2015 SOx Limits: Is The World Fleet Scrubbing Up?

At the start of 2015, the SOx limit for vessels operating in Emission Control Areas (ECAs) will drop to 0.1%. Ships are currently subject to a 3.5% global limit on the sulphur content of fuel and a 1.0% cap in ECAs, but the 2015 ECA limit will necessitate a switch to low sulphur fuel, SOx scrubber technology or the use of LNG as a fuel. This month’s analysis looks at how shipowners have responded so far.

Emission Possible?

SOx is one of the main shipping emissions targeted by the IMO and is related to the sulphur content of the fuel burnt by ships. Limits on the sulphur content of fuel have been introduced on a global level by the IMO (currently 3.5%) whilst ships operating in an Emission Control Area (ECA) are subject to more stringent limits (currently 1.0%). There are four SOx ECAs in existence: the North Sea, the Baltic Sea, North America and the US Caribbean Sea, and at the start of January 2015 the SOx cap within these areas will drop to 0.1%, the lowest limit proposed by the IMO. However, the global SOx cap will remain at 3.5% until 2020 when it is due to drop to 0.5% (this deadline may be pushed back to 2025 depending on the result of an IMO review on the availability of low sulphur fuels).
Technology Out There?

The three main methods of compliance with the SOx regulations are low sulphur fuels such as Marine Gas Oil (MGO), scrubber technology and LNG as a fuel. Which solution an owner opts for will depend on a range of factors including the amount of time spent in ECAs, the ship’s fuel consumption and age. With scrubber systems costing in the range of $2-4m it’s likely that the majority of shipowners will switch to MGO in the short-term, unless they are operating heavily in ECAs when scrubbers become more economic as they enable the use of Heavy Fuel Oil (HFO) which is cheaper than low sulphur fuel alternatives. Meanwhile, the uptake of LNG as a fuel will additionally depend on how bunkering infrastructure and technology develops.
Who’s SOx Compliant?

Currently, 92 vessels in the fleet are reported to have SOx scrubber technology fitted and 37 ships on order are due to have scrubbers installed. The majority of these units are Ro-Ro and cruise/passenger vessels (50%) and offshore units (18%) that typically spend a high proportion of their time operating in ECAs. Just 0.1% of the fleet is reported to have scrubbers fitted and 75% of these vessels are younger than ten years old. Meanwhile, a slightly larger share of the orderbook (0.7%) is due to have scrubbers fitted. Interestingly, bulkers account for 22% of the units on order compared to 3% of the fleet. Scandinavian owners, mainly Norwegians, account for 50% of the scrubber equipped fleet whilst ‘Other’ European owners account for 41% of the orderbook in numerical terms.

It appears that the majority of ships will meet the 2015 SOx ECA limits by switching to MGO in the short-term. A relatively small proportion of the fleet and orderbook is reported to currently have scrubbers installed and these ships typically spend a lot of time in ECAs where SOx limits are most stringent. However, when the global SOx limit drops to 0.5% cheaper long-term alternatives to MGO could be more attractive and scrubber systems may begin to be more popular.
Source: Clarksons