Emission Control Area (ECA)SOx Requirements

Guidance to INTERTANKO Members for the Selection of Compliance Alternatives

July 2012

Notice of Terms of Use:The advice and information given in this Guidance (“Guidance”) is intended purely as guidance to be used at the user’s own risk. No warranties or representations are given nor is any duty of care or responsibility accepted by the International Association of Independent Tanker Operators (INTERTANKO), the members or employees of INTERTANKO or by any person, firm, corporation or organisation who or which has been in any way concerned with the furnishing of information or data, the compilation or any translation, publishing, supply or sale of the Guidance for the accuracy of any information or advice given in the Guidance or any omission from the document or for any consequence whatsoever resulting directly or indirectly from compliance with, adoption of or reliance on, guidance contained in the Guidance even if caused by a failure to exercise reasonable care on the part of the aforementioned parties.

CONTENTS

1 Introduction........................................................................................42 The regulatory regime.......................................................................5

2.1 International Maritime Organization (IMO).......................................................................5

2.2 Regional Regulations for SOx emissions limitations......................................................6

2.3 Overview of international and regional/local SOx emissions limitations......................6

3 The alternative options for compliance...........................................73.1 Marine Gas Oil (MGO).........................................................................................................7

3.2 Liquefied Natural Gas (LNG)..............................................................................................8

3.3 Exhaust Gas Cleaning Systems (EGCSs).........................................................................8

3.4 Advantages of the use of clean fuels..............................................................................10

4 ECA Calculator.................................................................................11ANNEX 1 – Guidance for Hazard Identification (not included).................13ANNEX 2 – Specific Operational and Safety aspects for Scrubbers........13ANNEX 3 – Advantages of using Clean Fuels instead of EGCS...............13ANNEX 4 – The 2009 IMO Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59))...........................................................................13

www.intertanko.com

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1 IntroductionThe aim of this document is to provide guidance to INTERTANKO Members and other interested parties on a number of specific technical, operational, safety and cost-efficiency elements which need to be considered by shipowners when choosing between alternatives for compliance with the Emission Control Area (ECA) regulatory regime under Annex VI of MARPOL 73/78 between 1 January 2015 and the enforcement of a global sulphur cap in 2020 or 2025.

This Guidance is not intended to promote one single route to compliance. The Guidance should be regarded as a means to facilitate shipowners’ decisions on how to comply with the ECA regulatory regime and provide advice on various foreseeable impacts of each of the alternatives to meet ECA emission limits.

The list of items addressed in the Guidance is not exclusive, which means that for each individual ship there might be additional considerations which need to be accounted for in the selection process. The Guidance covers:

(a) a review of the regulatory regime;

(b) a brief review of the alternatives shipowners have for compliance and their advantages and challenges;

(c) more detailed listings of challenges for these alternatives; (Annexes 1 and 2)

(d) a simplistic algorithm to estimate the cost-efficient alternative to comply with (Marine Gas Oil (MGO) or scrubbers) as a function of a ship’s expected remaining lifespan and the estimated time to be spent in ECAs; and

(e) a list of advantages of using clean fuels in both existing ships but also new buildings as compared with scrubbers and continued use of Heavy Fuel Oils (HFO). (Annex 3)

It is strongly advised that the selection process should be done in co-operation with classification societies and equipment manufacturers. Decision-making will however, have to take into consideration the requirements of individual Flag Administrations and Port States, if relevant, as well as each ship’s configuration and trade pattern. A ship’s age may also play a part in the selection of the most adequate alternative for compliance.

Annex 2 of this document provides more details on operational and safety aspects of Exhaust Gas Cleaning systems (EGCS), also called scrubbers, which shipowners should consider when assessing the challenges of scrubbers and when discussing with classification societies, equipment manufacturers and Flag Administrations.

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2 The regulatory regime

2.1 International Maritime Organization (IMO)

The international regulatory regime for air emission limitations from ships is regulated through provisions of Annex VI to MARPOL 73/78 Convention (adopted in 1997; entry into force in 2005; significant amendments in 2008).

Emission Control Areas (ECAs)

As from 1 January 2015, MARPOL Annex VI will require that the maximum sulphur content in fuels used by ships in ECAs shall be of 0.10% by weight. Alternatively, ships could use technologies, like scrubbers to ensure a similar limitation of SOx emissions. However, scrubbers are defined by regulations as “equivalent means” for compliance. Therefore, in order to be used by ships, scrubbers have to be approved by an Administration and IMO should be informed of such approved systems.

Currently, there are four approved ECA regions (as detailed in Figure 1)

the Baltic Sea the North Sea the North American ECA – 200 nautical miles offshore USA and Canada, including

Hawaii, St. Lawrence Waterway and the Great Lakes (as from 1 August 2012) and the United States Caribbean Sea ECA (as from 1 January 2014).

Figure 1: The four approved ECAs

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Global cap on sulphur content on marine fuels

Currently, outside ECAs, one should use fuels with a maximum sulphur content of 3.50%. However, the maximum allowable sulphur content of any fuel oil used by ships outside ECAs will become 0.50% by weight either on 1 January 2020 or 1 January 2025 based on a final decision to be taken by the IMO’s Marine Environment Protection Committee (MEPC).

2.2 Regional Regulations for SOx emissions limitations

In addition to the IMO regulations, there are two regional regulations with provisions limiting SOx emissions from ships:

EU Sulphur Directive (in force since 2000; amendments in 2006) – has an additional provision to use fuel with a sulphur content of maximum 0,10% when “at berth” (including at anchor) in the EU ports. When calling at EU ports, ships have to use 0.10% sulphur content fuel, or use alternative measures (scrubbers).

California Air Board Resources (CARB) (in force since June 2009 and revised on 1 December 2011) – Phase I (until 1 August 2012) mandates the use of marine distillates with maximum sulphur content of 0.50% for the DMB grade and 1.50% for the DMA grade; From 1st August 2012, Phase I mandates the use of marine distillates with a maximum sulphur content of DMA at or below 1.0% sulphur or DMB at or below 0.5% sulphur. Phase II mandating use of marine distillates with a maximum sulphur content of 0.10%. From 1 December 2014, ships have to use 0.10% fuel content marine distillates within 24 nautical miles from the California shore line. The rule can be seen at www.arb.ca.gov/ports/marinevess/documents/fuelogv13.pdf

2.3 Overview of international and regional/local SOx emissions limitations

Maximum sulphur content allowed in fuels used by shipsRegulations IMO1 EU Sulphur Directive CARB (24 nm off

coastline)2

Application dates Global ECAJuly 2009 DMA grade max 1.5%

DMB grade max 0.50%1 Jan 2010 0.10% fuel “at berth” Prior to 1 July 2010 4.50% 1.50%From 1 July 2010 4.50% 1.00%From 1 Jan 2012 3.50% max. S content on supply

(unless ships have scrubber)From 1 August 2012 NA ECA3 DMA grade max 1.0%

DMB grade max 0.50%1 Jan 2014 0.10% (any marine

distillate)1 Jan 2015 0.10%1 Jan 2020 (2025) 0.50% 2020 no matter result of IMO

study1. Regulation allows use of alternatives such as exhaust gas cleaning systems (scrubbers)2. CARB specifically requires compliance by fuel only (no scrubbers allowed). CARB rules allow however a

“non-compliance fee” as per the table above. These fees are 50% discounted if vessels purchase and use compliant fuel during California port visit.

