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Derek Langston, senior director of SSY Consultancy & Research

Looming 2020 low sulphur regulation raises concerns over costs, ship design

The looming IMO regulation to restrict bunker fuel sulphur content to a maximum of 0.5% from 2020 may result in higher ocean transportation costs and profound changes in ship design, industry players have warned.

With the low sulphur regulation less than three years away, shipowners have to decide on their compliance choice, including retrofitting exhaust gas cleaning systems or scrubbers, turning to low sulphur fuel or distillates, or using clean gas LNG.

“The upcoming IMO legislation has major implications for vessel design with both dual-fuelled engines and ‘scrubber-ready’ designs under discussion,” Derek Langston, senior director of SSY Consultancy & Research, told delegates at a breakfast forum held during the London International Shipping Week.

“This raises a key question: will the widening spreads in vessel earnings between modern ‘eco’ designs and older units shorten trading lives for less fuel-efficient vessels?” Langston questioned.

SSY profiled vessel specifications from the older segments of the dry bulk carrier and tanker fleets to assess the potential impact and outlined the number of vessels potentially approaching demolition age.

The forum also heard discussions on whether there will be a “softer” implementation of the low sulphur regulation or even outright postponement, as opposed to maintaining the 2020 schedule in view of broader environmental pressures.

“When deciding how to comply with 2020 sulphur emissions it’s impossible to ignore other environmental legislation ranging from ballast water management, to oxides of nitrogen, particulate matter and, in the future, potentially carbon dioxide,” said William Bathurst, head of credit and market analysis for Peninsula Petroleum Group.

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