. . . or so the petroleum industry used to say, back in the 1970's. That's proving true in the maritime shipping industry right now, as major change looms next year. We don't think much about an industry that's "out of sight, out of mind" for most of us, but it has a huge impact on global pollution, and changing that is going to require major changes to the way we fuel the ships that fuel the world's economy. Forbes reports:
A United Nations mandate on the shipping industry to remove up to 85% of the sulfur content from its fuel to cut 3% of global carbon dioxide emissions could throw the industry into massive disruption.
Some analysts argue it could lead to fuel supply and demand imbalances and arbitrage opportunities that could extend crude oil price volatility.
. . .
In 2016, the United Nations’ International Maritime Organization (IMO) gave the global shipping industry four years to make sure the 90,000 vessels at sea burn 85% less sulfur by Jan. 1, 2020.
The IMO standard requires ships to produce a maximum of 0.5% in sulfur emissions rather than the present 3.5% limit.
“Implications go beyond shipping and refining. Changes will be felt in the entire commodity landscape, including petrochemicals, road fuels, and airlines,” said Aftab Saleem, KPMG’s director of its risk analytics advisory, which helps a large swath of the global shipping industry comply with the standard. “Costs are going to go up. This has huge, huge implications across the supply chain, all the way back to producers.”
. . .
Oceana says if global shipping were a country, only the U.S., China, Russia, India and Japan would emit more carbon into the atmosphere than the global shipping industry.
KPMG Global says 15 of the biggest ships emit more sulfur dioxide and nitrogen dioxide than all of the world’s cars combined, and one million cars emit as much particulate matter as one cruise ship produces.
There's more at the link.
If you're interested in global economics, it's worth reading the Forbes article in full. Consider that well over 80% of global trade moves by sea, and you'll get some idea of the impact of the current changes. They have to be paid for, so freight rates will have to be adjusted, and that in turn will influence the price of goods and services worldwide.
What's more, a major part of the world's merchant fleet (particularly that concentrated in the Third World) won't have completed the necessary mechanical and engineering changes in time for the implementation of the new standards. What's going to happen? In theory, at least, they'll be barred from most, if not all, First World ports - but there won't be enough carrying capacity for world trade without them. Pollution control is going to run headlong into economic practicality, as far as many ships are concerned.
The cost of installing fuel scrubbers is plus-or-minus $1 million per ship - and many older merchant vessels aren't worth that much. Will they be scrapped? The cost of replacing them will be far greater than the cost of a scrubber. And what about open-loop scrubbers, which take the pollution out of the funnel smoke, only to discharge it into the sea? Are we to replace air pollution with sea pollution? Many First World ports have banned open-loop scrubbers for that reason . . . but many ships are nevertheless going to be equipped with them, as the only available option in the short term. If the regulations are strictly applied, will there be enough "clean" ships to meet the new requirements? I suspect not, for at least the first few years.
This is going to get very interesting and very complicated. It'll be worth paying attention, because we're all going to feel the after-effects in our wallets.
Peter
9 comments:
This is a component of the urge to restore to the US that manufacturing that had gone overseas - gone largely because of lower immediate costs, but also because that dipersal had been seen by owning corporations as beneficial to them, if not necessarily to the US.
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Madness. SO2 emissions in the high seas have little effect in human health, and maritime shipping is already the most energy-efficient transport mode.
The Tier 4 standards that have been implemented on the emissions of diesel engines have been both a boon and a curse. In the case of smaller diesel installations such as semi's and Locomotives has not been as large an issue to comply with as compared to the ship propulsion systems.
In terms of scale, it is doubtful that many understand the size of the problem. No, I am not talking about the emissions but the massive size of the diesel engines that we are concerning ourselves with here. Some are 3 stories tall and over 100 feet long. Pistons that are nearly 3 feet across. In terms of scale, these engines are so far off the charts that you cannot see them because they are the size of houses. So, the problem of managing such a large engine is not a light undertaking.
Without getting into the nuts and bolts suffice it to say that the current push to curb ship emissions is not easy to comply with. I do have one question though that is perhaps more to the point of addressing global emissions.
Why is it that the less developed nations in the world are still dumping massive amounts of sulphur dioxide and other noxious pollutants into the atmosphere through their nationwide industrial activities and they continue unabated while the remainder of the world such as Europe the US and Japan all do double back flips complying with the edicts of an environmental criteria that seems to ignore the real source of the pollution?
China. India. Most of Africa. They all dump a billion times as much into the atmosphere on a daily basis compared to shipping or the emissions of the rest of the world that has complied with the strict regulations. The eco-advocate will say that it is a good start for the advanced technology nations to reduce their emissions so that we can work on the rest. Problem is we are paying the freight in meeting our emission requirements and then we dump billions into primitive industrial economies as well.
While there is a benefit to the ground up redesign of a lot of technology we use the notion of retrofitting equipment that represents such a small portion of the pollution spectrum seems to me to be a bit extreme. In the case of autos, semis and locomotive engines the increasing restrictions have resulted in some amazing technological accomplishments but these have been implemented in new product production as opposed to a retrofit. All of these different transportation technologies have evolved to meet standards and the nominal life expectancy of the vehicles requires replacement at a fairly predicable time interval.
Shipping is seeing growth in terms of new ships being built at a scale not seen since WWII. Massive ships are being built to handle the bulk cargo, container, petroleum and LNG transportation needs and with the enlargement of the Panama Canal, these ships are now ENORMOUS. Their power-plant installations are engineered to meet the new requirements. Profitability in transportation is heavily weighted to the large scale vessels that we see. Ships less than 10 years old are being scrapped in favor of larger more efficient vessels.
