Key questions and responses, with INTERTANKO’s conclusions

Would a mandatory global low sulphur cap work?

There are three alternatives:

(a) Do nothing, keep the rules unchanged.

(b) Keep the SECA system, but reduce the sulphur emissions from ships by reducing the sulphur in fuels used by ships in SECAs (e.g. 1.0% or 0.5%); or by use of high-sulphur HFO with scrubbers to clean the exhaust.

(c) Add the “mini-SECA” concept where ultra low sulphur content fuels (down to 0.1%) are required locally – as is currently the case in the European Union (EU) and in California.

INTERTANKO believes:

(a) that lack of action by the IMO will result in increased local requirements outside the IMO regulations. This is not in the interest of ship operators.

(b) that this would be soon seen as yet another “interim” stage of MARPOL Annex VI, which achieves SOx and PM emission reductions in limited areas, but which does not use all available means for a global emissions reduction. This would mean a new revision a few years ahead, and possibly also more specific local requirements. This is not in the interest of ship operators.

(c) that fragmented, regional/local legislation would make it difficult for ships to comply and for authorities to monitor compliance as they require evidence of compliance with complex onboard operations involving multiple fuel grades (4.5%, 3%, 1%, 0.5%, 0.1%). This is not in the interest of ship operators.

INTERTANKO concludes:

Starting from the assumption that part of the IMO plans for the revision of MARPOL Annex VI is significantly to reduce SOx and PM missions from ships, it is estimated that the reduction of SOx emissions as a result of enforcement of the two current SECAs is less than 5% of the total SOx emissions from ships. Significant reductions will be obtained only if low sulphur limits are imposed on fuels used by ships over much larger sea areas than the current SECAs. Based on these observations, and on maintaining global requirements rather than increasing different local requirements, INTERTANKO opted for a global sulphur cap.

What are the advantages of the Distillates Option?

Using MDO reduces fuel consumption by some 5% through its higher specific energy content and therefore reduces CO2 emissions.

The use of low sulphur MDO would remove a large amount of the current SOx and PM emissions from ALL existing engines and would reduce significantly the NOx emissions from ALL existing engines. The

1 use of MDO would bring about new lower emission levels, from which point further reductions would be facilitated by the use of more sophisticated and efficient technologies.

Furthermore a mandatory global low sulphur cap on the fuel used by ships should remove the need for SECAs, bringing ease of implementation and global uniformity to the regulations, bringing safety, efficiency and simplicity to ship operations, and bringing straight-forwardness to law enforcement and monitoring.

The MDO solution has aroused criticism based on three main concerns (which will be answered later): - that it is an expensive solution due to the premium price paid for MDO - that a lack of availability of MDO will make it impractical - that additional production of MDO will result in additional CO2 emissions from refineries

What are the alternatives to the Distillates Option?

Low sulphur residual fuel oil (LSFO). LSFO currently has limited availability, although additional volumes could be obtained by large-scale desulphurisation of HFO. This would need large investment in improved refinery technology and would therefore be expensive - possibly as expensive as producing MDO but with none of the benefits that MDO brings. Oil refining industry experts state that 1.0% sulphur content is the threshold below which desulphurisation of residual fuels is not economically viable. It is therefore not an attractive alternative. This means that the only alternative is to use existing high-sulphur residual fuels, with several onboard scrubbers to clean up the exhausts.

High sulphur residual fuel with exhaust gas scrubbers. The cleaning of exhaust gas by scrubbers does produce acceptably clean air emissions, but at a cost. The environmental cost is the negative impact on the marine environment caused by scrubbers generating liquid and solid waste - the disposal of significant quantities of this waste will become a problem and cause inevitable pollution. The financial cost is that of installing and operating 2-3 scrubbers on 60,000 ships – an investment which dwarfs the refinery investment in additional MDO production.

There are also operational burdens to having scrubbers. The ship owner would have to assume the responsibility for onboard fuel treatment as well as onboard waste treatment which complicates ship operations, impacts the safety of the ship, impacts the working conditions of the crew, and results in discharges of waste into the marine environment. By comparison, the use of low sulphur MDO provides simplicity and safety and cleanliness in ship operation.

