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SAFETY4SEA

Shipping 2020 & Beyond: Navigating uncharted waters

by Apo Belokas
March 14, 2019
in Fuels, Opinions
Shipping 2020 & Beyond: Navigating uncharted waters

Above image is used for illustration purposes only

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We are currently navigating the 4th industrial revolution, the so called Shipping 4.0 which focuses on digitization, environmental leadership and safety excellence. During the course of 2018 we have ween IMO announcing an ambitious strategy toward 2050 emissions reduction by 50%, discussions over the forthcoming 2020 Sulphur Cap implementation and also a heated debate on whether to scrub or not to scrub.

The point is that, there is no silver bullet, there’s no one-size fits all strategy for either 2020 or 2050, especially given the very fact that these two targets are not aligned but they are exactly the opposite. Ongoing discussions between operators and charterers are not arriving to a clear consensus regarding decisions post 2020 and scrubber makers assign delivery time for 2020 Q1 or Q2 onward. To cut a long story short, that’s a huge mess that the industry is in, for the time being.

When we are talking about IMO 2020, we refer to the ‘landmark decision’ which IMO adopted during MEPC70 in October 2016. As IMO stated, the decision to implement from that date and onwards a 0.50% m/m (mass/mass) represents a significant cut from the 3.5% m/m global limit currently in place,  something that ‘’demonstrates a clear commitment by IMO to ensuring shipping meets its environmental obligations.” Thus, this a huge development for IMO, however, we as an industry, have certainties and uncertainties around the implications and the practical aspects of the IMO 2020 decision.

To start with, the industry is not ready yet. The uncertainty lies on several practical aspects : How is it going to be enforced, monitored, policed and even better allow for a level playing field? We know that the legislation framework is not complete since we are still missing critical parts, like, fuel availability, specification, costs etc. and we have not yet a certain fuel specification. Furthermore what is going to happen with early believers of the new era that installed open loop scrubbers as we are missing a clear IMO decision and some local states are fighting that?  As a result, we see the lack of a level playing field, as we are unable to regulate non-compliance and the incentives to bend the rule are significant amounts that make or break an organisation.

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Apart from scrubbers, for 2020, operators have other options on the table such as distillate fuels, LNG, methanol or other sort of new fuel solutions. Of course, each solution goes with pros and cons. However, there is no optimism even in the LNG sector; as many consider LNG as a transitional fuel, possible not even in the land fuel mix in 50 years from now, because most probably many countries are willing to enforce carbon-free power, by 2040 or maybe, 2050.  And when we think of the long term, we are should be aiming at 0% carbon and not 50%.

On the IMO 2020 decision we may identify the following eleven key challenges:

  1. Fuel Availability
  2. Fuel Safety onboard Ships
  3. Fuel Price (for cost effective compliance)
  4. Global Enforcement outside ports/ECAs
  5. PSC monitoring, enforcement & penalties
  6. Fuel Quality onboard (ISO 8217)
  7. Refinery Investment & strategy
  8. Fuel costs post 2020/2025/2030?
  9. CAPEX/OPEX for IMO 2020 options (beyond NOx)
  10. Operational & Commercial complexity
  11. Regulatory Instability (local vs global etc)

On a real case study for a ship consuming 30 tonnes per day, with a steaming time of 60%, i.e. 290 days per annum and a 90% of that time outside post limits (i.e. no policing) the amount of fuel burnt is in the range of 6,000 tons. Given a price differential in the range of 200 -300 $ per ton this will provide an incentive for non-compliance in the range of 1.2 to 1.8 million per ship, per annum with zero policing mechanism on the open sea.  That’s a huge incentive by any account!  It’s a huge incentive even for an owner to develop a fund in order to pay the fines, if and when they will get caught. Even at ports, the sampling scenarios are in the range of 10 to 30% of the ships calling, providing a 70% to 90% of chances of never being caught! Even in an open sea the option to forge a BDN for a 1,000 tons of bunkering will provide an incentive of 200 to 300K $. The incentive for non-compliance is huge for the main reason that there is no policing and enforcement mechanism on the high seas!

On the scrubbers debate we have seen the full spectrum of opinions. From one side, the scrubber sceptics, lets put the iconic figure of Paddy Rodgers, the CEO of Euronav on this corner, arguing that we industrialize pollution by pumping scrubber exhaust overboard indicating that it will most probably going to have an effect on future legislation. “The problem with [open-loop scrubbing] of course, is once you’ve cleaned the exhaust which you do with sea water, you simply industrialize pollution by pumping it overboard. So this looks like something that’s very vulnerable to future regulation“ states Paddy Rodgers, CEO Euronav.

On the other side we have seen scrubber pro figures, lets put the iconic figure of John Angelikousis, one of the largest shipowners in the world on this corner stating that shipowners are not in the business of making regulations but instead in the business of making money stressing the fact that as long legislation permits and economics are there scrubber is a very viable and economic option leading to a heavy investment on scrubbers.

So, what the owner would do? They need to carry out due diligence, meaning they have to consider the following:

  • Decision has to be made per ship/trade/segment
  • Consider age, CAPEX, OPEX & complexities
  • What is my competition doing?
  • What are my charterers red flags/wishes?
  • Am I committed long term or short term ?

For example, if you operate capsizes and VLCCs, the majority of the competition is going to invest on scrubbers. You cannot stay out of this, lighthearted. Specific segments are going to invest heavily. Why? Because the payback period is less than a 12-24 months. It’s a no brainer to invest.  Again you have to see what the charterers are doing and what business you are in, in the long run.

