Emission Control Area (ECA)

SOx Requirements

Guidance to INTERTANKO Members for the Selection of Compliance Alternatives

July 2012

Notice of Terms of Use:

The advice and information given in this Guidance (“Guidance”) is intended purely as guidance to be used at the user’s own risk. No warranties or representations are given nor is any duty of care or responsibility accepted by the International Association of Independent Tanker Operators (INTERTANKO), the members or employees of INTERTANKO or by any person, firm, corporation or organisation who or which has been in any way concerned with the furnishing of information or data, the compilation or any translation, publishing, supply or sale of the Guidance for the accuracy of any information or advice given in the Guidance or any omission from the document or for any consequence whatsoever resulting directly or indirectly from compliance with, adoption of or reliance on, guidance contained in the Guidance even if caused by a failure to exercise reasonable care on the part of the aforementioned parties.

CONTENTS

1Introduction

2The regulatory regime

2.1International Maritime Organization (IMO)

2.2Regional Regulations for SOx emissions limitations

2.3 Overview of international and regional/local SOx emissions limitations

3The alternative options for compliance

3.1Marine Gas Oil (MGO)

3.2Liquefied Natural Gas (LNG)

3.3Exhaust Gas Cleaning Systems (EGCSs)

3.4Advantages of the use of clean fuels

4ECA Calculator

ANNEX 1 – Guidance for Hazard Identification (not included)

ANNEX 2 - Specific Operational and Safety aspects for Scrubbers

ANNEX 3 – Advantages of using Clean Fuels instead of EGCS

ANNEX 4 – The 2009 IMO Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59))

1Introduction

The aim of this document is to provide guidance to INTERTANKO Members and other interested parties on a number of specific technical, operational, safety and cost-efficiency elements which need to be considered by ship owners when choosing between alternatives for compliance with the Emission Control Area (ECA) regulatory regime under Annex VI of MARPOL 73/78 between 1 January 2015 and the enforcement of a global sulphur cap in 2020 or 2025.

This Guidance is not intended to promote one single route compliance. The Guidance should be regarded as a means to facilitateship owners’ decision on how to comply with the ECA regulatory regime and provide advice on various foreseeable impacts of each of the alternatives to meet ECA emission limits.

The list of items addressed in the Guidance is not exclusive, which means that for each individual ship there might be additional considerations which need to be accounted for in the selection process. The Guidance covers:

(a) areview of the regulatory regime;

(b) abrief review of the alternatives ship owners have for compliance and their advantages and challenges;

(c) more detailed listings of challenges for these alternatives; (Annexes 1 and 2)

(d) a simplistic algorithm to estimate the cost-efficient alternative to comply with (Marine Gas Oil (MGO) or scrubbers) as a function of ship’s expected remaining life span and the estimated time to be spent in ECAs; and

(e) alist of advantages of using clean fuels in both existing ships but also new buildings as compared with scrubbers and continued use of Heavy Fuel Oils (HFO). (Annex 3)

It is strongly advised that the selection process should be done in cooperation with the classification societies andequipment manufacturers. Decision-making will however, have to take into consideration the requirements of individual Flag Administrations and Port States, if relevant, as well as each ship’s configuration and trade pattern. A ship’s age may also play a part in the selection of the most adequate alternative for compliance.

Annex 2 of this document provides more details on operational and safety aspects of Exhaust Gas Cleaning systems (EGCS), also called scrubbers, which ship owners should consider when assessing the challenges of scrubbers and when discussing with classification societies, equipment manufacturers and Flag Administrations.

2The regulatory regime

2.1International Maritime Organization (IMO)

The international regulatory regime for air emission limitations from ships is regulated through provisions of Annex VI to MARPOL 73/78 Convention (adopted in 1997; entry into force in 2005; significant amendments in 2008).

Emission Control Areas (ECAs)

As from 1 January 2015, MARPOL Annex VI will require that the maximum sulphur content in fuels used by ships in ECAs shall be of 0.10% by weight. Alternatively, ships could use technologies, like scrubbers to ensure a similar limitation of SOx emissions. However, scrubbers are defined by regulations as “equivalent means” for compliance. Therefore, in order to be used by ships, scrubbers have to be approved by an Administration and IMO should be informed of such approved systems.

