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What happens when North Europe's ECA switches to 0.1% sulphur fuel?

What happens when North Europe's ECA switches to 0.1% sulphur fuel?
Come the start of next year, a tough new regulation of sulphur content in fuel will come into force in the North Sea, Baltic Sea and English Channel, pushing it down to 0.1%. Unfortunately, it is beginning to look like it will be a bit of a mess.

The legislation in its current guise creates a number of problems: for competition in northern Europe, for competition between big and small shipping firms, and probably, too, for emissions levels.

Nations such as Finland, Germany and the Netherlands are surrounded by waters covered by emissions control areas (ECAs) in order to trade with them at all, vessels will have to burn fuel with a 0.1% sulphur content. However, when visiting ports on the west coasts of the UK and France they will not need to do this. These countries will accept HFO-burning ships, allowing much lower operating costs than on shortsea trades that enter ECAs.

Crucially, many shipping representatives such as UK Chamber of Shipping director David Balston claim that increasingly expensive shortsea trade will cost jobs, force more cargo onto roads and actually result in a net increase in pollution.

Cutbacks are already happening. In September, ferry line DFDS will close its more-than-a-century old route between Harwich and Esbjerg, with a loss of 130 jobs, because it would otherwise have cost an additional $3.4m every year. "This is what the new environmental law and the requirement to use low-sulphur oil will cost based on current oil prices from 1 January 2015,” explained DFDS ceo Niels Smedegaard. “It's a very sad day for us all.”

The EU system contrasts starkly with that of the US and Canada, where no-nonsense ECA zones stretch to 200 nm off the Atlantic and Pacific coastlines. There, blanket crippling fines and ship detentions await those attempting non-compliance, with the US Coastguard, as ever, taking a strong line.

Meanwhile even the areas of Europe where the ECA does apply are fraught with indecision. Unlike the North American system, no unified body for policing SOx has been established, and shipowners tempted by non-compliance – with vessels perfectly capable of switching between fuel $600-per-tonne HFO and $900-per-tonne MGO at a moment’s notice – will have a much better time in some countries than others. Denmark, for example, one of the ECA’s strongest adherents, is setting aside less than $35,000 for new inspections.

Hoping to redress the balance, Maersk Line and Wallenius Wilhelmsen Logistics, as well as a number of other leading shipping companies, are in the process of forming the Trident Alliance, a group to lobby EU port state control authorities to be more stringent. Suggestions include on-board emissions monitoring equipment, and even for the use of sulphur-sniffing UAVs (drones).

European Community Shipowners’ Association (ECSA) director general Patrick Verhoeven agrees that “airborne means or fixed ‘sniffers’ systems could help to spot potential non-compliance by ships sailing through the ECA zones.”

However, ECSA maintains that a system based on one-off sampling of emissions is likely to be “misleading”. Verhoeven clarifies: “…vessels that are experiencing contaminations of compliant fuel by residues of HFO during the switch-over process, or that encounter technical or operational problems that may lead to incidental non-compliance, should be regarded as compliant and should not be faced with draconian measures or penalties.”

The Danish Shipowners’ Association (DSA) has been particularly outspoken, with chairman Carsten Mortensen’s assertion at its annual general meeting that “if ships can continue sailing on traditional, sulphur-containing fuel at virtually no risk, and if the penalty for discovery is a fine that in no way matches the savings, some shipowners will find it hard to resist temptation.”

DSA director general Anne H. Steffensen tells Seatrade Global: “Six months before the entering into force of the 0.1 % requirement, some regulatory and practical uncertainties still need to be clarified.”

One of these is the use of scrubbers. Open-looped scrubbers operate by washing SOx from the exhaust stream and “harmlessly” (according to manufacturers) dumping it into the sea. Sweden is looking to ban it, which causes problems for shipowners who have already invested a lot in ECA compliance. “Clarification is needed on the acceptance of open-looped and/or closed looped scrubbers in EU waters and ports,” Steffensen adds.

Of course, those banking on LNG – such as the Port of Gothenburg, which has announced it will slash port dues by 30% for LNG-fuelled vessels – will not have to worry about scrubbers. But most anticipate widespread low-sulphur fuel oil adoption: “The use of scrubbers remains an option for some shipowners, but what we have noticed is that a majority of shipowners will probably decide to choose for low-sulphur fuel in first instance,” says Verhoeven.

Dynamic Oil Trading ceo Lars Møller seems altogether more certain: “Whilst there are a number of compliance options available for vessels, neither scrubbers, nor alternative fuels such as LNG, will be deployed in large numbers in the short term. This leaves most owners and operators looking at distillates as the most viable solution.”

It remains to be seen whether the discrepancies can be ironed out in time, or whether compliance with 0.1% sulphur regulations in North Europe is to become fraught with difficulties.