HMM CEO highlights challenges of IMO sulfur cap

Meanwhile, ExxonMobil recently released a survey illustrating how the route to compliance with the International Maritime Organization’s 2020 limit on the amount of sulfur allowable in marine fuel is still unclear for many vessel operators.    Hyundai Merchant Marine (HMM) President and CEO C.K. Yoo discussed how the global shipping industry will be impacted by upcoming environmental regulations during the TPM Asia conference in Shenzhen on Wednesday.
   Yoo highlighted how the International Maritime Organization’s (IMO) decision to lower the global sulfur cap in 2020 will place strain on the shipping industry.
   The IMO’s Maritime Environmental Protection Committee will lower the global cap on the amount of sulfur in marine fuel from 3.5 percent to 0.5 percent on Jan. 1, 2020. The global cap on marine fuel sulfur content had previously been cut from 4.5 percent to 3.5 percent back in 2012.
   Commenting on the upcoming sulfur cap, Yoo said that “complexity in this issue comes from the fact that there are many options available on the table and the uncertainties related to these options.”
   In order to comply, shipping lines can either use marine oil with less than 0.5 percent sulfur emission, install scrubbers to old or new ships, or begin using ships that use liquefied natural gas (LNG).
   However, Yoo pointed out how prices of low sulfur fuel oil or low sulfur gas oil are currently over 50 percent higher than heavy fuel oil, adding that it is very difficult to forecast the price of low sulfur fuel oil in 2020 and its availability, region wise.
   Although installing or retrofitting scrubbers into ships allows ship operators to keep using heavy fuel oil – since scrubbers help to reduce sulfur emissions to meet the requirement – the installation of scrubbers is expensive and timely, and retrofitting scrubbers on the existing ships will result in sacrificing cargo space, Yoo said.
  In regards to using LNG fuelled ships, Yoo said they are expensive to build, there is a limitation in LNG bunkering locations, and the future price of LNG is hard to predict.
   “With all these complexities, I want to suggest that we need to make every effort to address these uncertainties by continuously seeking solutions from maritime technology in cooperation with relevant authorities and maritime technology institutions with an aim to reduce the cost burden or avoid wastage in investments related to compliance,” Yoo said.
   “We, at HMM, are committed to the sublime principle of protecting the environment and we are willing to share technical solutions as they are identified,” he added. “Furthermore, we would rather take the sulfur compliance as an opportunity of enhancing our competitiveness as we gradually keep replacing our old fleet with environmentally friendly ships in line with the new regulations.”
   Overall, the implementation of the sulfur cap could cause shipping industry fuel costs to jump by as much as $60 billion annually, according to a report earlier this year by research and consulting firm Wood Mackenzie.
   In addition, a survey conducted by ExxonMobil found that the route to compliance with the 2020 sulfur cap is still unclear for many vessel operators, the oil and gas company said this week.
   The survey found that of the respondents:
     • 70 percent do not believe the industry is ready for the deadline;
     • 53 percent predict an increase in fuel spend;
     • 45 percent predict an increased investment in abatement technologies (scrubbers), while only 11 percent said they were actively looking to install a scrubber before 2020, with 40 percent citing a lack of economic clarity as a reason for forgoing investment;
     • 31 percent believe there will be a growth in the adoption of LNG as a marine fuel;
     • 69 percent believe the cap will lead to the development of new low sulfur fuels;
     • And 32 percent believe that a combination of heavy fuel oil, marine gas oil and fuels and blends will be used.
   “The results of this survey show that that we are heading to a multi-fuel future and that there is not one obvious fuel solution that will apply to all vessels,” ExxonMobil Global Marine Marketing Manager Iain White said.
   “At ExxonMobil we expect that new 0.5 percent fuel formulations will emerge, based on low sulfur refinery streams, in addition to novel fuel blends,” he said. “As a result, it’s likely we will see increased compatibility and stability problems, which will make purchasing fuels from a trusted supplier more important than ever.”