During his presentation at the last GREEN4SEA Conference, Mr. Andreas Zontanos, Partner, Argo Navis, provided a recap of what we know and what we do not and perhaps why, with respect to the exhaust emission abatement, ahead of the 2020 sulphur cap, noting that a lot of interest from potential retrofitters reached the makers, but has not resulted in orders yet. As a consultant to shipowners and shipmanagers, Mr. Zontanos said there are too many uncertainties to allow for a reliable calculation on which the wise choice would be: the fuel price difference, the cost and duration of installation and commissioning, the reliability of the equipment and the durability of the materials.
We are working with some of our clients side by side trying to evaluate the case of scrubbers. For approaching this case in a holistic way, we wish to be provocative, so we present a set of questions and discuss all different opinions:
1. Will sulphur cap become effective on 1-1-2020?
Some say yes, some say that no, it will be postponed for one to two years, while some suggest that it will be postponed, and re-evaluated in order to become effective later one. There are also those who think that this is not even possible.
Our opinion is ‘yes’, it will take place. Of course, postponement is not a distant option. It is obvious that switching to compliant fuels cannot happen in one night and scrubbers cannot cover a significant proportion of the market demand, but IMO says “there is no turning back”.
2. Why sulphur cap has been imposed on shipping and not on the oil companies?
This question is heard often in the market. Potential replies include: ‘Ιt was IMO initiative’, ‘Oil companies achieved to avoid it due to their strong influence’, ‘The scrubbers will allow for the consumption of residual fuel,’ and ‘This is not a valid question’.
In our opinion, this is not a valid question, as this is not a case to discuss after the Sulphur cap is already in place.
3. Will burning of non-compliant fuel and the resulting penalties be an option?
Some say yes, as the penalty may be lower than the price difference added cost. Some say no, non-compliant fuel will not be allowed on ships without means to burn it. Others suggest no, due to the negative reputation of the practice or because the penalty is expected to be too high to bear.
We say no, non-compliant fuel will not be allowed on ships without means to burn it, although non-compliance was considered by 1/3 of the shipowners recently surveyed as a potential option for ‘escaping’ the Sulphur cap.
4. Which is the most important reason for installing a scrubber?
The price difference of the compliant fuel, the new technology fuel problems (stability, compatibility, etc.), not depending on the availability / sufficiency of compliant fuel, and carrying one grade of fuel onboard, are possible answers.
This is an easy reply and is related to price. There is a huge potential from price difference. This leads to the next question:
5. Which is the most important reason for not installing a scrubber?
The price difference will rapidly decrease, the high CAPEX, the immature technology, and the complexity of operation (open loop, closed loop etc.) are some of the reasons considered.
We believe the answer is hidden in the high CAPEX, but this is not exactly the case. If we consider the savings from installing a scrubber, CAPEX is not a problem to the decision.
6. Is the boiler exhaust gas used for cargo tanks inerting exempted from the sulphur cap requirements?
This discussion started when we were wondering why washing water discharge from the scrubbers’ inert gas was allowed and now it is not allowed. Possible answers are:
- No, it should comply
- No, but the existing IGS scrubbers will easily comply with increase of water supply,
- No, the exhaust gas will be led to the tanks,
- Yes, it is considered safety critical.
The first one is the right answer.
7. What is the purchase price range for an open loop EGCS retrofit?
The different price ranges for installing scrubbers is approximately 1 million USD. We have prices up to 1,7 million.
8. What is the estimated payback period of an EGCS retrofit?
We spent a lot of time making this internal investment calculations. In our opinion, this is not a really valid question, as there are too many uncertainties to allow for a reliable calculation:
- the fuel price difference
- the cost and duration of installation and commissioning
- the reliability of the equipment
- the durability of the materials
Even after calculating all these, the uncertainties will remain. So, we first of all should wait for installation to take place and, then, we should definitely consider it as a purely commercial decision.
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9. What is the estimated price difference between the compliant and the non-compliant fuel?
We have huge value different scenarios to make the calculations for the return of investment. As such, we consider this also not a valid question. Who could say? There are extreme and conservative projections. Projections are used for the evaluation of the risks and probable benefits. Nothing can be really “calculated”.
A conservative scenario that we used is that, in the first one or two years, the price difference will be significant, but will soon decline to a very low difference (say 50 USD). The extreme scenario could be that the difference will start at a higher level (USD250-350) and will also decline but will settle to USD100 or higher.
We believe there are so many different and unpredictable factors that will affect the price difference, that we really cannot say anything about it. One of them though will be the success of scrubbers, both in existing ships and newbuilds.
10. What is the estimated duration of retrofit works (installation and commissioning)?
There are so many things to be considered, that this is not a valid question for sure:
- which type of scrubber to use,
- which type of ship,
- which shipyard,
- how much time available for preparations and prefabrications,
- how well organized,
- how much experience and expertise involved…
They are all factors which will decisively affect the duration of the works. Commissioning and sea trials could significantly prolong the period of retrofit – there are plans though for same to be carried out during the ship’s normal trading.
Finally, our general opinion on the scrubbers’ retrofit is summarized in the following:
- To strategically decide for installing scrubbers, purely commercial criteria should be used and commercial risks should be evaluated.
- The technical feasibility of a retrofit project is an open question which involves various technical variables & challenges.
- Return of investment calculations are only indicative of the potential benefit but the uncertainties involved do not allow decisions to be based on them.
- In this first period of retrofit projects, owners should trust certain makers and proceed with them, carefully reviewing each step and selection along the way.
The views expressed in this article are solely those of the author and do not necessarily represent those of SAFETY4SEA and are for information sharing and discussion purposes only.
Above text is an edited article of Andreas Zontanos’s presentation during the 2018 GREEN4SEA Conference
View Andreas Zontanos’s presentation on Scrubbers during the last GREEN4SEA Conference herebelow
Andreas Zontanos, Partner, Argonavis Andreas Zontanos holds a Naval Architect and Marine Engineer diploma from NTUA, and a M.Sc. Degree in Precision Engineering Metrology by Cranfield University, Cranfield, UK. Before establishing ARGO NAVIS, he has worked in consulting firms as junior and later senior consultant, in two (2) Greek ship management companies as superintendent engineer, led on-site newbuilding supervision teams in two (2) bulk carrier newbuilding projects in Croatia and China for Greek ship-owners and worked as an independent engineer conducting surveys and supervising conversions and repair works.
