Scrubbers is cheapest way to comply with IMO cap: BP
London, 19 April (Argus) — Exhaust cleaning scrubbers will be the cheapest way for larger ships to comply with the 2020 International Maritime Organisation's (IMO) 0.5pc sulphur cap on marine fuels, according to BP.
Heavy fuel oil (HFO) is set to fall sharply in price when the cap comes into force in 2020, while the price of low-sulphur fuels will dramatically rise, BP Marine fuels supply and trading manager Justin Longhurst said today at the International Bunker Industry Association (IBIA) forum in London. And the use of exhaust gas cleaning technology, known as scrubbers, will become the most cost-effective way for larger ships to comply with the sulphur limit, assuming the price differential between high-sulphur fuels — which are not compliant unless a scrubber is installed — and marine gasoil (MGO) is as large as some, including BP, have forecast.
"Scrubbers are very good for the largest ships", he said. He added that just 6pc of the global fleet account for 30pc of bunker fuel demand.
BP has already installed scrubbing technology on two 80,000t LR2 tankers, an experience that Longhurst describes as good "so far". This comes despite the technical challenges involved in the scrubbers' installation. BP said it was a difficult transition to set-up the scrubbers effectively, but they have had success at reducing 3.5pc sulphur fuel gases down to 0.5pc sulphur content, without any caustic soda being required in the process. As a result BP is now looking at retrofitting scrubbers on a larger number of tankers in the company's fleet.
Longhurst also said that sophisticated refineries — which have the ability to turn high-sulphur crude grades into low-sulphur compliant products — would also be significant beneficiaries of the 2020 cap. He said coker utilisation is likely to rise as margins for high-sulphur crude slates increase towards 2020. Refiners would no longer place valuable low-sulphur crude feedstocks into cokers, replacing this with cheaper high-sulphur alternatives.
He said refinery runs would increase, where possible, with refiners using up any spare capacity in order to maximise production of low-sulphur product, as the price of IMO compliant fuels increases. Longhurst also said that the 2020 sulphur cap would increase demand for low-sulphur crudes and that the refinery yield is likely to shift away from gasoline to compliant middle distillates as margins increase for them.
He said the potential for widespread non-compliance with the sulphur cap was limited, because most of the marine fuel is consumed by the largest shipowners, which are likely to comply with the IMO ruling.
But he said greater certainty was required to ensure HFO was not delivered to ships which do not have scrubbers installed. He said additional legislation was also needed to ensure ships do not play the system by burning non-compliant fuel in the open seas away from detection.