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LNG Proponents Hail IMO's Sulfur Cap Decision

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LNG bunker barge (file image)

By MarEx 2016-11-02 12:34:56

The industry consortium SEA\LNG said Tuesday that investments in LNG bunkering will rise thanks to the IMO's 2020 deadline for a fuel sulfur cap of 0.5 percent. 

The SEA\LNG consortium includes Carnival Corp., DNV GL, ABS, Keppel, Engie, GE, Lloyd’s Register, Mitsubishi, NYK Line, Shell, TOTE and Wärtsilä, among others. It works to promote LNG as a marine fuel and to address market barriers to adoption. 

"In light of MEPC 70's approval of the global sulphur cap in 2020, there is now new impetus to resolve the structural and commercial obstacles hindering the widespread adoption of LNG as marine fuel," said Peter Keller, chairman of SEA\LNG and executive vice president of TOTE Maritime. "We anticipate increased and significant investments across the shipping value chain as a result of this decision and the certainty it provides."

Delegates at MEPC 70 considered whether to push implementation of the 0.5 percent sulfur cap back until 2025, which would have given refiners more time to change their processing equipment. However, the committee determined that 2020 was still a reasonable deadline.

Proponents say that with new certainty on the implementation date, investors will also have a better ability to predict when new LNG fueling infrastructure will pay off. In addition, the cost of more expensive low sulfur fuel oil could make LNG more economically competitive.

The new sulfur rules are widely expected to add an extra expense for ship operators. Analysts estimate the additional bunkering costs for the container shipping sector alone could be $35-40 billion, and leading carrier MSC says that its annual fuel costs will go up by $2 billion. Still, major industry players (including the International Chamber of Shipping) have welcomed IMO's decision as it gives them a more precise target date for implementation. 

Instead of switching to LNG or to low sulfur fuel oil, some shipowners may opt instead for exhaust gas scrubbers, which would allow their vessels to continue burning high-sulfur HFO. This may accelerate scrapping for older tonnage, as retrofitting scrubbers or switching to a more expensive fuel may prove uneconomical compared with ordering a brand new, scrubber-equipped vessel.