3. Canada delays enforcement; according to Transport Canada, possible enforcement in November 2012.

Visit 1st 2nd 3rd 4th 5th & more

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Fee (USD) 45,500 45,500 91,000 136,000 182,000

3 The alternative options for complianceDuring the period after 1 January 2015, ships are required to use in ECAs a fuel with ultra-low sulphur content (i.e. 0.10% by weight), or alternatively use of exhaust gas cleaning systems (EGCS) also called scrubbers, which will ensure same or lower amount of SOx

emissions.

The two fossil fuels which currently could have such a low sulphur fuel are the MGO (grades DMA and DMZ from ISO 8217:2010) or liquefied natural gas (LNG).

Compliance by the use of ultra-low sulphur content MGO implies a significant premium per tonne of fuel used, but no capital investment is required.

Conversion of existing ships to use LNG – as its main fuel is expensive. In addition, there is an obvious lack of supply network for LNG.

Compliance through the use of EGCSs such as scrubbers requires a significant initial capital investment for equipment purchase and installation on board, but it allows the continue use of less expensive residual fuels.

The evaluation of which option to choose is a complex exercise related to the individual operational and trading pattern, the ship’s age, the ship’s operational time in ECAs and the individual commercial/financial considerations.

3.1 Marine Gas Oil (MGO)

Advantages:

No need for initial investment for existing ships.

No need for fuel treatment and significant reduction on sludge production in ECAs. The fact that there is no need to heat the fuel when using MGO will further mean: a reduction of up to 10% power demand and fuel consumption a significant reduction of maintenance and repairs

No need for redundancy in terms of carrying low sulphur fuel in case of a malfunctioning EGCS.

Further advantages of using MGO as means of compliance are listed in Annex 3 of this document.

Challenges:

Ultra-low sulphur MGO is now available for about a US$300 premium compared to the price of the residual fuel.

Availability of ultra-low sulphur MGO is not yet clarified for 2015 and beyond, when the demand from the marine side is expected to increase.

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Development of proper fuel switching procedures to be done in liaison with the manufacturers and class societies (reference also to the OCIMF/INTERTANKO fuel switching guidelines – see Annex 1).

3.2 Liquefied Natural Gas (LNG)

Advantages:

LNG has all the advantages of MGO, as above with the additional benefits: LNG as fuel is more environmentally-friendly in terms of SOx, NOx and CO2. The current price of LNG is attractive.

Major engine manufacturers have developed dual-fuel engines which can use LNG and HFO/MGO but these would primarily be suitable for new buildings.

Challenges:

Conversion of an existing vessel to use LNG, in terms of storage and engine modification, is an expensive project. A cost-effective assessment may indicate that such a conversion is viable only if it is partly subsidised.

Technology needs further improvements to limit the “methane slip” phenomenon (escape of minor, non-combusted amount of fuel, mainly methane which has a global warming potential approximately 23 times higher than CO2).

Except for very few ports, there is no proper supply network for LNG. So, even for new buildings, it could be a challenge to use LNG as a fuel in ECAs in the near future.

Use of LNG as a fuel would also assume that the IMO adopts and enforces the new International Code of Safety for Ships using Gas or other Low Flashpoint Fuels (IGF Code).

It is INTERTANKO’s view that use of LNG as a fuel is not at present a practical option for compliance with ECA SOx emissions limitation as from 1 January 2015 except in special cases where part of the retrofitting costs are subsidised. It may become an option for future new buildings when the global sulphur cap is enforced.

3.3 Exhaust Gas Cleaning Systems (EGCSs)

Advantages:

The vessel will continue to use cheaper residual fuels.

Challenges which need clarification at an early stage with manufacturers, Flag Administration and classification societies are:

Fit for purpose certification: In case of scrubbers, shipowners to liaise with manufacturers, Flag Administration and classification societies to ensure that such systems are certified for achieving the required SOx emission limit and, in the case of wet scrubbing systems, are certified for achieving the wash water effluent standards when the ship uses a residual fuel with a sulphur content of at least 3.5%. IMO 2009 Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59)), do not indicate the minimum sulphur content for which scrubbing efficiency should be tested. (for further details see Annex 2 of this document).

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Capital cost: Number of units and cost per unit to be defined with manufacturers

for each Main Engine for each auxiliary diesel engine or for a group of auxiliary diesel engines, as

applicable for each auxiliary boiler, as applicable to different ship types and sizes (e.g.

a tanker with steam cargo pumps and cargo heating might need an EGCS for the large boiler(s) onboard).

Installation/EGCS unit dimensions

Space required is a very important issue for an existing ship, both for exhaust gas handling and scrubbing water pumping and effluent handling where applicable from wet or dry scrubbing systems

If installed externally, the increase in air drag should be considered Stability issues due to operational weight and high location of EGCS Heel considerations and DWT adjustment, due to added weight, if relevant.

Operation

Additional power demand (pumps, fans, etc.) to be clarified with manufacturers as it may necessitate installation of additional power generation

Additional daily HFO consumption to cover such increased power demand Cost of consumables, if any Cost for disposal of solid and water effluent.

Maintenance

Additional equipment requires intensive maintenance due to the nature of exhaust gas, size and location

PMS to be updated to cover the additional equipment to be installed.

Compatibility of SCRs/NOx emissions reduction technologies

Ships built from 1 January 2016 will have to meet Tier III of NOx emissions reductions. Currently, this can be obtained by using a Selective Catalytic Reduction (SCR) device

There seems to be an incompatibility problem between SCRs and wet scrubbers. (see Annex 2).

Redundancy

The need for additional MGO tanks and systems, for redundancy in case of EGCS failure.

New ships built to use MGO only as means of compliance with the global sulphur cap will not need the additional MGO storage for redundancy. That may give a minimum of 500m3 additional volume gain for cargo tanks in comparison with ships built with scrubbers.

