Delft base case in the official availability study for the IMO, which predicted that 3,800 ships would be ready to comply with sulphur regulations by using scrubbers in 2020, burning some 36 million tonnes of HSFO accounting for 11% of total global marine fuel demand.
Faber said “we may still see” something closer to the lower level of EGCS uptake predicted in the model, which pegs the number of ships using the technology in 2020 at 1,200 which would burn 14 million tonnes of fuel accounting for 4% of total marine fuel demand.
Asked what might be different if CE Delft was to do the 2020 availability assessment for the IMO today, Faber said both the EGCS uptake figure and the projected uptake of LNG as a marine fuel by 2020 “were probably on the high side”. However, this would not change the study’s overall conclusion that there will be sufficient refinery capacity to meet global demand for low sulphur fuels in 2020. Unexpectedly high or low investment in EGCSs and LNG ships would have to coincide with much higher transport demand than currently predicted to change that conclusion.
The CE Delft study’s base case for LNG (excluding boil-off gas used by LNG carriers), is that it will account for 3.22% of the global marine fuel market in 2020. Industry consultant and current IBIA chairman Robin Meech of Marine and Energy Consulting Limited (MECL) predicts that figure will be closer to 1% in 2020.
Meech told the IBIA forum that MECL’s model currently estimates there are 400 ships with EGCS scrubbing some 4 million tonnes of fuel annually, predicting this figure could rise to 10 million tonnes by 2020 based on 1,350 ships having installed abatement technology by then. MECL predicts the scrubbed volume will then rise ten-fold by 2030 to just over 100 million tonnes.
The predictions for uptake of alternatives to low sulphur fuels by 2020 is important for all stakeholders, but in particular for refiners and bunker suppliers that need to assess how much demand there will be for low sulphur fuels and HSFO to plan their market strategies effectively.
At present, it looks increasingly likely that the vast majority of demand will be for oil-based fuels to meet the global 0,50% sulphur limit, with the main question being how much of this will be traditional marine distillate grades and how much will be fuel blends that do not fit into any of the current ISO 8217 distillate grade categories.
The base case in the CE Delft study for 2020 assumes that some 13% of petroleum fuels will have a sulphur content of 0.10% or less, and that these will be mostly distillates, while 76% of petroleum fuels will have a sulphur content of between 0.10% – 0.50% which will consist of various blends.
Faber told the IBIA forum that the only factor that may change the overall conclusion about refinery capacity to meet low sulphur fuel demand in 2020 would be delayed or aborted expansion projects, delayed upgrading of hydroprocessing catalysts, unavailability of low sulphur crude as a result of geopolitical tensions, or new regulations requiring lower sulphur in road diesel.
But overall, the study concluded that global shortages are “improbable” although regional oversupply and shortages are likely, however they cancel each other out on a global level. Such regional supply and demand can be balanced by transport of products and changes in bunkering patterns as demand grows in areas where good availability allows for more competitive pricing, Faber said.
The IBIA forum, held in London on 13 September during LISW was more than fully subscribed. Attendees were treated to presentations and panel debates with expert participants, followed by drinks sponsored by Intertek.