Great Eastern Shipping Co Ltd will fit exhaust gas cleaning systems or scrubbers on seven of its ships. This makes it the first Indian fleet owner to take concrete steps to comply with the 0.5 per cent cap on sulphur in ship fuel oil mandated by the International Maritime Organisation (IMO) from January 1, 2020.
Currently, the maximum sulphur limit in fuel oil globally is 3.5 per cent. Ship fuel or bunkers account for as much as 40 per cent of the operating cost of a vessel.
“We have ordered scrubbers to be installed on seven of our modern and large-sized ships,” said a spokesperson for India’s biggest private ocean carrier. The Mumbai-listed firm runs a fleet of 49 vessels, including crude and product tankers, LPG carriers and dry bulk cargo ships.
On Friday, the management briefed the board on the company’s decision to install scrubbers that allows the shipowner to continue using cheaper, high sulphur fuel oil and yet comply with the IMO rule.
“It makes sense to spend money and install scrubbers only on the more modern and larger vessels due to their higher fuel consumption and therefore higher savings,” the spokesperson added.
The price differential between low and high sulphur fuel has widened to nearly $300 a tonne. Large ships such as oil super tanker and Suezmax burn as much as 50 tonnes of fuel oil a day.
Great Eastern said the cost of its scrubber retrofit program would be about $3 million per ship. However, it did not disclose the entity from where it has ordered the scrubbers. The firm says that the cost of putting the scrubbers may be recovered in 18 months depending on how the price differential sustains between the low and high sulphur bunker fuel.
The company said it will start fitting scrubbers on the seven ships when they go for their next mandatory dry-docking, which typically happens once every two-and-a-half years, and can take as much as 45 days.
Top global fleet owners such as Frontline Ltd, Scorpio Bulkers Inc, Stena Bulk A B, Norden A/S, Star Bulk Carriers Corp, DHT Holdings Inc and CMA CGM have announced plans to retrofit their bigger ships with scrubbers instead of using high cost, low sulphur fuel.
Scrubber orders and installations are expected to grow four times in 2018 in preparation for the IMO 2020 sulphur mandate from 344 units installed in January to more than 1,400 units by December, according to industry sources.
The IMO rule faces challenges including adequate availability of both low and high sulphur fuels, their price and capacity addition of refineries involving huge investment, particularly for the older ones.
By not reducing the sulphur emissions limit for ships from 2020, air pollution would contribute to more than 570,000 additional premature deaths globally between 2020-2025, according to a study submitted to IMO's Marine Environment Protection Committee.
“So, a reduction in the limit for sulphur in fuel oil used on board ships will have tangible health benefits, particularly for those living close to ports and major shipping routes,” the IMO said after the 73rd session of the MEPC held in London between October 22-26.