Risk of legal implications and detentions, should the EGCS itself fail. Need for more than one hydro-cyclone for efficient treatment of various and

variable wash-water flows.

Availability

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The maximum capacity of EGCS manufacturers to manufacture and install the required number of systems, projected over the period remaining is an important factor to be considered in timing the decision shipowners need to make.

Human factor and safety

Additional crew training for operation, safety and increased risk when working with highly corrosive materials (i.e. high-acidity wash-water; solid waste including heavy metals and up to 50% solution of caustic soda). See further details in Annex 2.

Operations in port/rule predictability

Before making a decision for use of EGCS, clarification should be sought with the Flag Administration that they approve the use of the proposed system as an equivalent to the use of low sulphur marine fuels and which scrubbers are eventually approved by them.

Clarifications are needed as to whether authorities will allow the use of EGCSs in their ports, in particular open loop wet scrubbing systems. Due to the high capital cost, it is prudent to consider consulting port authorities at which ships are expected to call frequently.

If ports do not allow use of an open loop wet scrubber, a closed loop scrubber using fresh water and caustic soda can be used as an alternative. However, this requires additional storage capacity for the caustic soda.

As a consequence of the chemical reaction between sulphur and caustic soda solution, the re-use of the same amount of caustic soda is limited. In order to avoid topping up new/fresh caustic soda on top of the used caustic soda, it would be necessary to have two storage tanks.

Clarification is needed whether authorities will provide disposal facilities for used sodium sulphate/bisulphate solution if a closed loop system is used.

Further details on safety and operational aspects of scrubbers as well as some advices linked to their type approval are given in Annex 2.

3.4 Advantages of the use of clean fuels

For informational purposes, Annex 3 is included in these guidelines to provide the reader with a revised list of advantages in using MGO, which is based on a public document released by INTERTANKO in 2008 when proposing that IMO include distillates in the revision of Annex VI to reduce air emissions from ships.

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4 ECA Calculator

The current ECAs cover limited sea areas. Until the global sulphur cap is enforced, many ships may not call at ECA ports. Many other ships may have limited time sailing through ECAs and calling at ECA ports. Shipowners of the latter category, particularly of existing ships, may need to assess the cost effectiveness of the alternatives in complying with the ECA SOx emissions requirements.

To assist shipowners to make such an assessment, INTERTANKO has developed an “ECA calculator”. This should be seen only as one tool among many others. In this case it specifically compares the option of using MGO as a fuel compared to the installation and use of scrubbers as EGCS. Each shipowner and ship operator may consider multiple parameters in doing such an assessment in conjunction with this guidance. Other and more sophisticated calculators (e.g. Lloyd’s Register) have been developed for a more in-depth analysis of possible strategies, including time before 1 January 2015.

The INTERTANKO model is simple. It calculates the Payback Period in the number of years over which a ship can pay a premium for use of MGO with a sulphur content of 0.10% instead of retrofitting scrubbers in order to comply with SOx emissions limitations in ECAs between 1 January 2015 and time the global cap on sulphur in marine fuels is enforced. The “ECA calculator” will allow the user to insert most of this data. The data required and used is as follows:

- CAPEX (scrubber price + installation costs)- Weighted Average Cost of Capital/Depreciation rate - Daily fuel consumption1 - Total days at sea/year - Fuel consumption for cargo discharge- Number of discharges in ECAs- Days at sea in ECAs/year (as percentage of the total days at sea/year)- Price of regular residual fuel

The Payback Period is given at a variety of premium values paid for use of 0.10% MGO and for varying times used by each ship in ECAs as a percentage of the total trading days/year.

The model does not take into account operating and maintenance costs of scrubbers, which are considered important, but are not known at this point in time. Various information estimates annual running costs of up to US$200,000 or even higher. Shipowners and ship operators may add their own estimates to such additional costs.

Without disregarding more sophisticated forecasting models, INTERTANKO believes that the results of such calculations are no better than the assumptions that underlie the data and parameters that go into it. Thus future availability, prices and price gap between low sulphur and residual fuels, future trade patterns and changes in regulations affecting the viability of scrubber solutions installed today are all vital to what decision the shipowner makes. INTERTANKO has therefore intentionally kept its “ECA calculator” as simple as possible to give an approximation or an indication – not necessarily and an answer on whether the use of MGO is a viable alternative as compared with installing scrubbers, at least for existing

1 MGO daily consumption is suggested to be considered 95% of daily HFO consumption to discount the higher calorific value of the MGO, the higher consumption of HFO for running scrubbers and the less MGO needed as there is no need for fuel treatment/heating (there are additional savings in using MGO which were not included for the simplicity of the calculation).

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ships and for the period of time before the global cap on sulphur in marine fuels will be enforced.

The “ECA calculator” can be accessed at the following link on the INTERTANKO website: http://www.intertanko.com/upload/92963/ECACalculator.xlsx

The following worked example calculates how long a ship will pay a premium for using MGO until it equals the CAPEX for retrofitting a scrubber solution to a specific tanker. In this case, a product tanker of 38,500 DWT is used and data is taken from publicly available literature [see reference 8 in Annex 2]. Users are requested to read the Assumptions and Criteria used by the methodology included in the “ECA calculator”. The input data for this example is as follows:

Cost (US$) 5,840,000Weighted Average Cost of Capital/Depreciation rate (%) 9%Daily consumption (tonnes) 22.8Days in sea/year 335Voyages/year 30Fuel/discharge (tonnes) 10HFO cost 650

The cost (or CAPEX) includes the price of scrubbers, the cost of retrofitting (onboard installation), cost to classification society and off-hire cost. The model accounts for daily consumption at sea and consumption for a discharge but ignores variable lower consumption for manoeuvring, waiting, idling, etc. The results are given as follows:

ROI (Return of Investment)/Payback time (years)      Share of days in sea in ECA    

    5% 10% 15%20%

25%

30% 35%

40%

45% 50%

55% 75%

100%

Prem

ium

MG

O v

s H

FO(U

SD p

er to

nne)

50 0.0* 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0100 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

