Archives for posts with tag: fuel

Environmental concerns are increasingly to the fore in world political economy, with the global energy mix and questions of “peak demand” for different fossil fuels receiving increasing attention as a result. While there is clearly still much uncertainty around this topic, it is worth exploring how shipping continues to develop alongside the changing dynamics of the global energy mix.

For the full version of this article, please go to Shipping Intelligence Network.

The introduction of new environmental regulations is leading the shipping industry to look for ways of reducing its emissions of harmful gases. This week we focus on two separate but related issues: the way in which vessels are powered, and the type of fuel that they use. New technologies are being adopted, with certain ship types leading the way…

Electric Therapy

The majority (96%) of active merchant vessels are powered by mechanical systems in which a form of fuel oil powers a main engine (usually a 2 or 4-stroke diesel) which is connected to the propeller. Most other vessels are “diesel-electric”, in which the power generated by the (4-stroke) main engine(s) is converted to electricity before being transferred to propeller(s) or thruster(s) via electric motors.

By optimising the loading of the engines, diesel-electric systems can lower fuel consumption and emissions. These systems are well established in sectors such as offshore, tugs and passenger, where manoeuvrability, variation in power demand and engine noise are important considerations. For larger cargo vessels, where demand for power is generally higher and more consistent, conventional mechanical systems remain more efficient and cost-effective. Our Graph of the Week shows that against a backdrop of reduced contracting in the larger cargo sectors, electrically-driven ships have assumed a greater share of the newbuilding market, accounting for 22% of reported newbuilding contracts so far this year.

Battery Charged

The next step for electric power may be more widespread adoption of batteries in main propulsion systems. There are 22 vessels in service and 14 on order that use batteries, mostly alongside either conventional diesel or dual-fuel generating sets. As well as reducing emissions when using battery power, these can enhance efficiency by optimising engine loads and transferring surplus power to or from the batteries as required. For smaller ferries intended for short routes, all-electric propulsion systems are feasible.

Gas Treatment

LNG has been identified as a cleaner fuel capable of reducing vessel emissions in line with new regulations. Clarksons Research’s World Fleet Register currently identifies 542 merchant ships in the fleet and on order capable of using LNG fuel. 351 of these are LNG carriers, which can use cargo boil-off to fuel a choice of turbine, dual-fuel diesel electric or dual-fuel 2-stroke main engines. In other sectors LNG fuel has taken longer to gain market share, but there are signs that where ship designs and the supply of bunkers allow, it is becoming more popular. Out of the 130 contracts recorded so far in 2017, 21 are for vessels capable of using LNG fuel. These include 4 Aframax tankers, the largest vessels other than LNG carriers to adopt dual-fuel 2-stroke engines.

More efficient power systems and cleaner fuels are two examples of how the shipping industry is responding to the challenges set by new environmental regulations. Alongside other developments in vessel design and operating practices, shipping is steering towards a more efficient and cleaner future. Have a nice day!

SIW1266:Graph of the Week

In the well-loved sitcom Absolutely Fabulous, Jennifer Saunders, Joanna Lumley and company provide an apt demonstration that even totally dysfunctional families can muddle through pretty well in the end, and have fun doing it. Could these comedy characters be a possible role model for regulating the shipping family?

Step Change For Regulators

As shipowners struggle with a long recession, escalating fuel costs and tricky credit, it’s easy to see why changing regulations seem like yet another chaotic burden in an already dysfunctional world. And, to be fair, the regulatory framework has made life harder in the last decade. Regulation of emissions, carbon footprint and ballast water have propelled regulators into the heart of shipping economics, leaving many owners struggling with hard choices about how to meet the new rules.

A Real Little Scrubber

Sulphur emissions illustrate how tricky things have become. Ideally regulations have a well-defined timescale and global adoption, but the sulphur regulations have neither. Although the timetable cuts the 3.5% global sulphur cap for marine fuel to 0.5% in 2020, the implementation date could be 2025 if the IMO’s distillate fuel study indicates supplies may not be available. And the global cap is not global either. The “Emission Control Areas” (ECAs) in North America, the Baltic and the North Sea have different rules. From next January ships trading in ECAs face a 0.1% sulphur cap.

