Sailing towards sustainability: the future of low-sulphur fuel

The shipping sector has been forced to switch from high-sulphur fuel oil (HSFO) to cleaner alternatives as a result of the international maritime organization's (IMO) 2020 sulphur cap. Unquestionably, the switch to LSFO has improved the environment, but there have also been drawbacks, chief among them being that LSFO is more expensive than HSFO. Operating costs may be greatly impacted by this cost disparity, especially for businesses with narrow profit margins. 

On the horizon, though, comes a potential remedy: technology that can more cheaply convert HSFO to LSFO. This invention has the potential to completely transform the marine industry by providing a more profitable and environmentally friendly route to regulatory compliance.

Cleaner ships, warmer atmosphere 

Sulphur oxide emissions, a primary cause of air pollution and acid rain, are directly addressed by converting HSFO to LSFO. This method could significantly lessen the environmental impact of the shipping industry by utilising the resources already available to HSFO, possibly eliminating health problems like lung cancer that are linked to sulphur emissions.

But the possible effect on global warming must be carefully taken into account. Even though LSFO emits lower sulphur emissions, the environment is cooled by these emissions. Reducing them can unintentionally add to global warming, a problem that needs more investigation and possible solutions. 

The paradox of reduced sulfur emissions 

According to recent studies, there is conflicting evidence that the IMO 2020 regulation's reduction in ship sulphur emissions may cause a little rise in global temperatures. This is due to the cooling action of sulphur particles in ship exhaust, which reflect sunlight and affect the development of clouds. Cutting back on these particles might lessen the cooling effect and possibly hasten warming. 

Although there is ongoing discussion on the precise extent of this warming effect, some research suggests that it may account for as much as 80% of the observed rise in global heat absorption since 2020. This demonstrates the intricate relationship between various emissions and how they affect the climate. 

It is important to remember that the overall advantages of lowering sulphur emissions, which have greatly enhanced air quality and public health, are not negated by this possible warming effect. It does, however, highlight the necessity of developing ways to lessen any negative effects and having a thorough grasp of the unintended repercussions of environmental rules. 

Improved operational efficiency and cost reduction

HSFO conversion technology has the potential to revolutionise maritime vessel operations. In comparison to constructing costly scrubbers or moving to alternate fuels like LNG, it provides a more affordable means of complying with IMO 2020. Scrubbers can cost anywhere between $2.5 and $4.5 million, and LNG operations require significant infrastructure expenditures. Operators might drastically lower fuel costs and increase operational efficiency by switching from easily accessible and less expensive HSFO to LSFO. 

It is advantageous for a ship to operate on LSFO even if the price difference between LSFO and HSFO stays at $300 per metric tonne, according to a cost analysis of ships with and without scrubbers over a 15-year tenure. This implies that vessel operators may find HSFO conversion technology to be the most cost-effective choice if it can further lower the price of LSFO. 

Let's look at a big container ship that uses 100 metric tonnes of gasoline every day to show the possible cost reductions. The daily fuel cost savings from using converted HSFO would be $30,000, given that LSFO and HSFO have a $300 per metric tonne pricing difference. This results in gasoline cost reductions of more than $10 million over a year.

Major impact on bunkering services

This technology could also revolutionise bunkering services. In order to provide ships with converted LSFO at competitive pricing, bunkering hubs may provide HSFO conversion services. The HSFO market might be revived, and bunkering service providers might see new sources of income.

Maersk is investing in methanol-powered vessels, while Shell, a significant provider of bunker fuel, is growing its LNG bunkering infrastructure. These illustrations show how open the industry is to change and make investments in innovative fuel technologies. 

Singapore's leadership in maritime decarbonization

The future of green shipping in the area and beyond is being actively shaped by Singapore, a significant maritime hub. The country is leading a number of measures to reach its ambitious goals of having its port terminals have net-zero emissions by 2050.

