Gulf Oil Marine’s Peter Deegan warns shipowners need to prepare for the switch to low sulphur fuel now

As the global technical manager for marine lube supplier Gulf Oil Marine, Peter Deegan is working pretty much at the coalface when it comes to adapting to the new conditions that will prevail come 2020, when a global adoption of 0.50% sulphur emissions from ships comes into effect.

When, in October 2016, IMO announced the deadline for the implementation of the new restrictions the International Chamber of Shipping welcomed the decision. But Mr Deegan observes that many shipowners still appear to be taking a wait and see approach.
 

Call for action

He acknowledges that although there remains lingering doubts about sufficient availability of 0.50%S fuel, IMO have formally accepted the CE Delft study which calculated that there will be sufficient fuel below the 0.50% therefore deferral to 2025 is no longer an option: “Any lingering thoughts that implementation may provide an excuse for a deferral are misplaced and would be a spectacular own goal,” he claims. “It has taken so long to get this far. I think there is enough awareness of what shipping does in terms of emissions to acknowledge the urgency for action,” he adds.

Preparation will take time. Aside from retrofitting scrubbers to existing vessels, which is an enormous and very expensive task for those who choose that option, even shipowners, who choose to switch to distillate fuels, will have to re- examine their systems.

They still have to clean tanks,” explains Mr Deegan.

“If they have residues of heavy fuel oil and they fill a 3,500 mt bunker tank with marine gas oil there is a likelihood of contaminating a fuel or fuel blends that are inherently prone to instability. Shipowners must have plans in place to combat such probabilities.”

There are also power considerations: a tonne of heavy fuel oil and a tonne of distillate provide a different level of power and this would likely impact voyage plans.

“2020 is just 27 months away. Whatever their plans are, shipowners need to be taking action now, Mr Deegan insists.
 

Refinery challenges

Thus far, publicly most concern has centred on the ability of oil refineries to provide the necessary quantities of low sulphur fuels. Gulf Oil Marine estimates that about 200m tonnes of fuel oil will change to low sulphur. This can be set against an estimated global demand of around 500m tonnes in 2020.

On the way to that target refineries will need to reconfigure their output parameters because these are usually on default settings, which are not necessarily easy to change.

There are also geographical considerations. Refineries in one part of the world receiving light sweet crude, which is a low sulphur crude, will have a natural advantage over a refinery receiving sour crude, which is a high sulphur crude.

More importantly, refineries offer various products for multiple markets. If they are not convinced by the numbers, and the probability of a sufficient return on their investment, the refiners may well be reluctant to undertake the reconfiguration required for production.

Due to the requirements for low sulphur fuels that have been in place for a number of years to cater for European emission control areas, European refineries are unlikely to present a problem. But it has been widely acknowledged that refineries in Asia may have difficulties in fulfilling demand in the region.
 

HFO redux

There is of course an alternative to relying on the supply of low sulphur fuels. Fitting a marine scrubber has long been an acceptable if expensive option. Extolling a theory that could actually bring the shipping industry back to heavy fuel oil in not much more than a decade, Mr Deegan is confident scrubbers are the way forward, at least when it comes to newbuildings.

“Any newbuilding should have a scrubber on it,” he says without hesitation.

“As the regulations start to take effect and a lot of shipowners begin using distillate fuel the supply and demand balance will change; and with that change there will be a lot of heavy fuel oil around.

“Whatever the refiners do there will still be plenty of HFO. If a shipowner has a scrubber on-board he will be able to power the vessel with HFO, which the refiners will be practically giving away.

“I would say if a shipowner has ordered a newbuilding he should ensure it is fitted with a scrubber. The fuel costs going forward are likely to be very low.”

Mr Deegan is also convinced that the majority of shipowners will see the wisdom in fitting scrubbers to newbuildings.

“We reckon that around 10% of the world fleet will be scrapped in the next few years followed by a surge in newbuilding orders. In a limited time frame the shipping industry could once again be choosing HFO as the fuel of choice.”
 

The race for the optimum BN

Even should Mr Deegan’s predictions prove to be correct, marine lubricant suppliers such as Gulf Oil Marine have their own challenges in terms of product modification determined by the changing regulatory landscape.

“We have been reviewing our product portfolio for some time, the most important items being the cylinder lubricants,” he says.

“Right now we have products for high base number cylinder oils that are necessary for the high sulphur fuels including 70BN and 100BN. And we have the low base number product, ECA 50 for when vessels switch over on the approach to an ECA. This means the vessel is carrying two different cylinder lubes. It’s not ideal; it’s simply the way it has to be at the moment. There is a big difference in the base number required with 3.5% sulphur fuel to the base number needed for 0.10% sulphur fuel.

“With the introduction of the global cap at 0.50% there will be a much smaller shift to 0.10% for use within ECAs, at which point there may no longer be a need for high base number cylinder oils. If that is the case we need to establish what the optimum base number is.

“In getting the balance right we have to work with OEMs and additive companies we need the right additive technology and approvals from the OEMs without that we cannot run the business and they are challenges from a lube provider’s point of view. At present it is a work in progress,” says Mr Deegan.
 

Unrivalled network

Any variation in the product range can bring its challenges to a lubes provider but Gulf Oil Marine has created an unrivalled network that by the action of rivals has been building on its advantage.

“Ships aren’t factories, they tend to move around, so that means our supply operations have to be set up to deal with that.

“One of our strengths is global port coverage. We have worked very hard at ensuring that we cover over 1,000 ports. Nobody has port coverage like Gulf Marine. It’s just a fact,” Mr Deegan concludes.