200.1 28.1

150 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

126.5 58.4 18.5 10.0

200 0.0 0.0 0.0 0.0 0.0 0.0

226.7 59.7 34.4 24.2 18.6 9.7 6.1

250 0.0 0.0 0.0 0.0 0.0

76.0 35.0 22.7 16.8 13.3 11.1 6.6 4.4

300 0.0 0.0 0.0 0.0 63.7

29.2 18.9 14.0 11.1 9.2 7.9 5.0 3.4

350 0.0 0.0 0.0 83.3 29.7

18.1 13.0 10.1 8.3 7.0 6.1 4.0 2.8

400 0.0 0.0

471.6 37.2 19.4

13.1 9.9 7.9 6.6 5.7 5.0 3.3 2.4

450 0.0 0.0 72.1 24.0 14.4

10.3 8.0 6.5 5.5 4.8 4.2 2.9 2.1

500 0.0 0.0 39.0 17.7 11.4 8.4 6.7 5.5 4.7 4.1 3.7 2.5 1.8

550 0.0

301.1 26.7 14.0 9.5 7.2 5.8 4.8 4.1 3.6 3.2 2.2 1.6

* 0.0 = never pay-back

The pay-back period is given as a function of both the premium paid for the MGO and the time spent by a ship in ECAs out of the total trading time, including discharges. In this case, if a ship spends some 30% of its time in ECA and if the premium for the MGO is US$350,

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the ship can use MGO for some 18 years until it would equal the investment into scrubbers as a means of compliance. Of course, if the ship spends 75% of its time in ECA, the investment on scrubbers will be equalised by the premium in MGO in four years. The calculations do not include running costs, maintenance and repairs which could potentially add another one to two years to the results presented.

ANNEX 1 – Guidance for Hazard Identification (not included)

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ANNEX 2 - Specific Operational and Safety aspects for Scrubbers

EXECUTIVE SUMMARY

This annex provides more details on the operational and safety aspects of Exhaust Gas Cleaning Systems where scrubbing systems are utilised, and provides additional clarifications on the items requiring consideration when assessing the challenges of scrubbers.

In principle and based on the scrubbing medium used, there are four types of technologies:

a) A system using seawater (open loop)b) A system using fresh water with a solution of sodium hydroxide (caustic soda)

(closed loop)c) A system using low frequency radiated seawater for part of the system and seawater

direct for the other part of the system – the low frequency radiation of seawater causes the seawater to become alkaline in character. (CSNOx – Ecospec)

d) A “dry scrubber” technology where the SOx component is brought into contact with a solid sorbet (limestone granulate or calcium hydroxide granulate) with which it reacts and forms a solid salt.

However, the majority of scrubbers have three basic components:

The scrubber which enables the exhaust stream to be well mixed with either seawater or freshwater (or both) or be run through a solid sorbent.

In the case of wet scrubbers, a treatment plant (hydro-cyclone) to remove pollutants from the wash-water after the scrubbing process.

Sludge handling facilities – sludge removed by the wash-water treatment plant or from the solid sorbent must be retained onboard for disposal ashore and cannot be burned in the ship’s incinerators or discharged at sea.

SCRUBBER DIMENSIONS/VOLUME & SPACE REQUIRED

The dimensions/volume of scrubbers are determined by the volume of the exhaust gas to be treated. Efficient treatment/scrubbing will require a minimum volume and flow rate of the scrubbing medium (seawater, fresh water and caustic soda or limestone) dependent on the volume and nature of exhaust gas to be treated. For reasons of available space and access the exhaust gas cleaning units tend to be high up in the ship in or around the funnel area.

Manufacturers’ data indicate that efficient scrubbing of the exhaust gas from an engine using a residual fuel with a sulphur content of 3.50% by weight will demand a minimum rate of seawater of 45 t/MW/hour. From another angle, there is a need of a water flow of some 15 t/MW/hour to reduce the sulphur content in the exhaust gas by 1%. So, the higher the sulphur content in the residual fuel, the higher the minimum of required water flow. Likewise, the lower the seawater salinity, the higher the minimum required seawater flow. For fresh/brackish water and no added caustic soda, the minimum rate of required seawater flow may increase by as much as 50%, up to over 65 t/MW/h.

These units will therefore be quite large and, for reasons of available space and access the exhaust gas cleaning units would probably be installed at a high location, around the ship’s funnel, even for new buildings. Some indicative sizes are given in the table below. These are based on information received from manufacturers either from direct discussions with them,

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their web sites or from presentations made over the last two or three years at different conferences.

Engine

MW

Diameter

m

Length

m

Height

m

Dry weight

ton

Operational weight

ton

1 0.8 1.6 4.0 1.00 3.50

2 1.35 2.4 4.5 1.70 4.75

4 1.75 3.3 4.8 2.35 5.50

6 2.0 3.9 5.8 3.90 6.25

8 2.5 4.7 6.2 5.00 7.00

11 2.9 5.6 7.3 6.15 7.85

15 3.5 6.3 8.2 8.75 9.50

For a dry-scrubber, the indicative volume of an unit is somewhere between 40 – 70 m3/MW.

ADDITIONAL STORAGE

Both the fresh water scrubber and the dry scrubber require additional storage for caustic soda and limestone. The storage capacity should be related to the hours of operations and a sulphur content in bunkers of at least 3.50%. There is no easy way to find available data from manufacturers as information provided in their presentations is sometimes given for lower sulphur content. As an example, in one of the presentations given by Wartsila, for an engine of 20 MW, efficient scrubbing with fresh water of exhaust gas from a residual fuel with a sulphur content of 2.70% requires 0.1 – 0.2 m3/MW/h of fresh water and some 15 l/MW/h of 50% solution of caustic soda. A dry-scrubber may require 16 kg/MW/h of limestone for efficient scrubbing of an exhaust gas from a fuel with a 2.70% sulphur content.

IMO Guidelines for EGCS (Resolution MEPC.184(59) do not specify the maximum sulphur content of the fuels with which the EGCS unit is tested. They address the issue by creating a series of correlation factors or ratios between SO2 and CO2 exhaust emissions based upon the calculation methodology in Appendix II of the IMO EGCS guidelines. The ratios for the relevant regulatory sulphur contents are shown in Table 1 of the IMO guidelines and are reproduced here below for easy reference. These ratios are important so that direct equivalence can be achieved between a vessel with an ECGS and a vessel that has opted to consume low sulphur fuel oil.

Fuel Oil Sulphur Content(% m/m)

Ration EmissionsSO2 (ppm)/CO2 (ppm)

4.50 195.03.50 151.71.50 65.01.00 43.30.50 21.70.10 4.3

Fuel oil sulphur limits recorded in regulations 14.1 and 14.4 and corresponding ratio between SO2 and CO2 emissions values

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As example, using a fuel oil with a sulphur content of 3.50%, the scrubber efficiency to meet the 0.10% ECA level should be 1-4.3/151.7 = 0.972 or 97.2% efficiency. Such efficiency is determined by the amount of seawater/fresh water and caustic soda/limestone the various scrubbers are using and the flows or quantities required determine the dimensions of the scrubbers and the storage capacity of catalysts used. As mentioned, some data presented on scrubber tests onboard ships was related to a sulphur content of 2.70% in the fuel oil.

