Logistics

Shipping Corporation change course on retro-fitting scrubbers on its ships

P Manoj Mumbai | Updated on August 12, 2019 Published on August 12, 2019

File photo

To use low sulphur fuel oil to comply with IMO rule from January 1

State-run Shipping Corporation of India Ltd (SCI), will not install exhaust gas cleaning systems or scrubbers on any of its ships, and will use low sulphur fuel to comply with an impending global rule aimed at cutting emissions from ships.

Beginning 1 January 2020, ships must use fuel oil on board with a sulphur content of not more than 0.5 per cent mass/mass (m/m), a steep cut from the current global sulphur cap of 3.5 per cent m/m, according to rules framed by the International Maritime Organisation (IMO).

Ships can meet the requirement by either using low-sulphur compliant fuel oil or continue to use high sulphur fuel oil by fitting scrubbers.

The IMO rule face challenges including adequate availability of both low and high sulphur fuels, their price and capacity addition of refineries involving huge investment, particularly for the older ones.

Earlier this year, Anoop Kumar Sharma, Chairman and Managing Director, SCI, had told BusinessLine that India’s biggest ocean carrier was looking at the option of fitting scrubbers on its bigger ships like the very large crude carriers (VLCCs) and Suezmaxes.

SCI runs a fleet of 63 ships, of which five are VLCCs. Installing a scrubber is estimated to cost some $3-5 million per ship. But, after conducting an in-depth study, SCI has decided to change course.

Price difference

“We are not putting any scrubbers whatsoever,” Sharma told BusinessLine on Friday. “In the beginning, we were thinking of installing scrubbers on our VLCCs and Suezmaxes, but then, the more we studied (the matter), we realised that we will not have a pay-back period. So, we will go for the low sulphur fuel. As of now, we are buying high sulphur fuel, but come October, we’ll start buying low sulphur fuel,” Sharma, who will leave SCI on September 11 after completing a three-year term at the helm, said.

The price difference between low sulphur and high sulphur bunker fuel has narrowed to about $60 a ton from nearly $300 a ton a few months ago, forcing SCI to re-think the scrubber retrofit plan.

Bigger ships such as oil super tankers and Suezmaxes burn as much as 50 tons of fuel oil a day. A higher price differential between low and high sulphur fuel oil would, therefore, fetch higher savings for the fleet owners and lowers the pay-back period on fitting scrubbers.

On the contrary, if the price differential narrows, then the pay-back period on installing scrubbers increases.

Out of the total bunker oil demand estimate of about 4 million barrels per day (bpd), around 15 per cent is already the low sulphur fuel usage. By 2020, it is estimated that the demand for low sulphur fuel may go up to about 2.5 mn bpd, a jump of over 60 per cent from the current 15 per cent, posing a challenge to refiners to meet the demand.

Combating pollution

By not reducing the sulphur emissions limit for ships from 2020, air pollution would contribute to more than 570,000 additional premature deaths globally between 2020-2025, according to a study submitted to IMO's Marine Environment Protection Committee (MEPC).

“So, a reduction in the limit for sulphur in fuel oil used on board ships will have tangible health benefits, particularly for populations living close to ports and major shipping routes,” the IMO said after the 73 session of the MEPC held in London between 22 and 26 October 2018.

Published on August 12, 2019
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