Unquantifiable Options

More complexity is added by the options for getting down to 0.1%. One is to use eye-wateringly expensive distillate fuel; another is LNG; and the third is to install a “scrubber”. Since distillate fuel costs about 50% more than MFO, that’s unattractive, but LNG is unlikely to be much cheaper and scrubbers can cost in the region of $2-4m each.

Undecided Or Indecisive?

Luckily, the immediate decision is not too difficult because most ships will not spend long in ECAs. For example, a ship trading between Rotterdam and New York sails about 3,400 miles on the high seas, and around 20% of the distance is in ECAs. However, with more diverse trading the average over the year should be less, say 10%? From January 2015 a bulker sailing 300 days a year at sea, with 10% in ECAs, would spend an extra $0.2m a year on distillate fuel. Is it worth fitting a scrubber to save $0.2m pa? For bulkers no, but for ferries, offshore units and the like trading full time in ECAs, it might be. But when the global sulphur cap drops to 0.5% in 2020 the annual fuel bill will jump by over $2m, which would pay for a scrubber in a year or two, so that’s when the big step change in scrubber installation will happen. Unless, of course, the IMO defers to 2025.

Fabulous Future, Darling

So there you have it. Fuzzy regulations, but for most the economics are not too tricky. Intra-ECA ships should scrub up soon, global traders “wait-and-see”, and Transatlantic traders follow the ‘Ab Fab’ strategy – mix up a distillate cocktail and have a bit of fun! Have a nice day.


SIW1080Fuel efficiency has become one of the hottest topics in shipping. Any new design now comes equipped with a whole host of ‘Eco’ features to reduce consumption and emissions. But shipping is not alone in this shift. The car drivers of the US form one of the largest parts of global oil demand (12%) and they have also been reacting to recession and high oil prices by reducing fuel consumption. Yet, paradoxically, this has turned out to be a net positive for product tankers

Vroom Vroom

Motorists in North America accounted for 10.4m bpd of oil demand in 2012, forming the lion’s share of the 23.7m bpd of overall North American oil demand. This has long made the US the largest single component of global oil demand. But since a peak in summer 2007, the growth in the amount of driving being done by Americans has ceased: the latest figures are around 10 billion miles per month below the peak, and the impact of the often discussed sea-sonal upturn during the “driving season” (US holidaying promotes long-distance driving) has been weak.

Circling the Station-Wagons

US driving patterns have been interrupted before: in the early 1990s, in 1978-9 and 1973-4, as the graph shows. That is to say, during the other periods in the last 40 years when shocks to the US economy have dampened consumer demand for car usage. But post-2009, this has been compounded by a significant improvement in new vehicle fuel economy – just like the one now on its way in new ships.

All this is problematic for the major import trades into the USA, both in terms of direct gasoline imports, and crude imports for refining. Transatlantic gasoline trade remains a mainstay of MR requirement. However, demand is less than it was: in 2008 the US imported 0.63m bpd of products from Northern Europe, but this was down to 0.40m bpd in 2012. At the same time, crude imports by the US have also been declining steadily.

Actually a Good Thing?

So, is this an exclusively negative story for products tankers? Not necessarily (though lower US crude imports certainly don’t help their larger cousins). The shale oil boom and weak local demand have generated strong growth in US product exports. Most of this is gasoil, with much being exported to Europe, allowing triangulation, or to South America (up 30% y-o-y in 2012). US gasoline exports to South America have also grown: by 69% in 2010 and 41% in 2011. At 0.62m bpd of total products trade, US-South America is now a significant trade flow exceeding the transatlantic gasoline trade.

Moreover, the distances from the US Gulf to the west and east coasts of South America are more than that from Rotterdam to New York: by around 25% and 60% respectively. So, the more parsimonious attitude of US drivers towards fuel consumption is actually producing a net tonne-mile boost for product tankers – the drop in demand at least generating some good news. Have a nice day.