Therefore, shipowners should require manufacturers to provide information on the minimum amount of water/caustic soda/limestone required for efficient scrubbing of a fuel with a sulphur content of at least 3.5% to a slightly lower value than the 0.10% limit required in ECA from 2015. They may also need to know the maximum sulphur content of residual fuels that can be used which will still allow the scrubber to be able to meet the SOx emission limits, corresponding to both the sulphur global cap and the sulphur cap in ECAs.

NUMBER OF SCRUBBERS

Ships will need at least two scrubbers: one for the main engine and a common one for the auxiliary engines. Ships with large auxiliary boilers, like large tankers may need a third scrubber dedicated to such a large boiler.

One manufacturer indicates that they can provide a single scrubber unit for the main and all other auxiliary engines onboard ships. There are a few technical and operational considerations which may still indicate the need to segregate scrubbers for different types of onboard engines.

Ships’ engines do not operate normally at constant load and therefore the exhaust gas volume for treatment will vary significantly. Hence, the control of water flow which is dictated by the engine’s load has become difficult to manage for a scrubber unit treating the exhaust gas from the main engine and from one or two auxiliary engines. Using one scrubber for all engines will require a very large unit to ensure that the back pressure it generates does not exceed operational limits of all engines running simultaneously. In addition, the use of one scrubber for all engines or for a large number of engines onboard would require a redundancy system if the scrubber does not function.

NUMBER OF PUMPS AND HYDRO-CYCLONES

Wash-water will usually have a low pH. In order to meet the standards required by the 2009 IMO Guidelines for EGCS, particularly when ships are stationary, the wash-water would need to be diluted. Therefore, manufacturers provide an additional pipeline through which a ship brings seawater onboard to dilute the wash-water. The amount of diluted seawater would be substantial and it will require a separate pump.

For redundancy purposes, there may be a need for an additional water feed pump in case the main pump experiences a mechanical failure. Therefore, shipowners are advised to consider the minimum number of pumps necessary for reliability of compliance. An alternative solution for redundancy is to have onboard storage of 0.10%/0.50% sulphur content fuels to meet the requirements for ECA and global cap respectively, in case of a mechanical failure of the scrubber unit.

The hydro-cyclone for wash-water treatment is efficient to a defined design flow rate. Hydro-cyclones are used in continuous flow systems for the separation of higher density, solid compounds from the liquid stream. The separation process relies upon the flow rate of the

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fluid flow into the hydro-cyclone and the shape of the device which determines the centrifugal forces for separation. In order to achieve optimum efficiency, a hydro-cyclone unit has to be dimensioned sufficiently to be compatible with the flow rates within the overall system. The various operations of each ship will mean a variety of exhaust gas volumes to be scrubbed, thus resulting in different flows of wash-water to be treated in order to extract the dry waste.

Attention should be paid to the minimum number of hydro-cyclones needed for adequate redundancy and an efficient treatment of variable amounts of wash-water.

WATER FLOW & PUMP SIZE

Water flow for efficient scrubbing is directly proportional to the volume of engine exhaust gas flow, thus with the engine specific fuel consumption and the engine power. The power required for the water feed pump should be sufficient to lift the maximum amount of water required from the sea level to the location of the scrubbers.

Due to their large sizes, scrubbers are currently retrofitted next to the ship’s funnel. This may require a pump to lift the water between 20 and 40m depending on the size of the vessel. It would be advisable to check the entire piping system, including the sea chest and filters to ensure that maximum water flow will be sustainable at the highest freeboard the ship may have in ballast.

Undersized pumps will risk producing a low scrubbing efficiency and thus may possibly not meet the SOx emissions limits. The estimated power requirement for wet scrubbers is of 20-30kW for each MW of engine power. Therefore, tankers would need additional power from 200kW for a LR and up to 1MW for a VLCC.

COMPATIBILITY WITH SELECTIVE CATALYTIC REDUCTION (SCRs)/NOx EMISSIONS REDUCTION TECHNOLOGIES

Ships built from 1 January 2016 will have to meet Tier III of NOx emissions reductions. Currently, this can be obtained by using a SCR (selective catalytic reduction) device.

There seems to be an incompatibility problem between SCRs and scrubbers, at least the wet scrubbers.

SCRs use a catalytic conversion of the exhaust gas which means it uses a catalyst (ammonia/urea). A large sulphur content in the exhaust gas will shorten the life expectancy of the catalyst by souring. Therefore, it would be logical that the scrubber would have to be placed first in order to reduce the SOx content of the gases entering the SCR.

However, the SCR is efficient in reducing the NOx emissions at an exhaust gas temperature of some 350oC. Since the temperature of the exhaust gas exiting the seawater scrubber unit would be significantly lower (50oC), it would require re-heating to the catalytic reaction temperature of 350oC. This will require a significant heat energy input into the emission gas stream which means additional fuel consumption and a penalty on CO2 emissions.

ENVIRONMENTAL PERFORMANCE

Shipowners should request detailed information on the condition of tests carried out for the scrubber type approval. The IMO 2009 Guidelines for Exhaust Gas Cleaning Systems

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(Resolution MEPC.184(59) gives indication that the expected characteristics of the wash-water to be released into the sea should have a minimum pH 6.5 and the difference between the alkalinity/acidity of the sea water and the wash-water should not be greater than ΔpH2.

Acidity of the wash-water – It is important to request test results and evidence of said results on the acidity value of wash-water before and after the treatment of the hydro-cyclone. The acidity number, or pH number, of the wash-water will indicate the amount of water needed for dilution to raise its pH to the required value. Assuming seawater is the scrubbing medium, the wash-water at the bottom of the scrubber will be expected to be acid with a likely pH as low as 2.0 or 2.5 as it will contain a large proportion of sulphurous gas concentrations in the original input exhaust gas stream, and it will contain a lot of particulate material (ash), including metallic elements and uncombusted carbon residues. The pH scale is defined as a negative decimal logarithm of the hydrogen ion activity in a solution.

The pH scale is logarithmic and as a result, each whole pH value below 7 (neutral) is ten times more acidic than the next higher value. For example, pH3 is ten times more acidic than pH4, 100 times more acidic than pH5 and 1,000 times more acidic than pH6. Therefore, the amount of water to raise the pH value of the scrubber wash-water from say pH3 to pH6.5 could be extremely large. Since the acidity of wash-water exiting the hydro-cyclone treatment would determine the required amount of dilution water, shipowners should request data from manufacturers to this extent.

