Proceedings Of The Marine

FALL 2015

Proceedings magazine is a communication tool for the Coast Guard's Marine Safety & Security Council. Each quarterly magazine focuses on a specific theme of interest to the marine industry.

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58 Proceedings Fall 2015 in emission control area (ECA) sulphur to 0.1%. Owners have decided between using ECA-compliant fuels or installing scrubbers. There appears to be apathy among charterers and owners about the long-term implications, even despite the looming Tier III requirements and the 2020 global sulphur cap. 2 • The current lack of LNG bunker supply vessels or equiv- alent infrastructure makes it look as if fuel supplies will be inconvenient and costly. • A bewildering mix of codes and regulations, depending on whether you are short sea, deep sea, coastal, harbour, or inland waterways. Likewise, the liaison with land- based regulation does not help the decision process. Crude Price — Partial Eclipse Let's be clear that, certainly as far as fossils fuels are con- cerned, there is no such thing as cheap energy. For the future, gas demand is going to be stronger than that of oil. However, the investment in gas is initially higher, especially for cryogenic distribution. While the initial pump price can make gas irresistible, the truth is that there's a distribution premium to be paid to get it into your ships' tanks. So, while the price of crude remains low, the differential to gas is high, meaning you may leave your decision to later. However, whatever the reason for the current low crude prices, history tells us prices will go back up, perhaps to never come down again, and when the price does rise, this partial eclipse will be over. In a cruel twist, making cutbacks now for gas supply in the future could be felt just as global sulphur cap discussion and regulation will be topping the agenda around 2019–2020. 3 Distribution There are approximately 81,000 ships on the planet, 4 some 52,000 of which are larger than 500[GT]. Our best estimates over the next generation of new builds — let's say seven to 20 years — is that 11 percent of that feet will run on gas. 5 Right now, there are approximately 8,000 ports around the world with a coastline or river inland waterway. You can buy oil practically anywhere, but at SGMF, we count 14 ports able to supply LNG now or in the immediate future. While there is a high infrastructure cost involved, there is also a marvelous opportunity to lay out the distribution from scratch and take advantage of providing the fuel in the most effcient places. 6 When you tie this with natural shipping geographies and new gas transshipment projects, things get very interesting. What we see right now, however, is short sea trade and back- to-back liner trade, as is found in much of Northern Europe. are considerations; additionally waste product disposal also needs to be taken into account. This is a convenient but expensive short-term solution, especially for a retroft, but makes much less sense for a new build, so much so that some of these have been postponed. However, the practice of dumping sulphur into the oceans rather than the atmosphere or costly removal ashore (though permissible right now) can only be short-term solutions. Energy prices will equilibrate over the longer term, encour- aging ship owners to consider LNG as a fuel, especially for new builds. Factors affecting the decision: • An immediate need for ship owners to prepare for regu- latory compliance as of January 1, 2015, with the change Guidelines SGMF's technical committee consists of six work groups that are looking at important issues that need to be solved or raised as a priority. Bunkering Regarding operational issues between the parties supplying and receiving the fuel, the group has focused on the opera- tion itself by drawing upon the experience gained in the marine gas cargo sector over the last 50 years and applying that to the bunkering operation. Guidelines published in March 2015 address procedures, situation-specific areas, and examples of industry best practices. Quality and Quantity Issues It's crucial to get certain things right from the start, such as looking at all of the issues and best practices surrounding quality and quantity within the gas industry and marine fuel industry and laying down from the outset the best ways to get things right. Of course, gas has fewer quality concerns when compared to the problems shipping has faced with residual marine fuels over the years, but the gas industry measures by calo- rifc value, whereas the shipping industry has traditionally used volume. SGMF expects to publish this work for its members by the end of 2015.

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