ihs maritime and trade bunker fuel study

Information | Analytics | Expertise

WHAT BUNKER FUEL FOR THE HIGH SEAS

AUGUST 2014

Krispen Atkinson, Principal Maritime Analyst+44 203 253 [email protected]

Michael Jones, Technology Analyst+44 203 253 [email protected]

© 2014 IHS

Information | Analytics | Expertise

mailto:[email protected]



© 2014 IHS 2

Study brought together key elements of IHS’ capabilitiesMulti-client study was undertaken as a collaboration between Energy Insight Downstream and Maritime.

Further support was provided by:

• Energy Insight Global Gas & LNG

• Supply Chain Solutions

• Sovereign Risk

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Who benefits from this study?

Shipping companies Understand how changes in bunker specifications and demand will affect both global bunker prices and inter-port price relationships. Assess the likely speed of development of LNG retail.Assess the viability of scrubbers.

Shipping equipment suppliers Forecast demand for equipment for natural gas engines and scrubbers

Trading firms Assess impact on bunker trade in matching excess refinery residual supplies with high bunker fuel demand centers.

Government agencies, port authorities, bunkering operators and financial firms

Gain an understanding of the global stakes (competitiveness, pollution) and the perspectives of different ports in the development of shipping trade

© 2014 IHS

PRESENTATION NAME / MONTH 2014

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Driver for the study – MARPOL Annex VI

• Maritime industry is set to undergo tough regulations in the next few years

• This study focused on:

• Impact of these regulations on supply of fuel

• Possible alternatives for the industry

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2005 2010 2015 2020 2025 2030

Global

ECA

Max Sulphur content, wt%Review in 2018 to determine availability of LS fuel and start date for 0.5% S limit

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Current & Future Emission Control Areas (ECAs)

• There are currently 4 ECAs:

• North American (US, Canada, Hawaii)

• North Sea

• Baltic Sea

• US Caribbean

• Within these ECAs, sulphur content in emissions will be reduced from 1% to 0.1% (by weight) on 1st January 2015

• Emission controls will come in force within the European Exclusive Economic Zone on 1st January 2020.

• Maximum sulphur content will be 0.5% (by weight)

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Fleet Analysis • IHS Maritime used its extensive maritime database to provide comprehensive time series of the fleet

• Speed

• Type

• Size

• Studied current and future trends in world shipbuilding order book

• Trends in ship size, ship efficiency

• Presence/intention of alternative fuel or scrubber technology

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Ship Movement Analysis

• Using IHS Maritime’s extensive AIS coverage, the fleet dispersal was analysed

• Sample points taken back to 2011

• Analysis of trade area (inside/outside ECA)

• Analysis of speed (compared to service speed)

• Data was used to provide an indication of global bunker demand

• Enabled estimations to be undertaken on future bunker demand

• Including possible future ECAs

WHAT BUNKER FUEL FOR THE HIGH SEAS? / AUGUST 2014

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The study scenarios

• Scenarios

• Fuel compliance

• Scrubber compliance

• High LNG

• Technological basis for scenarios

• Operation on distillates

• Scrubber operations and issues

• LNG take-up and challenges


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Fuel compliance • The premise is:

• Limited shipowner acceptance of exhaust scrubbers to comply with emissions regulations

• Refining industry shifts the majority of its fuel production to low-sulphur bunkers by 2025

• Use of alternative fuels (LNG) remains limited even after 2025

© 2014 IHS

Open loop

Source: DNV-GL

Closed loop

BenefitsCompliance more assured (if bunker note is correct)Lack of complex machineryNo additional chemicalsCrew familiarity with operations

Drawbacks Expense of fuel for ECA operationFuel switching operationsCompatibility issues HFO/MDOSecond cylinder lube neededSecondary systems for fuels separation and lube oils

Existing system may have too many places for low sulphur fuel to need to flush high sulphur


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Scrubber compliance

• The premise is:

• Wide acceptance of exhaust scrubbers

• Requirement for refiners to shift production to low-sulphur supplies is limited

• Use of alternative fuels (LNG) remains limited even after 2025

© 2014 IHS

Open loop

Source: Lloyd’s Register

Closed loop

BenefitsSOx reduction to 0.10% emissions levelsUse of HSFO – no fuel switchingNo fuel system modificationsReduces particulate release

Drawbacks Susceptibility to cat fines in poor fuelEffluent issues unresolved (pH, other chemicals)Fresh water (open loop)Bunkering caustic soda (closed loop)Weight (unit plus tanks, pumps, pipes)

© 2014 IHS

Hybrid SOx scrubber (in closed loop mode)Benefits of both types of scrubber systems and mitigation of drawbacks



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High LNG • The premise is:

• Starting point for LNG acceptance is number of ships practicing fuel compliance

• Not a universal acceptance of LNG, but strong in some markets

• More optimistic view about pace of LNG use and the sectors in which it will be used

© 2014 IHS

LNG components


BenefitsMeets current and future emissions regulations for SOx, NOx, and PMPotentially cheaper than MGO/MDO (and HFO in some markets)

Drawbacks Installation adds capital costsSpecialised training for refuelling/operationPricing uncertaintyMethane slip in some enginesRefuelling restrictions (during cargo ops)


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Findings from the study

• Relatively few scrubbers have been installed in ships in time to meet the 2015 deadline

• Global growth in bunker fuel demand is weak as operators focus on cost and fuel efficiency measures

• The global spec change down to 0.5% sulphur will be delayed until 2025

• LNG infrastructure developments will enable the fuel to increase usage in to some shipping sectors

• Larger ships will choose scrubbers when difficulties with marine applications are solved

• The IMO bunker spec changes will cause massive disruption to oil markets

© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at [email protected], +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners. V2.0-29.04.14

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ihs maritime and trade bunker fuel study

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