INTERTANKO concludes: This leaves only Low Sulphur MDO. The major benefits/advantages of using MDO on a global basis include environmental advantages, safety benefits, ease of/advantages for rule enforcement/monitoring, technical advantages, operational benefits, and better marine fuel quality. (See below for a detailed statement of the advantages of each of these).

How can these benefits/advantages of using MDO be demonstrated?

* Environmental advantages

- Using low sulphur marine distillate fuels/DMB grade globally reduces SOx (70% to 80%), PM emissions (> 80%) and NOx emissions (10 to 15%) with no other measures required.

2 (The alternative. Using high sulphur residual fuels with exhaust gas scrubbers may reduce SOx and PM emissions to the same level as using distillates, but this would require huge installations and would complicate ship operations. Moreover scrubbers need power, meaning more fuel to operate and therefore most likely NOx emissions would actually increase. Reducing NOx emissions from scrubbed exhaust would actually result in increased fuel consumption, since NOx reduction using Selective Catalytic Reduction (SCR) will not work efficiently with scrubber operation unless the cooled exhaust gas ex scrubber is actually reheated for the SCR. As a consequence, use of HFO and scrubbers would increase CO2 emissions from ships or, at least would not allow the reduction of these emissions that MDO would facilitate.)

- Using MDO is applicable to all existing engines, with only minor modification, which means a fast track for global reduction of emissions.

(The alternative. The large dimensions of scrubbing installations mean that fitting scrubbers for the main and for each auxiliary engine demands major modifications to existing ships and to designs for new ships).

- Using MDO means a global reduction of SOx emissions from ships by approximately 67% (Tier II – global sulphur limit at 1.0%) and 83% (Tier III – global sulphur limit at 0.50%). This compares to the assessed SOx emission reduction as a result of the enforcement of the current two SECAs of less than 5%.

(The alternative. To achieve a global reduction in SOx emissions of over 83% with scrubbers, all 60,000 existing ships would have to be equipped with at least 180,000 scrubbers that would need to operate continuously).

- Using MDO reduces NOx emissions from existing engines and facilitates further NOx reductions through modifications to new engines for compliance with Tier II and Tier III limits. This would mean that the engine manufacturer rather than the ship operator would be responsible for NOx emissions reducing technology.

(The alternative. Scrubbers will hinder efficient in-engine solutions to reduce NOx emissions, which demand clean fuel).

- Using MDO reduces fuel consumption by some 5% through its higher specific energy content and therefore reduces CO2 emissions.

(The alternative. Scrubbers would increase the fuel consumption due to additional pumps which have to run tens of thousands of tons of water daily per ship. Additionally the continued use of high sulphur fuels outside SECAs results in significant CO2 emissions from ships - SOx emissions from ships are not only a local/regional pollution problem but also a Greenhouse Gas generating factor. Global scrubbing will take the sulphur out of the air but will still release the entire amount of sulphur into the marine environment.

(Research has demonstrated that sulphur entering the sea (through settling air emissions and through scrubber waste streams) reacts with sea water to generate CO2 emissions (buffering). Each molecule of SO2 entering the sea water generates 2 molecules of CO2 (or every kilo of sulphur entering the sea water generates 2.75 kilos of CO2).

- Using MDO means a further reduction in CO2 emissions because there is no need for heating and pre- treatment as required by residual fuels.

(The alternative. Use of scrubbers means use of HFO and thus also energy-intensive sequential heating (up to 130 C), centrifuging, decanting, settling, purifying and viscosity reduction processes carried out by the ship just to render the fuel useable in the main engine).

- Using MDO means a very significant reduction of onboard fuel-generated waste - less sludge to incinerate means lower CO2 emissions from ships. The small amount of generated waste from MDO is free of the toxic elements (such as heavy metals) contained in residual fuels.

