Realising the competitive potential of sulphur ECA compliance
Wärtsilä article August 2012
Producer: Mirja-Maija Santala, Media Manager, Wärtsilä Corporation
With the 1st January 2015 becoming ever closer, the 0.1% sulphur limit within ECAs is just around the corner and a global 0.5% limit is on the horizon. Decisions are being taken now that will shape the futures of companies and the industry as a whole. The details need to be weighed carefully on a case-by-case basis to establish the most appropriate method for ECA compliance.
There are three potential solutions available in the current market for achieving sulphur ECA compliance; burning distillate fuel, using LNG as a bunker fuel or installing scrubbers. From the practical operations and logistical considerations to the financial ramifications, each solution has its pros and cons that will vary depending on the vessel in question. There is no panacea, no one-size-fits-all solution, nor is there one that allows operations within ECAs to simply continue business-as-usual. However there is at least a choice.
An exhaust gas cleaning system, or scrubber, is an optimal option for compliance in many cases. And because each individual situation is different, Wärtsilä and Wärtsilä Hamworthy - acquired by Wärtsilä in January 2012 - offer a suite of wet scrubber systems. These include fresh water, seawater, closed-loop and open-loop scrubbers, as well as a hybrid system, which allows changing between the two at will, for example operating under open-loop scrubbing while underway and switching to a closed-loop system once in port waters.
Scrubbers do require an initial investment for purchase and installation. However, the installation of a scrubber from Wärtsilä removes up to 98% of SOx from vessel emissions and reduces harmful particulate matter by up to 85%, meaning that vessels can operate using conventional bunker fuel. Wärtsilä can also offer a Nitrogen Oxide Reducer that integrates optimally with Wärtsilä engines and scrubbers to provide a total air pollution package to meet upcoming regulatory requirements.
The potential cost savings achieved through the use of High Sulphur Fuel Oil (HSFO) rather than paying the 45% premium for distillates mean that the return on investment period is very attractive, and the more a vessel operates within ECAs, the shorter the payback period of that investment becomes. A report published this year by leading classification society Germanischer Lloyd provided an interesting illustration of this. The report demonstrated that for a 4,600 TEU container vessel post 2015, the payback period on a scrubber would be just under 72 months if under 10% of operations were within ECAs, but this was reduced to just over 24 months if operations within ECAs grew to only 45%. Based on the anticipated widening of price gap between HSFO and distillates as demand for the latter increases, one can assume that this ROI period will only become a more appealing proposition as time goes on.
Tried, tested and recognised
The viability of scrubbers has been acknowledged by the IMO, the European Union, in February 2012 by the US Environmental Protection Agency and in May by the British Parliament. In addition, extensive testing is performed upon each newly installed scrubber system to ensure that they are able to meet the demands placed upon them by the varying operational conditions that they will be working in. As increasing numbers of scrubbers are being installed and the industry’s understanding of their ability to achieve compliance develops, confidence in scrubbers continues to grow.
In testament to this, commercial vessels with scrubbers installed are starting to enter operation. Notably the first commercially operating scrubbing system on the Jolly Diamante, a 45,000dwt Ro-Ro vessel owned by Ignazio Messina, with four Wärtsilä Hamworthy scrubber units for its auxiliary engines and a fifth for the auxiliary boiler, was delivered at the end of 2011. Deliveries such as this and the increasing orders that the scrubber market is experiencing show a clear trend towards an awareness and understanding of the operational capability and economic viability of scrubbing systems.
Those burning distillates are likely to face a significant increase in their operational overheads. This could mean a dilemma over raising rates to reflect these increased costs or witnessing a reduction in profits at a time when some owners and operators are already struggling. Those who can maintain a business-as-usual approach to their bunker expenditure through the installation of scrubbers may realise a significant competitive advantage in terms of the rates they can offer customers and the profits they can achieve.
Ultimately, owners or operators transiting ECAs must not only consider regulatory compliance but also their competitive position.
For further information, please contact:
Ms Mirja-Maija Santala
Tel. +358 400 793 827
Wärtsilä in brief
Wärtsilä is a global leader in complete lifecycle power solutions for the marine and energy markets. By emphasising technological innovation and total efficiency, Wärtsilä maximises the environmental and economic performance of the vessels and power plants of its customers. In 2011, Wärtsilä’s net sales totalled EUR 4.2 billion with approximately 18,000 employees. The company has operations in nearly 170 locations in 70 countries around the world. Wärtsilä is listed on the NASDAQ OMX Helsinki, Finland.