Talking about 2050, IMO confirmed its commitment to reducing GHG emissions during MPEC 72 in last April. Namely, IMO decided to cut 50% the GHG emissions by 2050 compared to 2008, but actually there’s no framework, no guideline, there’s nothing specific on this ambitious target, only an optimistic vision; we know that we have to do that but we don’t know how. To add to the complexity, Esben Poulsson, ICS Chairman stated “The industry cannot achieve the 2050 GHG reduction target using fossil fuels“ leaving all if us to wonder what the solution will be.

When ballast water management convention initially voted back in 2004, there was no actual engineering capability to produce these systems. However, the BWMC was enforced.  And now, 15 years later, we’re still discussing how this will be done. We have to consider that engineering wise the ballast challenge is a fraction of the emissions and full industry decarbonization. Even the 50% reduction by 2050 may not be a realistic target as local interests may enforce carbon neutral shipping by 2040 or even 2050.

So, we have the vision framed, but we don’t know how, when or how much of the emissions need to be reduced. If we go back in 2000, nothing of what we are discussing today was at the agenda back then. And that was less than 20  years ago. For 2050, we’re talking about 30 plus years down the road and nobody has a crystal ball.

And again we need to keep in mind ‘the law the instrument’, by Abraham Maslow, which says that “if the only tool you have is a hammer, you tend to treat everything as a nail”. In shipping we tend to whine a lot. We complain. We tend to see everything as a problem. It’s not a problem. That’s life. Communities outside shipping demand a better, cleaner air and environment. We have to see how we can cooperate with them and deliver. So it’s not everything a nail because we have a hammer.

Concluding, 2019 is going to be an extremely challenging year because 2020 is next and there’s a lot engineering modification on ships. Also 2020 and 2050 are not aligned at all. Existing fuel oil will be transitional fuel for 200 years and LNG may be a transitional fuel for 50-100 years as the future generations will be told . Slow steaming and scrapping will boost. There’s a huge bet placed in the market, especially by those who are investing scrubbers; however the majority still prefer the ‘wait and see’ approach. The market will be distorted.The future is not certain but we have to understand is under development.

Closing what comes to mind is a recent quote by Jack Ma, the founder and executive chairman of Alibaba that stated: “There’s no experts of tomorrow, only of yesterday”. We tend to see the future through the mirror of the past and that is not the best guidance. Change has arrived in the industry and only those who are prepared to adapt will survive through this regulatory tsunami. Stay tuned and be prepared!


Apostolos Belokas, Managing Editor, SAFETY4SEA

Shipping 2020 & Beyond: Navigating uncharted watersApostolos Belokas is a Maritime Safety, Quality & Environmental Expert, Consultant, Trainer and Project Manager with more than 20 year background in shipping as Technical, Marine, Safety & Training Superintendent and Consultant. He entered the industry back in 1992 as Engineering Superintendent with a leading ship manager operating a mixed fleet of bulk and oil/chemical tankers and later shifted to regulatory compliance and QHSE issues as superintendent and later as a Consultant and Trainer. Apostolos has successfully completed a wide range of QHSE projects including 250+ management system projects (ISM/ISO 9001-14001-18001/TMSA/MLC), 500 vessel and office audits to various standards and he has trained more than 5,000 people in a wide variety of QHSE subjects. He is holding Mechanical Engineering Bachelor and Master’s specialising in Energy & Environment and Master’s Degrees in Maritime Business and Business Administration (MBA), all of them awarded with distinction. Apostolos is the Managing Director of SQE MARINE & SQE ACADEMY and he is also the Founder and Managing Editor of SAFETY4SEA.

Shipping 2020 & Beyond: Navigating uncharted watersShipping 2020 & Beyond: Navigating uncharted waters
Shipping 2020 & Beyond: Navigating uncharted watersShipping 2020 & Beyond: Navigating uncharted waters
Tags: 2020 sulphur capdigitalizationenvironmental footprintfuture of shippingIMOreducing shipping emissionssafety culturescrubbers
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Apo Belokas

Apo Belokas

Apo is the Founder & Managing Director of the SQE Group, including SQE MARINE, SQE ACADEMY, SAFETY4SEA and RISK4SEA. He is a veteran Maritime Safety, Quality & Environmental Expert, Consultant, Trainer and Project Manager with a 30 year background in shipping as Technical, Marine, Safety & Training Superintendent, Consultant and Project Manager. He entered shipping as Engineering Superintendent with a leading ship manager operating a mixed fleet of bulk and oil/chemical tankers and later shifted to regulatory compliance and QHSE specialization as superintendent and later as a Consultant, Trainer and Project Manager. Apostolos has successfully completed a wide range of QHSE projects including 250+ management system projects (ISM/ISPS/ISO 9001-14001-18001/TMSA/MLC/DBMS), 500 vessel and office audits to various standards and he has trained more than 10,000 people in a wide variety of QHSE and Shipping related subjects. He is holding Mechanical Engineering Bachelor and Master’s specializing in Energy & Environment and Master’s Degrees in Maritime Business and Business Administration (MBA). Apostolos is the founder and Managing Editor of SAFETY4SEA that produces a wide range of paper magazines, the globally leading portal in Safety & Environmental protection for shipping (www.safety4sea.com) and numerous large scale events and he is a frequent speaker in many events across the globe, while he has chaired more than 70 large scale forums so far. You may explore more about the activities of the group at www.sqegroup.com

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