Amount of solid waste – Ship operators will require details on the calculation of the solid waste for scrubbing exhaust gas of a fuel with a sulphur content of at least 3.5% by weight. Test results will also be required. One manufacturer indicates an average amount of 5kg/MW/day of solid waste but calculations done on potential solid waste content on exhaust gas from a typical residual fuel used by ships RMG 380 (Table 2 of the ISO 8217:2010) may indicate higher values. Shipowners should ensure that solid waste is calculated not only by considering the ash concentration, but also the carbon residue concentration which will also be extracted from scrubber water due to its pH content.

Demister/removal of water droplets from the funnel gas stream – Exhaust gas after scrubbing will still carry water droplets due to its velocity through the exhaust scrubber ducts. When the exhaust gas leaves the ship’s funnel at an estimated temperature of 40-50oC, these water droplets (i.e. scrubber water – acidic in nature) will condense instantaneously and will precipitate on the deck with negative impacts on paint and other fittings in the vicinity of the ship’s funnel. These water droplets should be removed in the main by a properly dimensioned and designed demister platform. Efficiency of the demister should be checked and demonstrated.

Filters – In addition to the hydro-cyclone, it is believed that additional filtration equipment will be needed to remove any heavier liquids, such as uncombusted aromatic hydrocarbons,

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before the scrubber water meets the water quality criteria required by the IMO guidelines and then can be discharged into the sea.

Measurement and recording of the SOx emissions – Test results and direct measurements of the SOx emissions should be required.

SAFETY AND OPERATIONAL ISSUES

Weight and location – For stability purposes, the operational weight (wet weight) of all scrubbers and their location should be considered.

Back-pressure induced by scrubber and turbocharger efficiency – Turbocharger efficiency is sensitive to exhaust gas back pressures. There are various possible restrictions to the exhaust gas flow within a scrubber unit which can create a cumulative back pressure which then may result in increased combustion temperatures and a possible increase in fuel consumption. Care should be given to proper dimensioning of the ducts, or the platforms (trays) and traps in spray rail systems (possible pressure drop), or the depth of the water in case of bath system scrubbers (static head) or a proper calibration of the flow through the demister (pipeline bends creating hydraulic resistance). Care should be given as to whether there is the need to place booster or extraction fans to compensate for any increased in back pressure.

Caustic soda – The following statements defining safety aspects related to caustic soda from this website (http://www.dow.com/productsafety/finder/caustic.htm)should be taken into consideration.

Caustic soda solution is a chemically stable product. It will pick up carbon dioxide (CO2) from the air to form sodium carbonate (Na2CO3) which can impact product quality over time. In addition, iron pick-up is common in carbon steel storage vessels or in lined carbon steel storage vessels where the liner has been damaged. To extend the storage life of caustic soda solution, minimise its exposure to air and its direct contact with iron-containing metals.

Heat is generated when caustic soda is mixed with water – use care when diluting concentrated solutions. In addition to using proper personal protective equipment, ALWAYS add caustic soda to tempered water with constant agitation to minimise a rapid temperature increase and the potential for the solution to boil, splatter or violently erupt. Flammable hydrogen may be generated from contact with metals such as: aluminium, brass, tin and zinc.

Caustic soda in a 50% solution is corrosive to the skin, and may cause severe burns, even with short exposure. Solutions or mists of caustic soda may also be damaging to the eyes, resulting in vision impairment or even blindness. Ingestion of caustic soda can cause chemical burns to the mouth and throat with possible ulceration to the gastrointestinal tract. Boiling point/range: 145oC – it would probably be wise to avoid placing the storage tank in the engine room as there would be a potential danger in vapour generation.

Engineering Controls: Provide general and/or local exhaust ventilation to control airborne levels below the exposure guidelines.

Handling of the solid waste onboard – Solid wastes from exhaust gases of residual fuels will also contain heavy metals. It will be the shipowners’ responsibility to consider shore regulations on delivery of such waste for disposal. Some countries may have quite strict

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regulations requiring test results to define the actual content of a container which carries such solid waste (such procedures are required today by the Netherlands when ships de-bunker off-spec fuels). As mentioned before, the potential amount of solid waste generation could be much higher than currently indicated (5kg/MW/day). Complete data on specification of fuel used for test (ash content, aluminium + silicon, vanadium and carbon residues) should be requested from the manufacturer.

MAINTENANCE & OPERATIONAL EXPENSES

Scrubbers do handle a very acidic, corrosive medium. The wash-water at the bottom of the scrubber is expected to be acidic, with a pH level possibly below 3. Treatment through the hydro-cyclone will remove the solid waste but the pH will not change too much. Therefore, it is very important to investigate the materials these components are made of and ask the manufacturers about the predicted maintenance burden and cost.

While operational expenses are not known, they cannot be ignored. There is an additional power demand which becomes important for ships having long trips in an ECA. The estimated additional power for running scrubbers stands between 100kW for small ships and up to 1,000kW for VLCCs and shuttle tankers with Dynamic Position II and propulsion redundancy notations. The additional estimated power for dry scrubbers is up to 2kW for each MW of engine power. For seawater scrubbers, one should also include the pumps that are required for running large amounts of seawater needed to dilute the wash-water.

The cost of discharging solid waste to shore facilities might prove significant and thus should be included in the estimated operational cost.

EGCS APPROVAL, SURVEY AND CERTIFICATION

The IMO 2009 Guidelines do allow two different standards for the approval of an EGCS. The first standard (Scheme A) is a type-approval standard where the EGCS is tested to show that, under the prescribed conditions determined by the manufacturer, the unit will meet, during its operation, all the requirements for exhaust gas cleaning. Thereafter the specific unit or serially manufactured units of “nominally similar” type are to be approved by an Administration for installation onboard one of its flagged vessels.

The second standard (Scheme B) allows the installation onboard ship of an EGCS but requires that the unit system includes a continuous monitoring system that is approved by the vessel’s flag Administration to continuously show and record that the system achieves the required regulatory standard for emissions.

There are several vague areas in these Guidelines as compared with the objectives of the relevant regulations in MARPOL Annex VI (paragraph numbers as in the IMO Guidelines).

- Paragraph 4.1.2.1 – “An EGC unit should be certified ... as capable of meeting the limit value (the Certified Value), specified by the manufacturer” – The limit value should be the one set by the Regulations and not set by the manufacturer. Attention should be given to possible limitations of flexibility of a scrubber performance and eventually the fuel specification limit for each scrubber can meet the emissions requirements.

- Paragraph 4.1.2.1 – “An EGC unit should be certified ... with fuel oils of the manufacturer’s specified maximum % m/m sulphur content” – Attention should be given to the maximum sulphur content in the fuel for which the scrubber can meet all

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emissions limits (the maximum sulphur content should be required to be at least equal to the maximum sulphur content allowed for use outside ECAs). The practical use of a scrubber is to help avoid having diverse grades of fuel onboard a ship, thereby limiting it to one grade of fuel.

