2020 will see the beginning of the IMO’s worldwide 0.5% limit on the sulphur content of marine fuel. This will be a huge step change for how the world’s merchant fleet sources its fuel: in 2016, global demand for high-sulphur fuel oil accounted for almost 70% of all bunker fuels sold.

But this poses a problem: producers and refiners now have less than three years to assure a supply of ultra-low-sulphur marine fuel that will satisfy demand from the world’s merchant fleet. A similar supply squeeze arose two years ago, when the IMO instated its 0.1% sulphur content limit within emission control areas (ECAs). And if we’ve learned anything from the past few years, satisfying demand will be expensive.

Shipowners have two options: switch to alternative fuels, such as marine gas oil (MGO); or install scrubbers, which remove sulphur from exhaust emissions.

Research firm Wood Mackenzie has estimated that a switch to MGO fuel would be the more costly option. A combination of higher crude prices and tight availability of MGO could take the price of MGO up to almost four times that of fuel oil in 2016, and eventually cost the entire industry additional $60bn annually, the consultancy said in a recent report.

“In full compliance, we expect [carriers] to try to pass the cost to consumers and freight rates from the Middle East to Singapore could increase by up to US$1 a barrel,” Wood Mac said in a recent report.

Installing scrubbers, on the other hand, may be expensive as an initial investment but Wood Mac estimates a high rate of return, ranging between 20% and 50% depending on investment cost, MGO-fuel oil price spread and ships’ fuel consumption.

That being said, the initial investment in scrubbers is high. Khalid Hashim, MD of Precious Shipping, said in a recent article he almost fell off his chair upon reading a quote of $91.5m for 14 ships to be fitted with scrubbers. This price – $6.54m per vessel – is way above the value of many older and/or smaller vessels – why spend more on retrofitting than your ship is worth? Added to this, many still regard scrubbers as a commercially unproven technology.

Chinese refiners like Sinopec and PetroChina, and Indian refiners such as Reliance and Essar will be the ones who benefit from higher MGO fuel prices. The firms are already “deep conversion” refiners with the capability to produce more MGO on demand. This means that after 2020 we could likely see many more vessels opting to bunker in China or India, rather than Singapore, which has been the world’s largest bunkering hub.

Singaporean bunker suppliers currently don't have the capability to keep up with incremental demand for MGO, unless drastic changes are made. Indeed, Singapore has been focusing increasing its LNG bunkering facilities during the past few years, supported by generous grants from the city-state’s Maritime & Port Authority.

Complying with sulphur limits on marine fuel will be a massive headache for the shipping industry in the coming years. But looking at the (much much) bigger picture, making shipping emissions “cleaner” won’t just be beneficial for the environment but for human health too. Around 60,000 lives are lost every year to lung cancer and cardiovascular diseases caused by emissions from shipping, according to 2015 research by Germany’s University of Rostock and Helmholzzentrum München. Researchers found that emissions from diesel fuel were even more harmful than those from heavy fuel oil, due to its higher soot content. The researchers recommended scrubbers as a solution to reduce the harmful particulate matter released in emissions. Might scrubbers be the world’s most expensive life-saving technology?

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