A tool to assist with strategic planning for SOX compliance with MARPOL Annex VI, Regulation 14
Lloyd’s Register (LR) recently introduced an ECA Calculator, a tool which is claimed to assist with strategic planning for SOX compliance with MARPOL Annex VI, Regulation 14.
At present, the majority of vessels choose to comply with the current 1% ECA requirement by operating with a fuel of lower sulphur content where required. In the majority of cases this is residual fuel oil.
In the future, however, in order to meet the 0.10% and 0.50% maximum allowable sulphur contents required within an ECA from 2015 onwards and in all other areas from 2020/2025 respectively, distillate fuel is likely to be used.
Crucially, however, MARPOL Annex VI allows, under Regulation 4, the use of an equivalent compliance method, which is at least as effective in terms of emissions reduction as the levels required by regulation 14 (which limits the sulphur content of fuel). One of these methods is the use of an exhaust gas cleaning system (EGCS).
As a result of the current and impending situation, (ie 2015 = 0.10% limit within an ECA and 2020/2025 = 0.50% outside an ECA) operators may need to evaluate their position in terms of SOX compliance costs and alternative options, LR said.
Decisions can be affected by a number of factors, including the size and type of the fleet, the time spent within an ECA, potential introduction of additional ECAs in the future, the relative cost of installing an EGCS (and payback period versus age of the vessel), the cost of fuel and price differential between fuels of different sulphur contents and many more.
In this complex environment, some decisions may affect the viability of a vessel’s service or operation. Assuming a core (but realistic) operational scenario and using inputs, which are easily available, the ECA Calculator projects the cost for the different scenarios in the future and, as the reduced fuel sulphur content requirements enter into force, allows for different fuel price scenarios to be used.
Also, parameters which have increased impact on the decision making process and, quite often, are associated with a high degree of uncertainty, can be easily adjusted providing an instant update of the results. With the ECA Calculator, LR said that it aimed to provide a tool to support a company’s strategic planning.
Ultimately, however, the input and decisions are left with the tool’s user. The tool should be seen as a relative and comparative guide for reference and not absolute in its final determination.
The main output of the ECA Calculator is a fuel cost projection using either exclusively fuel switchover (as per Regulation 14) or an EGCS (as an equivalent compliance method). The EGCS investment is also evaluated in terms of Net Present Value (NPV) for which the payback period is calculated.
In addition to these main outputs, other useful information is calculated at different stages of the tool, such as annual fuel consumption figures, average cost breakdowns for key periods, etc.
It is essentially provides an estimate of the annual fuel consumption, taking into account machinery types and operational scenarios. By combining the annual fuel consumption with a simplified fuel price model (which is dependent on price scenarios and cost of different types of fuel required for compliance), the future fuel cost is projected, based on present fuel consumption and prices. This is compared to the fuel cost using an EGCS. The EGCS investment is then evaluated by considering potential fuel cost savings as positive cash-flows.
The ECA Calculator is designed to accommodate up to six different cases, compared side by side. This allows quick comparison and evaluation of:
*Different ships in the fleet;
*The same ship but in different operational scenarios and time spent within an ECA;
*The same ship but with different EGCS configuration or type;
*A combination of the above
Source: Lloyd’s Register
