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Impact of Upcoming Marine Emission Control Regulations and available Options
1. Impact of Upcoming Emission
Control Regulations on Fuel
Price Scenarios and available
options
2. Upcoming Regulations
Options for Compliance
Major Factors affecting a decision
Fuel Price Trends
Comparative Analysis of available options
ROI calculations
Conclusion
Agenda
4. NOx control requirements of Annex VI apply to installed marine diesel engine of over
130 kW output power
Requirement not applicable to engine solely for emergency purposes irrespective of
the tonnage of the ship onto which such engines are installed.
NOx requirement for Tier I, II & III
The Tier III controls apply to the specified ships while operating in US and Canadian
Emission Control Areas (ECA) to limit NOx emissions
NOx Emissions
Tier Ship construction
date on or after
Total weighted cycle emission limit (g/kWh)
n = engine’s rated speed (rpm)
n < 130 n = 130 - 1999 n ≥ 2000
I 1 January 2000 17.0 45·n(-0.2)
e.g., 720 rpm – 12.1
9.8
II 1 January 2011 14.4 44·n(-0.23)
e.g., 720 rpm – 9.7
7.7
III 1 January 2016* 3.4 9·n(-0.2)
e.g., 720 rpm – 2.4
1.96
5. EUMRV regulation requires vessel operators to annually monitor, report and
verify CO2 emissions for vessels larger than 5000GT calling EU and EFTA (Norway
and Iceland) ports
EUMRV requires data collection and reporting of data collected on per voyage
basis.
CO2 emissions based on the Energy Efficiency Design Index (EEDI) give a
measure of the total energy consumed by the vessel.
Enhancement in this area can be achieved by harvesting best means of reducing
fuel consumption by adopting design and machinery efficiency models or by
using LNG as fuel as this has a much lower CO2 emission factor compared to fuel
oils.
CO2 Emissions
6. Available options for SOx compliance
ULSFO/VLSFO/LSMGO (0.1- 0.5 % Sulphur)
LNG
HFO (3.5 % S) with Abatement technology
Options for NOx compliance
Installation of a SCR
Exhaust Gas Recirculation
Tier III compliant engines
Fuel oil treatment systems
LNG
CO2 Compliance
Design modification
Improved EEDI
LNG
Each of the above options would involve multiple considerations based on vessels size, age, type, equipment
installed, trading pattern, activity period, Charterers requirements, remaining Life cycle, commercial
considerations etc.
Available Options for Compliance
7. Cost of continued operation with available fuel and no modifications.
CAPEX outlay of modification for accommodating alternate fuel options
OPEX and Maintenance costs of modifications and additional equipment installed
Differential commercial impact, when evaluating for New build or Retrofit
Duration of operations in ECA region
Required Crew Training & Certification
Potential Lost Cargo Capacity and revenue
Global Availability of fuel/LNG based on Voyage patterns
Price fluctuation of equipment and lead time for delivery
Shipyard availability, time required for Installation
Predictive differential cost between HFO, ULSFO, VLSFO, LSMGO and LNG
Eco friendly corporate image
Major factors affecting the decision
9. Based on underlying assumption that a substantial part of the global fleet shall switch from
HFO to ULSFO/LSMGO, there is prediction of rise in differential pricing in global bunker
fuel cost.
Forecasted fuel price trend is from an IBIA paper based on a study by Marine and Energy
Consulting Ltd with an LNG trend added and some changes included.
Forecasted Fuel Prices
A sharp drop off in HFO
demand in 2020 could be
see the price plummet
$400$200
0
100
200
300
400
500
600
700
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
ULSFO/LSMGO $/ton 0.5%S $/ton HFO $/ton LNG $/ton
A sharp drop off in HFO
demand in 2020 could be
see the price plummet
$400/ton$200/ton
Source: IBIA paper based on Study by Marine and Energy Consulting Ltd.