So, why not let obsolescence solve this problem instead of hamstringing the transportation industry? In the overall scheme of things ships are a small portion of the world wide problem.
I am not an advocate of enviro-law making as much as I am an advocate for technology improvements and efficiency. Let the market tweak its technology in response to efficiency needs and it will take care of the problem. Generally efficient machines produce less waste and can be engineered at the same time to produce less undesirable waste products. Yes, the push from government has been a driving factor in all of this but we cannot let the push become so intense that it causes inefficiency due to retrofitting a group of small and quickly becoming obsolete fleet of ships that by the pressures of market will be scrapped in less than ten years anyways.
Sulfur is not carbon. Seems unlikely that reducing sulfur emissions will have any effect on CO2. Also, sulfur comes from the fuel being burned. You don't want sulfur emissions, you need to burn low sulfur fuel. Getting sulfur out of oil isn't easy, nobody wants oil with a high sulfur content, which makes it really cheap, which makes it perfect for things like giant cargo ships. Sulfur from burning coal in power plants is what got us acid rain on the east coast, which is why we haul coal from far away Wyoming to Chicago instead of nearby West Virgina.
The days of ships lasting 40-50 years are over. Just look at the turnover rate on tankers, something like they are obsolete and sent to the breakers after 20 years. Crazy.
A sensible (stop laughing, I know we're talking about the UN here) solution would have been for all new construction to phase slowly into the new standards, rather than making a California-like proclamation.
The Greens are going to kill us.
As to Sulfur emissions, all the ships at sea for the last 40 years using the most sulfury fuel don't equal the sulfur emissions of 1 average volcano. And we in the United States have reduced our emissions to, in comparison to the rest of the world, nil. Want to stop manmade emissions? Stop China. Stop India. Stop Africa.
Quit listening to the UN. That's just a bunch of kleptocrats and entrenched bureaucrats (who seem to be more interested in protecting world-wide slavery and child sexual trafficking and lining their own pocket than actually doing any good. Kinda like much of the US State Department. Which, come to think of it, really adores the UN. Hmmm. Gotta think about that for a while to see if any patterns show up...)
Some environmental measures are good. Not releasing toxic waste into rivers so they don't catch fire, that's good. Trapping mine waste so it's not released into drinking water (unless you're the EPA, then it's okay!!!) is also good. Trying to change the levels from 0.0001 to 0.00005? That's ridiculous.
For environmental protection, ban the UN!
Letting the market and basic economics drive the turnover to newer, less sulfur-emitting powerplant technology? That's crazy talk! Where is the place for pettifogging international bureaurats in that? We must have CONTROL; actual impact on the 'problems' we purport to address are of secondary (or tertiary, or . . .) importance when compared to that.
ISTR that the latest(?) technique of big ships is dual fuel systems. They burn low-sulfur fuel near port, and switch to the cheap stuff when they get away from land.
Very high sulfur content is the problem with Venezuela's oil deposits. They screwed up their own refineries that were designed to reduce this, and therefore have a very limited market for their product. Idiots (socialists) in control of that nation for many years.
"The Greens are going to kill us."
Exactly according to their plans.
Bug for you; feature for them.
It's been interesting watching what is happening. I carry bunkers to ships, so this has been a big deal for us. As tonnage is increasing, so too the ability for ships to burn a wider-range of fuels. The old burnt out steam ships that could only burn 180 centistoke fuel (about 2/3 bunker, 1/3 diesel) are all gone in the US, and even RMG-380 centistoke fuel, which was the standard 5 years ago, we don't carry that much anymore. Maybe 1 job in 8. Newer ships burn RMK-500 or RMK-700, real crap that has to be kept at 120 degrees to even flow, and has 2-3 % sulfur. Think molasses, and you get the idea.
New ships aren't getting scrubbers installed very much. Most of them are and will be burning RMD-80, a mix of 5-10 % bunkers and 90%+ diesel. Using Ultra Low-Sulfur diesel mixed with standard heavy fuel oil. We're positioning ourselves to carry RMD-80, and already that represents about 20% of our deliveries in New York, Norfolk, Philly and Seattle, but there's a question as to whether ships will carry RMD-80 for Emissions Control Areas that require it for the duration, or whether they will buy it (it's expensive!) until they invest in scrubbers at their next scheduled shipyard period, once every 5 years. As such, we're unsure as to what the long-term demand will be for RMD-80.
I expect heavy fuel oil sales to spike in December, then dump in January, obviously, but that is nowhere near as scary as wondering what demand will look like in 3 or 5 years when companies figure this stuff out.
From the storage and production side, the advantage of Heavy fuel oils is that you can crack off the lightweight high-priced aromatics from crude oil, the gasoline, napthas and some of the medium-length stuff too, some of the diesel, and the glop left over is Heavy fuel oil. Without that market, I wonder what they will do with all the HFO? Might drive down plastics cost, I dunno. I do know that demand for formaldahyde is going to go through the roof. You can scavenge out the sulfur in heavy fuel oil by blending in formaldahyde then extracting it. It's an expensive enough process that it is usually done only when someone screws up and overshoots the sulfur content of a fuel parcel that for some reason can't be returned. I suspect the cost will now be more worthwhile. In the meanwhile though, if I'm confused, our suppliers are downright nervous. Companies are changing hands a LOT this year. BP is out of bunkers in the northeast, Buckeye (who bought Hess Bunkers) sold their bunker units to an investment bank, and Aegean bunkers (one of the largest suppliers in the world) US unit went under, and reformed under a new brand in the past few months. Shell bunkers is holding their own, and Phillips 66 is growing, but all are divisions of a larger company. Companies who aren't a division of a Fortune 500 company have a lot to be nervous about.
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