Fuel revolution - the search for viable new fuel alternatives

15 September 2014



Tough emissions targets present a major challenge for cruise operators as the industry seeks to address its environmental footprint. Peter Hall, chief executive of the International Bunker Industry Association, speaks with Andrea Ashfield about the search for viable new fuel alternatives.


It's been a busy year for Peter Hall, chief executive of the International Bunker Industry Association (IBIA). Since he stepped into his current role in April 2013, the former CEO and harbourmaster of the Gibraltar Port Authority has focused on developing IBIA's standing as a unique and crucial voice representing all those involved in the supply and use of marine fuel.

Through its forums, education and training initiatives, the association is actively involved in addressing the bunker industry's greatest challenges, and at present, there is no issue more pressing than the need to meet rigorous environmental legislation affecting the type of fuel used across the international shipping community.

The new rules have been well documented. In 2015, companies operating in designated Emission Control Areas (ECAs) including the North Sea, English Channel and Baltic Sea will be required to use fuel with a maximum sulphur content of 0.1%, and by 2020, all vessels will be forced to switch to a version with less than 0.5% sulphur on all journeys worldwide.

These stringent measures have ignited intense debate across the length and breadth of the sector, with a number of potentially viable substitutes in development or already coming into use.

"The biggest changes for the bunker industry have been through environmental legislation that has impacted on emissions and, consequently, the fuel being used," says Hall.

"With the 1 January 2015 thresholds coming down and the 2020 rules on the horizon, we have to look at what this means for everyone involved.

"Going forward, it's about the economics of the case - is there sufficient supply of the right fuel at the right price? There is also a bigger picture in terms of refining capability and whether there will be enough compliant fuel to meet the needs of the market in 2020. It's certainly a game changer for all concerned."

The enormous costs faced by operators have also driven the subject to the very top of the agenda: "We have legislation in one corner, but at the same time, we have the price of fuel increasing," says Hall. "For a typical cargo vessel, fuel represents 50-70% of operational cost, and that has taken the issue from the basement right into the boardroom for ship operators.

"When you set this against operational viability and freight rates, with a margin in the middle for a return from carrying either passengers or cargo, it challenges the feasibility of shipping operations and is driving companies to look for alternatives," he adds.

Making the switch

There are several different types of potentially viable fuel, each with its own advantages and disadvantages.

"We have a suite of options including liquefied natural gas [LNG], as well as renewable choices like wind and solar power," explains Hall. "The latter are not currently viable in their own right but can complement conventional fuels. Quite clearly, a ship solely reliant on wind energy in the doldrums can't deliver the commercial requirements of a modern shipping operation that runs to a timetable, delivering passengers to a variety of destinations.

"However, it would support conventional and alternative versions such as LNG, hydrogen fuel cells and methanol, which have all been tried and are currently being refined."

The introduction of new fuels will also impact heavily on the design and infrastructure of a ship.

"Vessels that are built to carry LNG, for example, have an area on board that is exclusively for the carriage and containment of the fuel, with no people in the vicinity for obvious safety reasons," says Hall.

"However, when we look at existing types of ships, we're starting to reinvent the wheel in terms of where it can be placed," he continues.

"There have been R&D trials on ferry operations in Europe where we've had tank containment close to accommodation areas, with any concerns overcome by stringent fail-safes, but introducing this on a conventional ship would require some very radical thinking."

These challenges mean the wide-scale use of LNG is unlikely to happen soon. "We are working on developments within the International Maritime Organization [IMO] to come up with standards in design and operational criteria that will deliver the safety required, but I think mass production is some way off," Hall adds. "Intermediary alternatives like scrubbing technology represent the easiest and cheapest way to go."

Indeed, scrubbing technology has already been successfully adopted in other industries.

"Broadly speaking, the automotive sector has been delivering this type of approach for some years with the use of catalytic converters," says Hall. "For ships, this equates to a process where water and chemical interaction pulls out the harmful substances in the exhaust emissions. Implementation has certainly picked up in the last few years and offers a reasonable alternative."

Some cruise companies have been backing scrubbers for a number of years, including Carnival Corporation, which recently announced plans to increase installation of gas-cleaning technology on more than 70 vessels.

"It is also possible to use residual fuel oil with a treatment process at the point of source – the refineries. Companies are working on the production of very-low-sulphur variations."

The expansion equates to 70% of the group's entire fleet, with an investment of $400 million allocated to design, build and install the systems, which will be used across the Carnival, Holland America, Princess, AIDA, Costs and Cunard brands.

Likewise, Norwegian Cruise Line is also set to introduce the technology on six of its vessels by 2016. The company has already placed scrubbers on its Hawaii-based Pride of America, and will add an extra ten on board the newly constructed Norwegian Escape and Norwegian Bliss.

There are other options, too. "It is also possible to use residual fuel oil with a treatment process at the point of source - the refineries," says Hall. "Companies like ExxonMobil are working on the production of very-low-sulphur variations. If this is produced in marketable quantities at a price that is sustainable and it can be distributed around the world, then this is a very viable alternative."

While tests are proving favourable, there remain many questions to be answered, however, before widespread use is possible.

At the coalface

Hall thinks the cruise industry is responding positively and swiftly to the situation: "Operators are making changes in time for compliance; it's not surprising, because they are at the forefront of the customer service industry and a good, clean, efficient image that delivers value for money is important. It's what the industry stands for, and in this respect, they're going to be ahead of conventional shipping."

Meeting emission targets at a viable cost is undoubtedly the biggest issue for those in the bunkering business, and Hall believes IBIA is ideally placed to drive the debate.

"We're the only association that represents the whole sector, from the wellhead to the engine," he explains. "We have 650 organisations and members, from blue-chip producers like BP and Total right through to the commodity sector, including brokering and trading, delivery and physical supply, and of course, the ship owners and managers.

"We also have the associated organisations that support the industry, such as port authorities, survey and testing companies, marine lawyers, P&I clubs and engine manufacturers," he says.

IBIA's strength lies in its ability to speak as one voice for the entire industry, and it provides education and training on a range of issues including new fuels, emission management compliance, arbitration and mediation.

"We bring together a range of people through our working and regional groups, and our annual convention," continues Hall. "We have a section that looks at the implications of new fuels and feeds back through our seat at the IMO.

"We also have a body that looks at technology, such as the Mass Flow working group in Singapore. No matter what is being considered, we pass it on to our membership across the world."

Looking forward, IBIA aims to increase its membership numbers in order to deliver more benefits.

"In the past year, our membership has grown by 12%, and we continue to interact with the marine fuel supply chain, basically scratching where it itches," he adds.

"We will continue to roll out the prospect of good practice, consistency and transparency, and spread information about new developments and different ways of doing things."

Despite the logistical challenges, Hall believes this is an interesting time for the industry, and one that is reminiscent of a previous major marine transition period.

"I like to think we're at the leading edge of change, similar to the switch from coal to oil in the 1900s," he says. "It took a game changer to push that through in the shape of Ministry of Defence objectives, but in the end, it was simple: a battleship carrying fuel instead of coal could put on heavier guns and address the needs of the time more effectively. This broadly took around 30 years to translate from the defence sector to shipping in general.

"I believe we are at the start of a similar process that will propel the modern shipping industry forward once again - it could be a strategy to implement wide-scale use of LNG or an alternative fuel, or something completely different.

"The key movers are capital cost, ongoing running prices and availability - but one thing is for sure: we are in a changing industry."



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