10. Possible Bunker demand
0 50 100 150 200 250 300 350
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Residual Max 3.50% S scrubbed Residual Max 3.50% S consumed ULSFO/LSMGO Max 0.1% S MGO/ LSHFO 0.1-0.5% S LNG
Bunker demand million tons
Source: IBIA paper based on Study by Marine and Energy Consulting Ltd
11. Comparison of available fuels
• ULSFO/VLSFO (0.1 – 0.5 % Sulfur)
Advantages:
No change in operational pattern
No need for additional CAPEX costs
No Training required
Disadvantages:
Differential cost of fuel
Global Availability
Stability?
Emission Impact:
NOx : Require Abatement measures
SOx : Emissions would in the compliant range
CO2 and GHG: Remains unchanged
12. Comparison of available fuels [cont’d..]
• LSMGO (0.1% Sulfur)
Advantages:
Reduced Risk as not much change to
operations
Less maintenance on diesel engine
HFO heating equipment eliminated
No Training required
Disadvantages:
Differential cost of fuel
Viscosity, Lubricity issues
Emission Impact:
NOx : Require Abatement measures
SOx and PM: SOx emission would in the compliant range, PM reduction would be about 50% to 85%
CO2 and GHG: Remains unchanged
13. Comparison of available fuels [cont’d..]
• HFO with Exhaust Gas Cleaning (EGC)
Advantages:
No changes in engine operations
Cost savings over ULSFO & LSMGO
Global availability of fuel presently
Disadvantages:
Major CAPEX outlay required to fit Exhaust Gas
Scrubber
Reduced engine power output
Increased cost of operation due to Scrubber
Additional maintenance of Scrubber systems
Additional cost of consumables for scrubber dosing
Environmental issue of Slurry disposal
Emission Impact:
NOx : Require SCR before Scrubber or Exhaust Gas Recirculation
SOx and PM: SOx emission would in the compliant range, PM reduction would be about 50% to 85%
CO2 and GHG: Remains unchanged
14. Comparison of available fuels [cont’d..]
• Liquefied Natural Gas
Advantages:
Comparatively Lower Cost of fuel
Virtually free of SOx compounds and the
associated PM
Lower NOx emissions due to lower
combustion temperature/pressure
Disadvantages:
Extremely High CAPEX for installation
Complex operation requiring rigorous crew
training
Operation at low load not possible, need dual
fuel switching during manoeuvring operations
Possible compromise on cargo carrying capability
due to size of LNG storage tanks required
Availability of global supply
Methane Slip
Emission Impact:
NOx : Significant reduction in NOx, satisfying Tier III requirements
SOx and PM: Virtually no SOx and PM
CO2 and GHG: Reduction in CO2 by about 22%
15. ROI calculations
ROI for HFO with scrubber and LNG are principally dependent on fuel prices. It also
depends on percentage of vessel operations in ECA regions and other intangible
CAPEX and OPEX costs due to specific nature of vessel, and/or operational
requirements etc.
ROI for HFO with scrubber should be in the range of 3 - 5 years for a fuel
differential cost of around 300 USD between HFO and ULSFO.
Anticipated cost of Scrubbers shall be between 1.2 million to 3.0 million USD
depending on vessel size, type, equipment maker etc.
Cost of Installation would work out to about 50% of equipment cost for New builds and
around 80% or more for retrofits
ROI for LNG could be 6-7years.
It is most convenient to consider an LNG conversion for new builds as retrofits at
present do not seem to yield a realistic ROI.
OPEX influence
16. Conclusion
The upcoming regulations help to make the Maritime Industry more eco-friendly
but at a certain cost, which raises raise the bar for an industry which is
grappling with diminished commercial returns.
It is not easy to predict the total cost of ownership of the various options as they
overlap considerably. Decision making teams will have to find their own reasons
for choosing between the available options based on a sum total of the analysis
for their fleets.
Future market predictions of fuel costs will remain speculative as they are based
on various different factors affecting the refineries, demand and supply across
different industries, LNG consumption and geopolitical influences. Would then a
Wait and Watch policy be prudent?
Could a wait and watch approach now, possibly trigger a rush to modify vessels
closer to 2020 due to certain leading indicators then, resulting in an increase in
total cost for compliance?
NON COMPLAINCE IS NOT AN OPTION!!!!!