Several panelists spoke this morning at the 5th annual Platts Bunker and Residual Fuel Oil (Bottom of the Barrel) Conference on proposals to shift ships away from using higher sulfur residual fuel oil to lower sulfur resids and distillates, lowering particulate emissions and SOx/NOx. But an effort to move the marine industry to a greener futures by moving to cleaner fuels could also create serious financial and fuel availabilty issues for shipowners, forcing them to pay more "green" for their fuel.
California is ahead of the pack on this, as usual, with a Air Resources Board proposal being debated this week to require ships to run lower sulfur marine gasoil and marine diesel within 24 nautical miles of the coast staring in 2009. Pacific Merchant Shipping Association, represented by vice president T.L. Garrett at the conference today, blocked CARB regulations similar to this in 2007 in court. Garrett reiterated how this could increase fuel costs and tighten fuel availability, and pointed to alternatives such as marine emission control systems, called "scrubbers," that ships could add and still burn resid to meet emission controls.
"Scrubbers" could be an alternative to upcoming IMO and CARB proposals for cleaner marine fuels, and while last week the IMO approved a design created by BP Marine, CARB has yet to approve these as alternatives. Also, scrubbers create their own environmental issues since they yield toxic sludge as a by-product.
The supply outlook for very low sulfur marine fuels is dire at present. As it stands now, only 0.5% of residual fuel oil production in the world will be able to meet these upcoming quality standards for marine fuels, Garrett said.
Stevka Ilieva, fuel oil analyst at Poten and Partners, said that widening spreads between low and high sulfur fuel oil could justify the economics behind resid desulfurization, potentially increasing the availability of fuel oil. The global move to 0.5%S max sulfur for marine fuels in 2020 proposed by the IMO will "send a shockwave through the shipping industry" -- raising prices significantly. However, incentives could be there for refiners to desulfurize resid if the spreads blow out wide enough.
Many conference attendees, representing the supply side of the marine fuels business questioned the panelists on the likelihood these changes would be adopted, and the fact that supplies of lower sulfur distillates and bunker fuels may not be adequate in the future to meet rising demand. However, the greener trend is not likely going away, the panelists reiterated.
"This isn't a question anymore of this is or isn't going to happen; it will happen, the question is how do you change your business to meet your customers' needs," Garrett said to the conference audience during the question and answer session.
In any case, a greener future for marine fuels is going to cost a lot of green too.
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