Following the European Parliament’s confirmation that it will not apply a five-year extension to the introduction of MARPOL regulations governing sulphur content of bunker fuels (read more here), the shipping industry is now faced with the unavoidable prospect of forwarding goods with a maximum limit 0.1% sulphur content in emission control areas (ECAs) around the Baltic and North seas, and the English Channel from 2015. Similar restrictions will also be in place along the US and Canandia coasts.
That decision came as a disappointment to shipping operators, including ro-ro lines, who have argued that the subsequent rise in bunker costs – which could result in a premium of between $350-$400 on top of near-historic highs of around $700 –will lead to substantial modal shift from short sea shipping to land transport.
While the industry is largely unprepared for the imminent change, one leading ocean forwarder is stressing the need for collective action to find a solution as soon as possible.
Speaking at last week’s RoRoEx conference in Gothenburg, Sweden, WWL’s CEO, Arild Iversen, acknowledged that the shipping industry was unprepared for the change but said that, equally, WWL was not prepared to see a shift back to the land-based movement of goods as it went against the environmental priorities that the company has maintained over the past decade.
“When we started in 2001 at seriously looking at how to bring our sulphur consumption down to a level that was set at 1.5% globally, it took us three years to find practical solutions that we could use,” said Iversen. “It is less than three years before these new ECA regulations come into force and I am asking, how are we as an industry going to face this challenge in such a short time when it took us three years to get down to 1.5%?”
Iversen outlined a number of options that WWL has been investigating that will require an industry-wide effort to achieve, and one in particular that will take a concerted effort in changing the minds of the oil companies involved.
The use of marine gas oil or diesel is currently lower in cost but is likely to skyrocket in the near future. WWL will use a mix if it has no other option said Iversen. There is also the costly investment required in scrubber technology, something that WWL is researching but ultimately an option Iversen does not believe to be the long-term answer. The cost is high, as outlined by Peder Gellert of DFDS Seaways, speaking at the ECG Assembly in Copenhagen recently, who estimated the cost of fitting scrubbers to DFDS’ entire fleet 54 ships at around €155m ($194m). In addition, the increase in weight on the ship of a 50-tonne scrubber would push up fuel expenditure and would mean it was unsuitable for smaller ro-ro vessels. And it still leaves the removal of sulphur in the hands of the shipping company.
“I hope we will never see scrubbers on 40,000 vessels, because the sulphur has to be gotten rid of somewhere,” said Iversen.
Instead, Iversen said the best solution would be to use desulphurised heavy fuel oil, something that doesn’t currently exist, but which WWL believes could be an industry-wide solution.
After company research, Iversen said the best route would be to remove the problem at its source, at the refineries producing the fuel. It is an option that WWL is calling on its industry peers and customers as a whole to help lobby for.
“Fuel comes with high sulphur and we should work with the providers, the refineries, to take out the sulphur at the source,” said Iversen. “We have to challenge our customers and competitors to work with us to lobby for a change here.”
This will not be easy given the resistance from oil companies wary of making the investment required.
“Desulphurised bunker oil is the product we are looking for [and] our understanding is that there are processes for this,” said Melanie Moore, WWL’s vice president of Environment. “However, this approach has been discounted as 'not an option' by the oil majors and refiners owing to the refinery investments that need to be undertaken.”
She also said that there was resistance because of the cost involved versus the alternative of creating other lighter product types.
"As we want the most cost-effective compliance solution for our customers, we want to work with other industry players to vocalise the demand for this type of desulpurized bunker oil product,” said Moore. “Compared to the fuel switch to the distillate product Marine Gas Oil (MGO) which would incur a 50+% price premium effect, we consider this to be the more sustainable compliance option for the industry.”
To achieve this, Iversen said it was the shipping companies, including bulk, tanker and container companies, that first needed to get organised together as a group and make sure they were pursuing the most cost-effective method before approaching their customers–in WWL’s case the vehicle and equipment makers. Once organised, Iversen said that the voice of the OEM would then be a powerful one and crucial in helping to reach the necessary critical mass.
“We as shipping and logistics companies first need to organise ourselves and then the next step will be to involve our customers,” Iversen told Automotive Logistics. “They don’t want us to end up being forced to have solutions that are not efficient, they don’t want us to have solutions that are not good for environment. I think then, there could be an enormous push from the car manufacturers.”