3 (The alternative. The use of HFO and scrubbers will significantly increase onboard fuel-generated waste whose disposal is the responsibility of the ship operator. Lack of reception facilities means ships will be even more exposed).

- Using MDO gives predictability for engine manufacturers and for ship operators. New engines, designed to use only marine distillate fuels, will be well suited for further emissions reductions over their entire life time of 25 years or more. New engines can meet further regulatory reduction of air emissions through better quality fuels. They will also have higher energy efficiency and thus even lower CO2 emissions.

(The alternative. Further emissions reductions may be possible with scrubbers. However the use of scrubbers will sustain the environmental challenges for ships with no expectation of efficiency and reliability gains from new engines.)

- Using MDO means significant reduction of harm to the marine environment from accidental spills involving residual fuels

To help sum up - some questions.

Residual fuels need to be processed so that the sulphur and heavy metals they contain do not pass into the environment. Should this happen at the refinery or on board ships? Should this happen on shore in some 670 refineries – well-tried installations built to process oil - or at sea onboard 60,000 ships built to transport oil rather than process it using installations some of which do not yet exist?

Should the sulphur and heavy metals delivered in residual fuel oil be collected and stored onboard ships to be returned back to shore? Will shore facilities accept large amounts of residues and waste? Why deliver all this sulphur and heavy metals to ships in the first place?

If the IMO remains unable to impose requirements on shore facilities to accept waste, then will the realistic consequence ultimately be that all sulphur, heavy metals and other associated waste will have to be disposed at sea in a way to be regulated by the IMO?

Can the marine environment really tolerate large amounts of sulphur and of CO2 as some maintain it can? Scientists relate that all this would, in the long term, change the marine aquatic eco-system with consequences yet to be predicted.

INTERTANKO concludes:

Low sulphur marine distillate fuel offers therefore the best net environmental impact compared with any of the current alternative measures proposed for the revision of MARPOL Annex VI.

* Safety benefits

Using MDO (a) improves safety of ship operations due to its higher quality.

(b) means no incompatibility problems as experienced by ships using residual fuels in SECAs.

(c) means no need for fuel switch over and thus no exposure to human error and engine failure.

(d) means no need for the hazardous switch from HFO to MDO/MGO in boilers.

(e) means reduced maintenance and reduced risk of breakdowns. 4 (a, e) These advantages depend on a complete departure from using HFO and thus no need for scrubbers. Currently, some 30% to 35% of all ship incidents are related to engine problems, some of which are also related to fuel quality problems. Although there is little information available on the root causes of the incidents involving engine troubles, one can assume that many of these are linked to the quality of the fuel used or to the demanding maintenance and frequent repairs due to the poor quality of the HFO (as compared with cleaner MDO).

(b) Ships currently comply with SECAs in the North Sea and in the Baltic Sea by switching to low sulphur residual fuels, obtained through blending different grades of residual fuels which sometimes are not compatible, resulting in the formation of precipitates (polycyclic aromatic hydrocarbons, e.g. asphaltene) which clog purifiers and fuel filters and hinder or even stop the fuel supply to engines. The same phenomenon may also occur during the fuel switch- over operation when “SECA fuel” and “open sea fuels” mix in the settling and the day tanks. There have been experiences with ships having to de-bunker, clean and re-bunker because of fuel incompatibility.

(c) The majority of existing ships are equipped with one settling and one day tank only. Fuel switch operation between HFO and low sulphur residuals/MDO for these ships could take a lot of time. Use of MDO only will bring back the advantage of using one fuel only. Use of scrubbers will permit the use of HFO only but, with increasing regulatory pressure, scrubbers will need to be used more and more and generate more and more waste which has to be safely stored and disposed of.

(d) There is a real concern with regard to switching from HFO to MGO/MDO in boilers when entering SECAs or mini-SECAs. Injection of volatile distillate fuel through an installation which is hot creates the risk of explosions.

INTERTANKO concludes:

The use only of MDO provides a series of significant safety advantages that cannot be matched by the use of LSFO and/or HSFO together with scrubbers.

