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MAERSK LOOKS TO SCRUBBERS AS ONE OPTION FOR IMO 2020

Friday, February 22, 2019 

Having previously expressed scepticism about the use of exhaust gas cleaning systems ('scrubbers'), global shipping giant Maersk appears to be coming round to the technology as a method of compliance with the IMO 2020 0.5% fuel sulphur cap.

The company's 2018 annual report identifies IMO 2020 as a significant risk. It states: "Currently, there are no compliant low-cost fuels that fulfil the global Sulphur regulation (IMO 2020) requirements coming into force from 2020. The existing compliant fuels, as well as new fuels being developed, are expected to cost substantially more than current High Sulphur Fuel Oil bunkers, implying substantial fuel cost increases in 2020. Installing scrubbers on vessels will enable today's lower cost fuels to be used, but will, on the other hand, require substantial capital expenditure.

"The risk is that the increased costs relating to the implementation of and compliance with the IMO 2020 requirements cannot be recovered from customers. Multiple commercial and operational mitigating initiatives are being pursued.

"While the consequences for container vessel supply are difficult to forecast, it could very well lead to the retrofitting of a significant part of the global fleet during a three-to-five-year period beginning in the later part of 2019.

"Together with incentives to reduce vessel speed, this would likely reduce effective supply, potentially by up to 2.5% by 2021. Moreover, the spread between bunker and crude oil fuel types could widen sharply, as early as from Q4 2019."

Maersk outlines its future strategy as follows: "To enable enforcement of the global cap, the IMO in 2018 decided on a carriage ban for non-compliant fuels on board vessels. Vessels with scrubbers installed for cleaning the exhaust gases are exempted from this ban. The OECD estimates the cost of switching to new, compliant fuels at up to USD 15bn per year for the container shipping industry, equalling around USD 2bn annually for Maersk. To prepare for the 2020 global cap, Maersk has:

  • invested in creating a global hub for low-sulphur bunker fuel. More such options are being explored
  • decided to apply scrubber technology to several vessels
  • entered into dialogue with customers on additional fuel costs."

Maersk, like much of the industry, is taking a longer-term view on future marine fuels. The Maersk 2018 report says:  "The latest assessments from the UN’s Intergovernmental Panel on Climate Change leave no doubt as to the need for the world in general to go through a deep transformation away from its reliance on fossil fuels. Maersk wants to play a clear and leading role in driving the shipping industry’s transformative process. This is the only responsible thing to do, but such efforts and investments are also believed to create strategic benefits for the business.

"At the same time, the risks of early mover disadvantages are being considered, and efforts are being made to avoid these through informative new framework conditions that will support the goal of having commercially viable vessels on the water by 2030."

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