Currently,there are four approved ECA regions ( as detailed in Figure 1:

  • the Baltic Sea
  • the North Sea
  • the North American ECA - 200 nautical miles offshore USA and Canada, including Hawaii, St. Lawrence Waterway and the Great Lakes (as from 1 August 2012) and
  • the United States Caribbean Sea ECA (as from 1 January 2014).

Figure 1: The four approved ECAs

Global cap on sulphur content on marine fuels

Currently, outside ECAs, one should use fuels with a maximum sulphur content of 3.50%. However, the maximum allowable sulphur content of any fuel oil used by ships outside ECAs will become 0.50% by weight either on 1 January 2020 or 1 January 2025 based on a final decision to be taken by the IMO’s Marine Environment Protection Committee (MEPC).

2.2Regional Regulations for SOx emissions limitations

In addition to the IMO regulations, there are two regional regulations with provisions limiting SOx emissions from ships:

EU Sulphur Directive(in force since 2000; amendments in 2006)- has an additional provision to use fuel with a sulphur content of maximum 0,10% when “at berth” (including at anchor) in the EU ports. When calling at EU ports, ships have to use 0.10% sulphur content fuel, or use alternative measures (scrubbers).

California Air Board Resources (CARB) (in force since June 2009) - Phase I (until 31 December 2013) mandates the use of marine distillates with maximum sulphur content of 0.50% for the DMB grade and 1.50% for the DMA grade; Phase II mandating use of marine distillates with a maximum sulphur content of 0.10%. From 1 December 2014, ships have to use 0.10% fuel content marine distillates within 24 nautical miles from the California shore line. Rule can be seen at

2.3 Overview of international and regional/local SOx emissions limitations

Maximum sulphur content allowed in fuels used by ships

Regulations / IMO* / EU Sulphur Directive* / CARB (24 nm off coastline)**
Application dates / Global / ECA
July 2009 / DMA grade max 1.5%
DMB grade max 0.50%
1 Jan 2010 / 0.10% fuel “at berth”
Prior to 1 July 2010 / 4.50% / 1.50%
From 1 July 2010 / 4.50% / 1.00%
From 1 Jan 2012 / 3.50%
From 1 August 2012 / US ECA
1 Jan 2014 / 0.10% (any marine distillate)
1 Jan 2015 / 0.10%
1 Jan 2020 (2025) / 0.50%

* - regulation allows use of alternatives such as exhaust gas cleaning systems (scrubbers)

** - CARB specifically requires compliance by fuel only (no scrubbers allowed). CARB rules allow however a “non-compliance fee” as per the table below. These fees are 50% discounted if vessels purchase and use compliant fuel during California port visit.

Visit / 1st / 2nd / 3rd / 4th / 5th & more
Fee (USD) / 45,500 / 45,500 / 91,000 / 136,000 / 182,000

3The alternative options for compliance

During the period after 1 January 2015, ships are required to use in ECAs a fuel with ultra-low sulphur content (i.e. 0.10% by weight), or alternatively use of exhaust gas cleaning systems (EGCS) also called scrubbers, which will ensure same or lower amount of SOx emissions.

The two fossil fuels which currently could have such a low sulphur fuel are the MGO (grades DMA and DMZ from ISO 8217:2010) or liquefied natural gas (LNG).

Compliance bythe use of ultra-low sulphur content MGO implies a significant premium per tonne of fuel used, but no capital investment is required.

Conversion of existing ships to use LNG as its main fuel is expensive. In addition, there is an obvious lack of supply network for LNG.

Compliance through the use of EGCSs such as scrubbers requires a significant initial capital investment for equipment purchase and installation on board, but it allows the continue use of less expensive residual fuels.

The evaluation of which option to choose is a complex exercise related to the individual operational and trading pattern, the ship’s age, the ship’s operational time in ECAs and the individual commercial/financial considerations.

3.1Marine Gas Oil (MGO)

Advantages:

No need for initial investment for existing ships.

No need for fuel treatment and significant reduction on sludge production in ECAs. The fact that there is no need to heat the fuel when using MGO will further mean:

  • a reduction of up to 10% power demand and fuel consumption
  • a significant reduction of maintenance and repairs

No need for redundancy in terms of carrying low sulphur fuel in case of a malfunctioning EGCS.