- Paragraph 4.1.2.2 – “Where testing is not undertaken with fuel oils of the manufacturer’s specified … the use of two test fuels with lower % sulphur content is permitted” – This paragraph permits certification upon a linear approximation to the maximum sulphur specification. Therefore, it could result in the certification and approval of a scrubber that is not capable of meeting emissions requirements when the engine is burning higher sulphur content fuels than those used for certification.

AVAILABILITY, MATURITY & RELIABILITY

Scrubbing technology is not new as such but its application to large engines onboard ships has proven challenging. There are limited test results carried out on a few ships and those test results are not transparently communicated, thus resulting in the need for more information. In this case, there should be a symbiotic overview of scrubbers’ availability, maturity and reliability. This should mean that at any one time there should be available scrubbers to be fitted and retrofitted for any ship type and size and that they are fit for purpose. One challenge will be the system reliability into providing a credible environmental performance, particularly with regard to the quality of the wash-water discharged at sea.

RETROFITTING

Time indicated for retrofitting is about two months’ activity which can be broken down into two to three weeks for preparation of the retrofitting, seven to 10 days for retrofitting work (ship out of trade) followed by two weeks for calibration, testing and certification.

APPROVALS AND RULE PREDICTABILITY

Scrubbers demand significant investment and additional operational expenses are expected. Scrubbers may, however, provide a cheaper alternative to meeting SOx emissions for ships spending significant time in ECAs. The uncertainty is whether Administrations, Coastal States/port authorities and, in the long run, environmentalists, would recognise scrubbers as an adequate and viable technology equivalent to burning low sulphur fuels.

Regulation 14 of MARPOL Annex VI provides only for the use of low sulphur fuels. The possibility for the use of scrubbers comes under the provisions of Regulation 4 of MARPOL Annex VI as “equivalents”. Therefore, the use of scrubbers is an option for ship operators only if the Administration of the vessel approves the use of this alternative compliance method. Consequently, an Administration will actively have to notify IMO under Regulation 4 if it allows scrubbers as an equivalent or, that it will allow scrubbers on a general basis for individual ships. In their ratification instruments, two governments (US and Canada) specifically stated that they would allow equivalents for sulphur compliance in their ECA application. To date, no other Parties to MARPOL Annex VI have specified anything to this effect.

On the other hand, in its ratification document, the US reserved its right to introduce stricter requirements in domestic waters, which makes it not clear how the US will consider approvals of scrubbers recognised by other Administrations. In general, a coastal State has

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under the United Nations Convention on the Law of the Sea (UNCLOS) the right to deny ships the right to operate scrubbers within its territory. Since there is no such notification requirement to that effect included in Regulation 4, it is not clear how that would work under MARPOL Annex VI and the question has to be clarified with Parties to MARPOL Annex VI.

It is assumed that recognition of utilisation of scrubbers will all depend on how environmentally-efficient the scrubbers will prove to be from a holistic viewpoint.

 

References

1. MARPOL Annex VI (2008 amendments)http://www.intertanko.com/upload/79278/Revised%20MARPOL%20Annex%20VI.pdf

2. IMO 2009 Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59)): http://www.imo.org/blast/blastDataHelper.asp?data_id=26469&filename=184%2859%29.pdf

3. EU Sulphur Directive 2005/33/EC: http://ec.europa.eu/environment/air/transport/directive.htm

4. California Air Resources Board - Regulation on Fuel Sulfur and Other OperationalRequirements for Ocean-Going Vessels within California Waters and 24 NauticalMiles of the California Baseline (OGV Fuel Regulation), 2011 amendments: http://www.arb.ca.gov/ports/marinevess/documents/marinenote2011_1.pdf

5. California Maritime Academy (CMA) - OGV Clean Fuel Regulation Investigation of Operational Issues: http://www.arb.ca.gov/ports/marinevess/documents/emissiontest/cma_technical_report.pdf

6. Wartsila: http://www.wartsila.com/en; (http://www.wartsila.com/en/references/Bit-Viking);(http://www.wartsila.com/en/search?q=scrubber+brochure+)

7. Hamworthy Moss AS: www.hamworthy.com

8.Clean Marine AS: http://cleanmarine.no/wp-content/uploads/2011/06/Clean-Marine-EGCS-Brochure.pdf

9. Vessel Emissions Study: Comparison of various abateement technologies to meet emissions levels for ECAs - Christian Klimt Nielsen; Christian Schack; Green Ship of the Future

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ANNEX 3 – Advantages of using clean fuels instead of EGCS

INTERTANKO believes the best solution is a global mandate for a specifically defined low sulphur marine distillate fuel to achieve significant reductions in air emissions. This will, at the same time, open up opportunities for engine manufacturers to find innovative, simple and efficient solutions for further reductions of air emissions from ships, including CO2 emissions.

INTERTANKO believes the best and safest practices and policies are those where each industry is required to do what it is designed and expected to do.

The refining industry should provide efficient and clean low-sulphur marine fuels. The shipping industry should concentrate on safe and efficient transportation operations. The engine manufacturing industry should then develop efficient technologies to improve ships’ energy efficiency.

Shipping should not concentrate on treating residual fuels to make them fit for use and then purify the emissions. Using ships as waste management plants is an obstacle to innovation that could achieve further reductions of air emissions from ships and further increase in ships’ energy efficiency, including reduction of CO2 emissions.

INTERTANKO acknowledges that under the current regulatory frame, the premium to be paid for very low sulphur content marine distillates (usually a DMA/DMZ grade as per Table 1 of ISO 8217:2010, also called marine gas oil (MGO)) makes it less attractive as compared with the alternative of continuing to use cheaper residual fuels and investing in scrubbers. However, the number of advantages for using MGO is larger than is usually considered. These advantages are important for both existing ships and new ships. Such a list is presented herewith, with brief explanatory notes when and if relevant.

* Environmental advantages

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

(The alternative. Using high sulphur residual fuels with EGCSs such as scrubbers may reduce SOx and PM emissions to the same level, but this would require huge installations and would complicate ship operations. Moreover scrubbers need power, meaning more fuel to operate and therefore most likely increased NOx emissions. Reducing NOx emissions would also result in increased fuel consumption. 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 MGO would facilitate).

-Using MGO is applicable to all existing engines, with only minor modification, which means a fast-track for a 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).

-When the global sulphur cap will apply (0.50%), using MGO means a straightforward and significant global reduction of SOx emissions from ships of approximately 83%.

(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 some 150,000 scrubbers that would need to operate continuously).

