Bunker Fuel Quality: 2020 Outlook North of England P&I Athens, November 2018 24
Options for 2020 Compliance After 1 st of January 2020, a fuel with Sulphur content in excess of 0.50% will be regarded as non-compliant by Port State Control. Essentially there are 2 options to comply: <0.50% Sulphur Fuels Conventional hydrocarbon fuels, blends. Alternative Fuels Abatement Technology, such as Exhaust Gas Scrubbers with HFO 25
Industry Fuel Forecasters: million barrels /day 4.5 4 3.5 3 2.5 2 1.5 1 0.5 Global Marine Fuel Consumption 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 HFO Distillate 3 million barrel/day switch from HFO to Distillate in 2020 Marine accounted for 45% of global demand for HFO in 2015 & 3% of global distillate demand. Marine will account for less 25% of global HFO demand during 2020 & 10% of distillate demand. 26
Global Oil Major s Forecast Regarding: Face of Fuel Demand The Changing 70 Forecasted Fuel Demand from 2020 Percentage % 60 50 40 30 20 10 0 2020 2022 2024 Year MGO >0.5%S LSFO HSFO with Scrubbers HSFO Non-Compliant LNG 27
CE Delft - Marine Fuel Demand Forecast Demand Million MT Fuel Type 2012 Demand 2020 Demand Forecast Diff % HFO 228 0.1% MGO / Hybrid 64 0.5% MGO / Hybrid 0 TOTAL 292 36* -84% 39* -39% 233 ++ 308 +5% *Demand considering projected market uptake of scrubbers. Note Alternative fuels such as LNG not considered, but a limited effect on demand expected 28
The Financial Impact of Fuel Change The International Transport Forum at the OECD* stated: In 2015, the TOTAL increase in container shipping costs due to the ECA requirements amounted to USD 500 million. The 2020 requirements could add annual total costs up to USD 30 billion for the container shipping industry. Forecasters are stating the price difference between Distillate and HFO could rise to >$400/mt in 2020. A heavy increase in OPEX for anyone choosing the Distillate Fuel option. *OECD: Organisation for Economic Co-operation and Development 29
Current Global Fuel Quality Currently, 15% of all Residual fuels and 9% of all Distillate fuels tested exceed the ISO8217 test specification for at least one parameter. In 2017, VPS released 58 Bunker Alerts: - 36 (62%) related to Residual fuel - 30% increase on 2016-22 (38%) related to Distillate fuel 70% increase on 2016 YTD 2018: 48 Bunker Alerts 30 x Residual, 18 x Distillate (63% : 37%) Key Parameters: Contaminants, Cat- Fines, FP, Cold Flow Properties No. of Alerts No. of alerts 15 10 5 0 0 2 4 6 8 Residual VPS Bunker Alerts by Test Parameter - 2017 Distillat e Residual Residual Distillat e Distillate VPS Bunker Alert Volumes by Region - 2017 Residual Distillat e Residual Distillat e Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Americas Europe Middle East Asia 30
Scrubbers There are about 1850 ships with installed or confirmed scrubber systems installations The first scrubber wave started in 2014 in preparation of SECA in North America The second scrubber wave is now on its way with over 1000 confirmed projects in the past 6 months The majority of the orders are for retrofits 31
Scrubber Types Open Loop Sea water flows through the tower and is discharged overboard. Few components (Lower cost) Utilises seawater directly from sea, no hazardous chemicals are required Not allowed in some ports and areas. Unsuitable in brackish and fresh waters. Hybrid/Closed Loop Process water flows through the tower re-circulates in a closed loop. Treated wash water is held onboard then discharged where permitted. Increased flexibility. Can operate in all areas regardless of seawater alkalinity or temperature Increased complexity (higher costs) Requires a constant supply of an alkaline medium. NaOH is hazardous and require special handling 32
Typical Scrubber Installation 33
Options for 2020 Compliance: 0.50% S max fuels The choice of available marine fuels is greater than ever: 1. ISO 8217:2017 Distillates DMA/DFA, DMB/DFB, DMZ/DFZ & DMX; 2. ISO 8217 Residuals RM Grades 3. Other Fuels: ULSFOs/Hybrids e.g. HDME50 LNG Methane, Ethane, Propane Methanol & Ethanol 4. Other Power Sources: Solar Wind Fuel Cells 34
Selection of Compliant Fuels General requirements of ISO 8217:2017 along with the characteristics included in Table 1 and 2 cover 2020 0.50% max. Sulphur fuels in the same way as they cover today s fuels. Compliant fuel will be more expensive that the traditional HSHFO. In order to avoid potential difficulties during the first few months of the implementation period, some shipping companies might consider operating their ships on distillate fuel initially, subsequently changing over to 0.50% blended fuels once sufficient reliability is ensured with regard to availability and safety. 35
Distillates The perception has always been, Distillates are Problem Free Increasing issues with: Flash Point Blending with more volatile components Cold-Flow Properties PP, CP, CFPP, waxing of fuel. As demand increases, quality issues will become more common Fuel Change-over, low viscosity, poor lubricity, reduced stability, wax precipitation at low temperature, FAME or Microbial contamination. 36
Residual Fuels At present Residual fuels remain the largest volume fuel used on board. Therefore generate the largest number of technical issues on ships Most significant issues are high cat fines, sediment. Fuels may meet the ISO 8217 Specification, but can still cause operational problems, due to the presence of components not normally found in the fuel oil. These materials are not specifically identified in ISO8217. Issues with contamination are increasing. 37
