What price sustainability? The cost of low-sulphur regulations

The cruise industry, like any other right now, is plagued by uncertainty. Unforeseen events such as the Costa Concordia tragedy and worldwide economic volatility mean that cruise operators have to be prepared for many eventualities. If anything is certain, it is something most of us wish were not: high and still rising bunker fuel prices.

At the time of going to print, prices are well above $700 a metric tonne, placing an even greater burden on organisations for whom fuel accounts for up to half of their operating costs. And with economic volatility prevailing in Europe and political uncertainty in the Middle East, there is no reason to believe that prices will not rise further.

This is a big enough problem in itself, without the need to comply with ever more stringent environmental regulations. Bunker fuel is a heavy, environmentally unfriendly fuel that could fairly be described as the dregs of the fractional distillation process. Attempts to make shipping cleaner are hence understandable, although the targets in place will prove a considerable, some might say unrealistic, challenge to cruise operators.

The International Maritime Organization's (IMO) MARPOL Annex VI regulations were introduced in 2005 and have been updated on a number of occasions. The most recent amendments were approved last year and will compel cruise lines to change to a fuel with a sulphur content of no more than 0.1% for operations in designated emission control areas.

By 2020, all cruise ships must burn fuel with a sulphur limit of 0.5%, no matter which body of water they on. Considerable investment is required to bring sulphur levels down from the current standard of 1%, and this will be very difficult to produce without passengers feeling some of the pain.

Extra costs

According to Francesco Balbi, environmental coordinator at MSC Cruises, identifying and producing sufficient amounts of low-sulphur fuel is the single biggest expense. There are a few options out there, but none are far along enough in their development to act as a genuine replacement for bunker fuel.

"The main challenge when burning cleaner fuels is the increase in fuel price," he says. "This is mainly due to the fact that low-sulphur fuel is a distillate product and there are high costs involved in the desulphurisation process. This also means extra costs for shipping."

Circumstances dictate that European operators will find it easier to adjust than their US counterparts. The source crude in the Baltic and North Seas is relatively sweet, so meeting the current 1% limit is not difficult. And if this fuel cannot be accessed, most countries will accept the next least sulphurous fuel available.

The only ready-made, low-sulphur alternative is gas oil, which, while much less environmentally damaging, is no more efficient and almost twice as expensive as bunker fuel. A more feasible solution, although one that is still very much in the developmental phase, is liquefied natural gas (LNG).

Already in use in other parts of the shipping industry, LNG is a clean, efficient source of fuel that is technologically proven to work on large-scale commercial vessels. Finnish engine manufacturer Wärtsilä has played a lead role in the realisation of LNG-powered cruise ships. Together with the Aker Philadelphia Shipyard, the company designed a conceptual vessel propelled by the same dual-fuel engines that are found on LNG-powered tankers. A few modifications were made with the cruise industry in mind.

"Everyone is discussing legislation and anticipates that it will only get more stringent," says Fred Danska, the director of Wärtsilä's cruise business. "We had to find a novel location for the fuel, so decided to put it in the centre-line casing. It provides free ventilation and does not disrupt the aesthetics of the interior."

Things have started to move beyond the theoretical. Viking Line, having signed an agreement with AGA Gas for LNG to power the 2,800-capacity Viking Grace, saw the vessel enter into service in January of this year. The company predicts that this vessel will produce 20-30% less CO2 than one powered by bunker fuel. Still, with the economic environment hardly perfect for building anew, the cost of converting an entire fleet to LNG is prohibitively expensive for most.

"The 2015 date, when the sulphur content in emission control areas goes down to 0.1%, will have a very significant impact on the cost of fuel," he explains. "We are in discussions with US and Canadian operators with regard to what we call equivalencies. For example, technology has developed to the point where you can now use exhaust gas scrubbers to bring emissions down to an equivalent level. We are also talking a lot about weighted emissions averaging. Ships might be able to burn ultra-low-sulphur fuel close to shore, permitting themselves to use higher-sulphur fuels further offshore."

Additional measures

The success of these reduction methods is in large part dependent on bringing regulators onside. This shouldn't be too difficult. If regulation were too strict, it would risk driving the cruise business away from the affected itineraries, negatively impacting local economies.

"Certainly, weighted emissions averaging could make a significant contribution," Balbi says. "The installation of the exhaust gas scrubbers could too if we are able to get the regulatory regime in place where the wash water that is used in these scrubbers is allowed to be discharged. Also, there are plenty of energy-efficiency measures that can be carried out onboard the ships, such as the capture of waste heat and using ultra-slick hull coatings. As an industry, if you are facing a possible 100% increase in the cost of fuel in emission control areas, it will inevitably make some itineraries much less desirable than others. This is worth considering."

Luckily, marine engineers have a head start in finding ways to reduce emissions. The current generation of cruise lines omits 25-30% less nitrous oxide than the one before, largely as a result of minor mechanical modifications. These include increasing compression ratios and making fuel-injection technologies more efficient. Then there are advancements in the way ships are designed, helped by a greater understanding of computational fuel dynamics.

"Energy efficiency covers the organisation of the hull and appendices, engines, propellers and motors," says Balbi. "Our research is not limited to fuels. We are looking at ship design, propulsion and the operation of machinery as well. MSC tries to work on all these categories."

The MARPOL Annex VI regulations pose a huge challenge for ship operators, refiners and engineers. Success will require big investment, technical ingenuity and, most importantly, a measure of understanding on the part of the regulators.