* Advantages for rule enforcement and rule monitoring

- The distillate option applies immediately to virtually all existing engines

(The alternative. Many existing ships may have serious problems retrofitting sufficient scrubbers to meet the emission limitations in the revised MARPOL Annex VI).

- The burden on administrations would be simplified. It will remove the drive for fragmented legislatory requirements (and monitoring) for open sea, SECA regions and in-port areas. This will make it easier for ships too - less need to document and evidence compliance.

(The alternative. The use of scrubbers increases paperwork for ships and burdens authorities with verifying proper use of the installation).

- One mandatory fuel specification would leave control on the supply side rather than on the buyer’s side. It would increase responsibility and thus reliability of proper supply.

(The alternative. The use of HFO with scrubbers means ship owners will still be left with the responsibility for controlling the quality and compliance of the HFO fuels purchased).

5 INTERTANKO concludes:

The use of MDO provides simpler and more workable monitoring and control procedures.

* Technical advantages

- All existing engines can safely use low sulphur distillate fuel/DMB grade. - There would be a need only for minor modifications, all easily manageable. In principle, the main changes would be to the fuel pumps and fuel injection systems.

(The alternative. Scrubbers demand serious modifications to the ship. Alternatively, compliance by switching between fuels with different sulphur contents is difficult and time consuming unless more serious modifications to ships’ bunker storage and piping lay out are considered.)

- Boilers can use marine distillate fuel/DMB grade fuel but would need to change injection pumps and burner nozzles.

(The alternative. Scrubbers for boilers are not small either. Alternatively, switchover from HFO to MDO/MGO in hot boilers raises serious safety problems).

INTERTANKO concludes:

Modifications to existing engines for MDO use incur a cost, but this is absolutely minimal when compared with the retrofitting of abatement technology, or compared with compliance through the use of multiple fuels which requires an increase and diversification of bunker storage capacity with a complete segregation of high sulphur & low sulphur content fuels, a 3rd/4th storage tank for 0.1% and 0.5% sulphur content fuels, additional storage for lower BN number lube/cylinder oil, manifold modifications and segregation for bunkering and fuel sampling.

* Operational benefits

- A simpler and more efficient operation can only be a benefit. - Crews will work in a better, cleaner and safer environment. - Reduced repair and maintenance loads. A car carrier, Turandot, used marine distillate fuel only for 3 years and the company reported that the workload of the engine crew decreased by 70% - No fuel change-over for SECAs or fuel treatment/processing. If required, a change-over from a DMB grade with 0.5% sulphur to one with 0.1% sulphur (fuel at berth as already legislated for in Europe) is much simpler and easier.

(The alternatives. Working with the storing and disposing of scrubber wastes. The necessity for complex fuel change-overs before entrance to SECAs, initial decanting, heating for purification and heating before combustion.)

(The alternatives. Operation in fresh or brackish water means using a freshwater scrubber, which operates with caustic soda solution in a closed system and a holding tank. Return temperatures ex scrubber of around 150C mean boiling caustic (caustic boils at 146C) which in turn means the likelihood of caustic vapour on board ship.)

INTERTANKO concludes:

The simpler, cleaner, safer environment on board ship which comes from using MDO is to the advantage of the ship owner and all his staff. 6 * Better marine fuel quality

As reported over many years by the marine fuel oil test laboratories, the main quality problems with residual fuels are:

• high abrasive materials • high ash • low flash point • high sediments • high density • used lube oil content • polyethylene contamination • polystyrene contamination • high calcium & high sodium • incompatibility of blends

When switching from HFO to a distillate fuel with lower, heavier aromatic hydrocarbon content, there is a risk of incompatibility between the two products. The changeover procedure takes quite some time, during which there will be a mix of the two very different fuels for an extended period of time. The asphaltenes of the HFO are likely to precipitate as heavy sludge, with filter clogging as a possible result, which is likely in turn to cause fuel starvation in the engine.

INTERTANKO concludes:

The fuel specification proposed by INTERTANKO removes all these problems.

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