There is currently a request for the use of low sulfur marine fuel in the ECA zones. A widespread implementation will apply starting 1st January 2015 when 0.1 % sulfur content distillate fuels will have to be consumed. Additionally fuels of sulfur content 0.5 % will have to be consumed worldwide, even in the oceans, starting 2020 (implementation of the use of fuels in the oceans with 0.5% limit is subject to review in 2018.) Present ECA-SOx zones are:
- Baltic and North Sea
- North American
US Caribbean (starting 1st January 2014)
The maritime community can expect that more ECA zones will come into effect in the next few years in response to the worldwide trend towards reducing harmful emissions from ships, particularity in heavily populated areas with significant maritime trade, like Japan and Korean coast, Mediterranean sea, etc.
Residual-Distillate fuels cost
The difference between Residual and Distillate fuel cost is of paramount importance for vessels trading in ECA-SOx zones where it is mandatory to consume low sulfur fuels. The past suggests that both Residual and Distillate fuels indicate a price rise with the time and the predictions are that the cost difference between such fuels may rise for the following reason: In 2015 distillate fuel will have a high demand created by ships complying with ECA requirements. The distillate premium may then escalate as refineries will be forced to employ energy intensive means for refining more distillate fuel than they do today. The premium for low sulfur distillate (MGO) has been in the region of 50% over residual fuel and is likely to remain so, if not increase. Therefore operators may consider electing alternative methods as to continue using residual fuels. Taking into consideration the present extent of ECA zones and the eventual future addition of new ones, the use of fuels with sulfur contain 0.5 % worldwide starting 2020 and the distillate fuel cost trend to increase in the future, it is worth, to at least, for Owner with rather young fleet to consider the possibility of installing EGCS’s or to investigate via a techno-economical study the eventual advantages / disadvantages of such installation. Argo Navis has developed such techno-economical studies for vessels operators to consult them decide whether it is worth considering the installation of an EGCS. From Argo Navis’ recent techno-economical study for a typical Bulk carrier of 75000 MT DWT trading 6 months of the year in ECA zones, the payback period for the acquisition / installation of an EGCS is estimated to be about 5 years. The shipping industry suffered five difficult years where the operational expenditure has typically been higher than the income. Therefore it is rather unlikely the vessels’ managers / operators to consider such high expenditure as the installation of EGCS. However based on Argo Navis techno-economical studies, the following has been concluded.
• At the end of the payback period the vessel will profit from the cost difference Residual / Distillate fuel which is calculated to about USD 1.0 to 1.5 million annually based on 6 months trading in ECA zones. On top of above, an additional profit will be added after the year 2020 when the world wide use of fuel will be restricted to fuels with sulfur content of 0,5%. • The implementation therefore of MARPOL ANEX VI Regulation 14 (SOx Emissions) unlike other MARPOL and SOLAS Regulations may prove profitable for vessels installed with an EGCS and therefore worth considering.
Argo Navis is already involved in techno-economical studies for EGCS projects which have driven Owners to consider installation of such systems on the vessels of their fleet based on the calculated future profit margins.