Catfines 0.5% Smax Fuels could contain elevated levels of cat fines which, if not properly treated, could trigger catastrophic engine damage. In case laboratory analysis shows a high concertation, then: Maintain storage tank temperature at least 10 C above pour point. Keep settling tanks at 85 C. Operate purifiers at optimum efficiency and minimum throughput. Drain Water from fuel tanks to aid settling. 38
Hybrids - Example of 0.50% Smax Fuel Oil Analysis 39
LNG & Methanol 247 LNG Fuelled ships, 110 LNG ready 7 Methanol Fuelled ships, 4 under construction 40
LNG LNG was considered as the solution to the environmental question regarding which fuel/s should be used for MARPOL compliance. Handling & Storage of LNG is more complicated than traditional fuels The infrastructure for distribution and supply has been relatively slow to develop, although improving. Forecasts estimate 2%-3% of the fleet will be burning LNG in 2020. 41
Risk of Delivering Off-Spec LNG in the LNG Supply Chain A key issue in LNG transportation is the generation of boil-off gas (BOG) The boil-off of the volatile components in the LNG stored leads to a change in composition of LNG. Boil-off rates depend on: Gas Composition of the LNG Temperature of the LNG Heat transfer rate to the LNG through the tank Residence time of the LNG in the chain 42
Ship Specific Implementation Plans Operators will need to consider and decide between: a) Cleaning tanks designated for the bunkering of compliant fuel b) Loading compliant fuel into tanks on top of the remaining of 3.5% Smax fuel (flushing process) to ensure that all non-compliant fuels is out of the system before 2020, bearing in mind possible incompatibility risks. Ships can consider conducting feasibility studies of increasing the segregation of bunker tanks and piping/pumping arrangements to mitigate compatibility risk. Also to consider increasing the distillate storage capacity to cover for any periods of the unavailability of compliant fuels. In case low viscosity distillate fuels are stored into tanks with heating coils, it is recommended that isolation arrangements are tested. The temperature of the fuel at each different location needs to be carefully maintained, from storage to combustion. 43
Changing from HSFO to VLSFO Organising the switch to low sulphur fuel As the sulphur cap implementation is imminent in less than 14 months, operators need to worry about many issues as well, other than fuel selection only. In fact, IMO's decision to implement a 0.50 per cent cap on sulphur emissions has created uncertainty amongst vessel operators. Questions are already being asked about how to comply with the changing emissions target, what types of fuels will be available and where. However, ensuring compliance isn t just about fuel selection; the actual change over process from heavy fuel oil (HFO) to new, low-sulphur alternatives needs careful management. There are also implications for the selection of lubricants. 44
Changing from HSFO to VLSFO Tank cleaning & Storage If a scrubber is not fitted, operators will need to ensure that their fuel tanks do not contain high-sulphur HFO by the IMO deadline. Fuel tanks will probably retain sediment from the existing HFO, which is likely to contain those higher levels of sulphur. If this is not removed, there is the risk that the sulphur will contaminate the compliant fuel, pushing its sulphur content above the 0.50% limit. Many compliant fuels entering the market will have a sulphur content very close to the 0.50 per cent cap, so even very low levels of residual sulphur left in a fuel tank could tip a vessel over the IMO s compliance limit. To minimise this risk, it is recommended that vessel operators flush fuel tanks with a distillatebased product, which will help remove sludge deposits. This process may need to be repeated, depending on the amount of residue present. In some instances, tank bottoms may have to be manually cleaned. 45
Changing from HSFO to VLSFO Tank cleaning & Storage During flushing of the tanks, the accumulated cat fines at the bottom, may swirl back into the fuel in concentrations that no purifiers can handle and cause abnormal wear to the engines or fuel system Many compliant fuels entering the market will have a sulphur content very close to the 0.50 per cent cap, so even very low levels of residual sulphur left in a fuel tank could tip a vessel over the IMO s compliance limit. Operators should remember that the storage, handling and treatment of 0.50 per cent sulphur fuels will involve bunkering fuels of a wider variety of viscosities, types and formulations than seen today. On-board handling practices have to take into account likely changes in fuel types, including fuel segregation and routine compatibility testing. 46
Change Over Procedure from a residual to a distillate or blended 47
Changing from HSFO to VLSFO Cylinder oils Cylinder oils will change, no more high BN will be required. BN40 could be suitable for both 0.50%Smax and 0.10% at emission control areas. Shell Shell Marine has a new BN40 product under field trial, for launch in 2019. ExxonMobil Mobilgard 540 will be available from the first quarter of 2019 and is compatible at any volume with ExxonMobil s current cylinder oil offer. 48
Summary Heading towards 2020 & beyond Wider range/choice of fuels available with many technical considerations. OPEX increase expected. Increase in fuel quality issues, and their complexity. Recommend to monitor fuel quality - improve operational efficiency, protect your assets, comply with legislation. 49
Thank you for your attention! YOUR FUEL MANAGEMENT PARTNER 50