FUELS AND LUBES Living with IMO 2020: What’s Changed?

Prior to January 1 this year, the question highest on the agenda for most shipowners was what steps to take to prepare for the new IMO global limit on sulfur in marine fuels of 0.5% for ships operating outside of Emission Control Areas compared with the earlier 3.5% (inside ECAs the limit is 0.1%). They had three basic choices: wait and hope that the new fuels would be available and pay the possibly higher price, make the considerable investment of installing an exhaust gas scrubber and continue burning 3.5% sulfur, or make the leap to burning liquefied natural gas as fuel, posing its own set of issues relating to investment cost and fuel availability. So, who got it right?

One owner that took the route of opting to burn compliant fuel was tanker giant Euronav. Prior to the IMO 2020 implementation date bought up large stocks of ultra low sulfur diesel and stored them afloat on its 442,470 dwt ULCC Europa, which it positioned off Singapore. In a September 2019 briefing, Euronav said that it had, at that time, bought 420,000 metric tons of compliant fuel oil (0.5% sulfur and 0.1% sulfur). The average price the company paid for VLSFO $447 per metric ton versus $400 per metric ton HSFO during the purchase period.

How did that pan out? In a note to its 2019 financial report published March 31, Euronav said that the low sulfur fuel oil it purchased last year in anticipation of IMO 2020 price volatility and which had not yet been consumed, would be subject to a mark to market valuation at the end of the first quarter and will lead to a write down as the current market is significantly below the acquisition cost.

In other words, compliant fuel has, thus far, been more available and more affordable than most people in the industry had anticipated.

Does this mean that companies that installed scrubbers or switched to LNG made the wrong bet? The roulette wheel is still spinning. The price differential between VLSFO and HFSO has recently been narrowing—meaning that it takes longer to pay back the capital and installation costs of scrubbers, around $2.5 million a pop for tankers, out of savings. But the last few weeks have shown that oil, and thus fuel, prices can be extremely volatile. Additionally, proponents of scrubbers can point to evidence showing that they remove even

Bunkering tanker Ostrov Russkiy container ship NYK Aphrodita

By Nick Blenkey, Web Editor

more sulfur from fuel than they are legally required to, while academic studies have indicated that, in overall terms, taking sulfur out of fuel locally on ships is better for the environment than doing so on an industrial scale in refineries.

Switching to LNG as fuel is also as much about emissions reductions as it is about costs savings.

Total: LNG Is Best We asked Jérôme Leprince-Ringuet, managing director, Total Marine Fuels Global Solutions, for some insights into the situation. “In our view, the market, currently less than one million tonnes per year, will reach at least 10 million tonnes in 2025 and exceed 20 million tonnes in 2030,” says Leprince-Ringuet.

He notes that use of LNG can reduce 99% of sulfur oxide emissions; 99% of fine particles emissions; up to 85% of nitrogen oxide emissions; and about 20% of greenhouse gas emissions.

What about price?

“While the price of bulk LNG today is cheaper than marine gasoil or heavy fuel oil on an energy parity basis,” says Leprince-Ringuet, “the challenge for companies considering LNG fueling for their newbuilds is the extra capital expenditure that can be 15% to 25% higher than for a conventionally fueled vessel. However, ship owners that have opted for LNG as a marine fuel could also have future choices in bio and synthetic LNG. Both options could be available in sufficient quantities to make a positive contribution towards future decarbonization.”

And, unlike some of the alternatives, including ammonia and hydrogen, LNG infrastructures such as liquefaction and regasification plants are well developed and mature.

“Offshore infrastructures, such as LNG Bunker Vessels are growing very fast and we expect the number of LNG bunker vessels to triple over the next two years reaching more than 30 units,” he notes.

Leprince-Ringuet notes that Total’s recent moves on the LNG bunkering front include the chartering of two 18,600-cubic-meter LNG bunkering vessels to serve customers in Rotterdam and Marseilles, including CMA CGM’s series of large LNG-fueled containerships and an agreement with Singapore’s Pavilion Energy to jointly develop an LNG bunker supply chain that includes the shared use of a 12,000-cubicmeter bunkering vessel newbuild.

Conventional Fuels Total is, of course, a major supplier of conventional fuel and Leprince-Ringuet notes that as an integrated energy company, it is also able to refine low sulfur products or create blended VLSFOs.

“The development of our new 0.5% sulfur blends started years ago with the joint involvement of our refineries, research centers, and indeed our customers,” he says. “We were the first oil major to run a VLSFO trial, on a containership loaded in the AntwerpRotterdam-Amsterdam (ARA) hub for a Europe-Asia trip. Last October, we bunkered our first vessels with VLSFO in Singapore and ARA, and have delivered volumes steadily since then.

“More recently, we started our operations in the region of Ningbo/Shanghai, China, through our newly created joint venture company with Zhejiang Energy Group. In line with our strategy of serving our customers where they need us, we can now offer them competitive low sulfur marine fuels in the world biggest ports.

Lubricants For some answers on how ships are handling these new fuels, we asked Serge Dal Farra, global marketing manager, Total Lubmarine, what feedback the company had had from operators on their experiences with compliant fuels in the initial three months of IMO 2020.

“The experience of the last three months under the new IMO 2020 regulations has proved to us and our customers, that the transition to cleaner fuels to produce less emissions is working well—especially when it is fully controlled with a robust monitoring program,” says Dal Farra. “Despite the challenges that our customers face under the new IMO 2020 regulations, feedback from has been generally positive.”

He adds that the biggest takeaway is the importance of engine cleanliness, confirmed by a number of sea trials.

“Engine cleanliness is, of course, essential in this new operating regime,” points out Dal Farra. “Various blends have created challenges for efficient engine combustion. So this requires a high level of in-depth technical awareness, support and solutions for all ship operators and OEMs to ensure they implement the right strategy—and are using the right combination of solutions to operate successfully. It is one of the reasons why our technical expertise is focused on ensuring all our customers use lubricants and monitoring tools that provide optimal engine performance and engine cleanliness. In March, the company’s product, Talusia Universal (BN57), was awarded a No Objection Letter from WinGD for all fuels with a sulfur content 0.00%S to 1.50%.

Maintenance, Inspection, Analysis Dal Farra stresses that maintenance, inspection and analysis are fundamental to safe and optimal engine operation. Oil analysis is part of an efficient and regular monitoring program endorsed and recommended by engine manufacturers and Total has invested heavily in developing an industry-recognized drain oil analysis program that provides customers anywhere in the world with an ability to access a full technical response on how to understand the health of an engine.

“We are now beginning to see heightened awareness across our customer base on the merits of drain oil analysis as a routine activity,” he says. “As a result, we are increasing the scope of this service to enable ship engineers to verify that their lubricated engine is operating according to expectations.”

Total sees this type of service increasing substantially as industry moves further through the year and into 2021.