Further advantages of using MGO as means of compliance are listed in Annex 3 of this document.

Challenges:

Ultra-low sulphur MGO is now available for about US$ 300 premium compared to the price of the residual fuel.

Availability of ultra-low sulphur MGO is not yet clarified for 2015 and beyond when the demand from the marine side is expected to increase.

Development of proper fuel switching procedures to be done in liaison with the manufacturers and class societies (reference also to the OCIMF/INTERTANKO fuel switching guidelines– see Annex 1).

3.2Liquefied Natural Gas (LNG)

Advantages:

LNG has all the advantages of MGO, as above with the additional benefits:

  • LNG as fuel is more environmentally-friendly in terms of SOx, NOx and CO2.
  • The current price of LNG is attractive.

Major engine manufacturers have developed dual-fuel engines which can use LNG and HFO/MGO but these would primarily be suitable for new buildings.

Challenges:

Conversion of existing vessel to use LNG, in terms of storage and engine modification, is an expensive project. A cost-effective assessment may indicate that such a conversion is viable only if it is partly subsidised.

Technology needs further improvements to limit the “methane slip” phenomenon (escape of minor, non-combusted amount of fuel, mainly methane which has a global warming potential approximately 23 times higher than CO2).

Except for very few ports, there is no proper supply network for LNG. So, even for new buildings, it could be a challenge to use LNG as a fuel in ECAs in the near future.

Use of LNG as a fuel would also assume that the IMO adopts and enforces the new International Code of Safety for Ships using Gas or other Low Flashpoint Fuels (IGF Code).

It is INTERTANKO’s view that use of LNG as a fuel is not at present a practical option for compliance with ECA SOx emissions limitation as from 1 January 2015 except in special cases where part of the retrofitting costs are subsidised. It may become an option for future newbuildingswhen the global sulphur cap is enforced.

3.3Exhaust Gas Cleaning Systems (EGCSs)

Advantages:

The vessel will continue to use cheaper residual fuels.

Challenges which need clarification at an early stage with manufacturers, Flag Administration and classification societies:

Fit for purpose Certification: In case of scrubbers, ship owners to liaise with manufacturers, Flag Administration and classification societies to ensure that such systems are certified for achieving the required SOx emission limit and, in case of wet scrubbing systems, are certified for achieving the water-wash effluent standards when the ship uses a residual fuel with a sulphur content of at least 3.5%. IMO 2009 Guidelines for Exhaust Gas Cleaning Systems (Resolution MEPC.184(59)), do not indicate the minimum sulphur content for which scrubbing efficiency should be tested. (for further details see Annex 2 of this document).

Capital cost: Number of units and cost per unit to be defined with manufacturers

  • for each Main Engine
  • for each Auxiliary Diesel Engine or for a group of Auxiliary Diesel engines, as applicable
  • for each Auxiliary Boiler, as applicable to different ship types and sizes (e.g. a tanker with steam cargo pumps and cargo heating might need an EGCS for the large boiler(s) onboard).

Installation/ EGCS unit dimensions

  • Space required is a very important issue for an existing ship, both for exhaust gas handling and scrubbing water pumping and effluent handling where applicable from wet or dry scrubbing systems
  • If installed externally, the increase in air drag should be considered
  • Stability issues due to operational weight and high location of EGCS
  • Heel considerations and DWT adjustment, due to added weight, if relevant.

Operation

  • Additional power demand (pumps, fans, etc.) to be clarified with manufacturers as it may necessitate installation of additional power generation.
  • Additional daily HFO consumption to cover such increased power demand
  • Cost of consumables, if any
  • Cost for disposal of solid and water effluent.

Maintenance

  • Additional equipment requires intensive maintenance due to the nature of exhaust gas, size and location.
  • PMS to be updated to cover the additional equipment to be installed.

Compatibility of SCRs/NOx emissions reduction technologies

  • Ships built from 1 January 2016 will have to meet Tier III of NOx emissions reductions. Currently, this can be obtained by using a Selective Catalytic Reduction (SCR) device.
  • There seems to be an incompatibility problem between SCRs and wet scrubbers. (see Annex 2).