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-Using MGO reduces fuel consumption through its higher calorific value and thus reduces the CO2 emissions from ALL ships by some 5%.

-Using MGO 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 the energy-intensive sequential heating the residual fuel at 80°C while the fuel is in the settling tank, heating residual fuel at 95°C before entry into the purifier/clarifier and further heating residual fuel at 130°C in the service tank to reduce the viscosity to 12-15 cSt for efficient combustion. Additional fuel consumption to run scrubber pumps and additional air emissions from incineration of the additional sludge generated).

-Using MGO 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.

(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 MGO 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 lifetime 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. Emissions reductions may be achieved 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 MGO means significant reduction of harm to the marine environment from accidental spills involving residual fuels.

* Safety benefits

Using MGO

a) improves safety of ship operations due to its higher quality b) means much better quality of fuels delivered to ships, thus eliminating the quality

problems with residual fuelsc) means reduced maintenance and reduced risk of breakdowns d) means no incompatibility problems as experienced by ships using residual fuels in

ECAse) means no need for fuel switchover and thus no exposure to human error and engine

breakdowns.

(a, e) These advantages depend on a complete departure from using HFO and eradicating the 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.

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(b) 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 flashpoint• high sediments• high density• used lube oil content• polyethylene contamination• polystyrene contamination• high calcium & high sodium • incompatibility of blends.

Most of these problems will be removed by the use of MGO.

(c) A car carrier, Turandot, used marine distillate fuel only for three years and the company reported that the repair and maintenance work decreased by 70%.

(d) Ships currently comply with ECAs 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 fuel supply to engines. The same phenomenon may also occur during the fuel switchover operation when “ECA fuel” and “open sea fuels” mix in the settling and day tanks. There have been experiences with ships having to de-bunker, clean and re-bunker because of fuel incompatibility.

INTERTANKO concludes:

The sole use of MGO provides a series of significant safety advantages that cannot be matched by the use of HFO and scrubbers.

* Technical advantages

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

-Boilers can use MGO but would need to change injection pumps and burner nozzles.

INTERTANKO concludes:

Modifications to existing engines for use of MGO incurs a cost, but this is minimal when compared with the retrofitting of abatement technology.

* 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 – the workload of the engine crew on

Turandot decreased by 70%.- No fuel treatment/processing.

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INTERTANKO concludes:

The simpler, cleaner, safer environment on board ships which comes from using MGO is to the advantage of the shipowner and all his staff.

* 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, ECA 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 shipowners will still be left with the responsibility for controlling the quality and compliance of the HFO fuels purchased).

INTERTANKO concludes:

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

What are the cost implications to refineries and to shipowners?

Whether MGO or scrubbers are the answer, the alternative solutions to reduce air pollution from ships both come with a substantial cost to shipowners. The elements to consider MGO:

CAPEX so small that not to be accounted for OPEX – predictable premium of USD 300+ per tonne of fuel Depending on availability of low sulphur MGO

Scrubbers: CAPEX significant OPEX unknown but also significant Depending on availability and price of the HFO

Except for the availability and price of the HFO, the above are the classic criteria and arguments used when comparing the two alternatives. The premium for using MGO for compliance has to be also associated with the cost savings in using MGO for compliance and these are:

less maintenance and repairs (by 70% or more) lesser fuel consumption (no bunker heating and treatment, no pumps needed for

scrubbers, higher calorific value, etc.)

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larger volume for cargo capacity (new ships built to use only MGO will have more cargo space as there will be no need for bunker purifiers, no space used for scrubbers and no need for additional MGO tanks as a redundancy for scrubbers, etc.)

lack of predictability to permit to the use scrubber, at least by ports, give further cost benefits to the use of MGO (on the assumption that some ports will forbid use of open-loop scrubbers, additional costs on use of caustic soda for a close-loop scrubbing system or even use of MGO will be the answer)

no risks of challenges for non-compliance, detentions and fines, etc.

Availability of marine distillates fuels

Another unknown factor is the potential problem with the availability of MGO for ships. The refining industry has stated that it may not be able to deliver the amount demanded. INTERTANKO, though, believes that delivery will be met should regulators be firm and request such a product. In addition, INTERTANKO suggests that the big missing argument into this debate is actually the potential lack of availability of HFO in 15 to 20 years from now.

It is common knowledge that a large number of refinery upgrades and new refinery construction projects are being undertaken by oil companies in many parts of the world, particularly in Asia. The reason for this is to reduce the percentage output of fuel oil (residuals) from the crude oil barrel due to the imposition of increasingly stringent environmental requirements governing the sulphur content in oil products. Most of the pressure comes from regulations on land industries but we suspect that the restrictions being introduced for shipping also give off a signal that that market may also diminish. This trend makes the refining industry to become more efficient. All new refineries are “not set to produce resides” (this is a quotation from an oil major slide presentation few years ago).

Recent analysis unanimously predicts that the demand for fuel oil (residuals) from any other industries except shipping will minimise in the future. It is predicted that in 15 to 20 years from now, the only “market” for residual fuels (fuel oil) might well be shipping. Logically, outdated/old refineries will close as they cannot be competitive compared with modern units and survive only by selling fuel oil to ships.

Historical data indicates that since 1973 the total supply of heavy residual oils has been continuously decreasing at an average rate of some 2% per annum. It is economically more attractive to produce more profit-making products and less fuel oil which sells at a price below or roughly the same price as crude oil. Therefore, a significant part of the assumed investment made for new and upgraded refining units is actually an expense that the refiners would incur anyway, following the trend of reduced residual oil sales. This trend is little influenced by the demand for shipping, which is a small percentage of the total refineries production.

Without implying these changes are easy or cheap, INTERTANKO concludes that the changes in the refining industry will occur anyway. Based on a sequence of logical observations, INTERTANKO questions whether, in 15 to 20 years from now, an ultra-efficient refining industry will have sufficient fuel oil available for ships. If fuel oil becomes insufficient, its price will increase and the cost-efficiency calculations for use of scrubbers will change dramatically.

INTERTANKO concludes:

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The long-term prediction may indicate a significant efficiency improvement of refining processes which will reduce amounts of resides from processing, reducing availability of HFO for shipping. This will not mean an automatic availability of MGO but, as shipping is one of the most essential means of transportation, it is predictable to conclude that shipping will be provided with the adequate amount of fuel which is required. There would be higher price for it but as long as it is the same for all ships, there would be no distortion of competition for cargo ships.

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ANNEX 4 – The 2009 IMO Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59))

http://www.intertanko.com/upload/92963/App.pdf

or

http://www.imo.org/blast/blastDataHelper.asp?data_id=26469&filename=184%2859%29.pdf

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