Redundancy

  • The need for additional MGO tanks and systems, for redundancy in case of EGCS failure.
  • New ships built to use MGO only as means of compliance with the global sulphur cap will not need the additional MGO storage for redundancy. That may give a minimum of 500m3additional volume gain for cargo tanks in comparison with ships built with scrubbers.
  • Risk of legal implications and detentions, should the EGCS itself fail.
  • Need for more than one hydro-cyclone for efficient treatment of various and variable wash-water flows.

Availability

  • The maximum capacity of EDCS manufacturers to manufacture and install the required number of systems, projected over the period remaining is an important factor to be considered in timing the decision ship owners need to make.

Human factor and safety

  • Additional crew training for operation, safety and increased riskwhen working with highly corrosive materials (i.e. high-acidity wash-water; solid waste including heavy metals and up to 50% solution of caustic soda). See furtherdetails in Annex 2.

Operations in port/rule predictability

  • Before making a decision for use of EGCS, clarification should be sought with the Flag Administration that they approve the use of the proposed system as an equivalent to the use of low sulphur marine fuels and which scrubbers are eventually approved by them.
  • Clarifications are needed as to whether authorities will allow the use of EGCSs in their ports, in particular open loop wet scrubbing systems. Due to the high capital cost, it is prudent to consider consulting port authorities at which ships are expected to call frequently.
  • If ports do not allow use of an open loop wet scrubber, a closed loop scrubber using fresh water and caustic soda can be used as an alternative. However, this requires additional storage capacity for the caustic soda.
  • As a consequence of the chemical reaction between sulphur and caustic soda solution, the re-use of the same amount of caustic soda is limited. In order to avoid topping up new/fresh caustic soda on top of the used caustic soda, it would be necessary to have two storage tanks for such purpose.
  • Clarification is needed whether authorities will provide disposal facilities for used sodium sulphate /bisulphate solution if a closed loop system is used.

Further details on safety and operational aspects of scrubbers as well as some advices linked to their type approval are given in Annex 2.

3.4Advantages of the use of clean fuels

For informational purposes, Annex 3 is included in these guidelines to provide the reader with a revised list of advantages in using MGO, which is based on a public document released by INTERTANKO in 2008 when proposing that IMO include distillates in the revision of Annex VI to reduce air emissions from ships.

4ECA Calculator

The current ECAs cover limited sea areas. Until the global sulphur cap is enforced, many ships may not call at ECA ports. Many other ships may have limited time sailing through ECAs and calling at ECA ports. Ship owners of the latter category, particularly of existing ships may need to assess the cost effectiveness of the alternatives in complying with the ECA SOx emissions requirements.

To assist ship owners to make such an assessment, INTERTANKO has developed an “ECA calculator”. This should be seen only as one tool among many others. In this case it specifically compares the option of using MGO as a fuel compared to the installation ond use of scrubbers as EGCS. Each ship owner and ship operator may consider multiple parameters in doing such an assessment in conjunction with this guidance. Other and more sophisticated calculators (e.g. Lloyd’s Register) have been developed for a more in depth analysis of possible strategies, including time before 1 January 2015.

The INTERTANKO model is simple. It calculates the Payback Period in the number of years over which a ship can pay a premium for use of MGO with a sulphur content of 0.10% instead of retrofitting scrubbers in order to comply with SOx emissions limitations in ECAs between 1 January 2015 and time the global cap on sulphur in marine fuels is enforced. The “ECA calculator” will allow the user to insert most of this data. The data required and used is as follows:

-CAPEX(scrubber price + installation costs)

-Weighted Average Cost of Capital/Depreciation rate

-Daily fuel consumption[1]

-Total days at sea/year

-Fuel consumption for cargo discharge

-Number of discharges in ECAs

-Days at sea in ECAs/year (as percentage of the total days at sea/year)

-Price of regular residual fuel

The Payback Period is given at a variety of premium values paid for use of 0.10% MGO and for varying times used by each ship in ECAs as a percentage of the total trading days/year.

The modeldoes not take into accountoperating and maintenance costs of scrubbers, which are considered important, but are not known at this point in time. Various information estimatesannual running costs of up to US$200,000 or even higher.Ship owners and ship operators may add their own estimates to such additional costs.