Key initiatives include:

• Green port terminals: Singapore is developing the next-generation Tuas port, designed with sustainability at its core. This includes incorporating green buildings, utilizing renewable energy sources like solar power , and implementing intelligent systems to optimize energy consumption and reduce emissions.
• Harbour craft electrification and nearshore grids: Singapore is actively promoting the adoption of full-electric harbour craft and aims to have all new harbour craft operating in its port waters be fully electric, capable of using b100 biofuels, or compatible with net-zero fuels such as hydrogen from 2030 onwards . To support this transition, the Maritime and Port Authority of Singapore (MPA) is developing a charging infrastructure implementation masterplan by 2025. There is also a potential for the creation of a near-shore energy grid in Singapore.
• Maritime energy training facility: recognizing the importance of a skilled workforce in the transition to cleaner fuels, MPA is establishing a Maritime Energy Training Facility (METF) to train maritime personnel in the operation of vessels using clean marine fuels like methanol and ammonia . The facility aims to train approximately 10,000 seafarers and other maritime personnel by the 2030s.
• Alternative fuels: Singapore is actively investing in research and development of alternative fuels like methanol and ammonia to reduce reliance on fossil fuels . The country has successfully conducted trials for simultaneous methanol bunkering and cargo operations, as well as ship-to-ship methanol bunkering.
• Wind propulsion: Singapore is engaging with stakeholders (eps) in wind propulsion technology to explore its potential in reducing emissions from ships . The country welcomed three wind-propelled vessels in 2023 and is collaborating with industry partners and research institutions to advance the use of this technology to reduce up to 5%.
• International collaboration: Singapore actively participates in international forums like the IMO and collaborates with other countries through Green and Digital Shipping Corridors (GDCSs) to promote sustainable shipping practices and facilitate consensus-building on key issues like zero and near-zero emission technologies, safety standards, and financing.

These initiatives demonstrate Singapore's strong commitment to decarbonizing the maritime sector and driving the development of sustainable shipping solutions.

A big deal for ASEAN

The ASEAN region will be significantly impacted by Singapore's leadership in maritime decarbonisation. Being the biggest bunkering centre in the world, Singapore is vital in influencing fuel decisions and encouraging environmentally friendly nautical practices in the area. In order to significantly reduce sulphur oxide emissions and support regional efforts to battle air pollution, Singapore can promote the widespread deployment of LSFO in ASEAN by adopting and promoting HSFO conversion technologies. 

Singapore's efforts in alternative energies and green technologies can also be used as a template by other ASEAN nations. The region's shift to a more sustainable maritime industry can be accelerated by Singapore by exchanging best practices and information. It's also important to emphasise how renewable marine fuels could promote sustainable development in ASEAN. Reducing dependency on fossil fuels and opening up new markets are two advantages that nations that manufacture and market renewable marine fuels stand to gain. The establishment of a regional market for renewable marine fuel could be sparked by Singapore's initiatives in this field, thereby advancing ASEAN's sustainability objectives.

Cost comparison and quantum for conversion

Since IMO 2020 went into effect, there has been a considerable fluctuation in the price difference between HSFO and LSFO. In Singapore, the difference between vLSFO and HSFO hit a record $538 per tonne in 2022. The hi-5 spread in Singapore, however, has decreased recently; it averaged $147.48/mt in 2023 and $127.56/mt in early 2024.   

The cost of conversion must be much less than the difference in price between LSFO and HSFO for HSFO conversion technology to be a viable commercial prospect. The financial advantages of adopting converted HSFO would be offset if the conversion cost was very high.

Let's look at Singapore's current hi-5 spread of $127.56/mt to demonstrate this. The total cost savings from employing converted HSFO would be $77.56/mt if the cost of converting HSFO to LSFO, for instance, is $50/mt. Because of this substantial cost benefit, HSFO conversion would be an appealing choice for ship operators. 

The demand for LSFO and the capacity of conversion facilities determine how much HSFO must be converted in order for it to be a profitable economic prospect. By 2034, the global LSFO market is expected to grow to a value of $397.1 billion, demonstrating the high demand for this fuel. There may be a sizable market for HSFO conversion services if conversion facilities can be expanded to accommodate a large amount of this demand. 

Chart of current and future cost difference

Although it is difficult to estimate the precise future price difference between HSFO and LSFO, the following chart offers a potential scenario based on current market patterns and professional projections:

Note: this is a hypothetical scenario and actual prices may vary.

The price difference between LSFO and HSFO is expected to stay substantial in the upcoming years, according to this chart, which will favour HSFO conversion technology.

Why conversion is more cost-effective than further cracking

Although HSFO can be further broken down into lighter products like petrol and diesel by conventional refineries, this process is frequently more difficult and costly than converting it directly to LSFO. Cracking calls for a large initial outlay of funds for specialised machinery and infrastructure. Because the procedure is energy-intensive, it also entails greater running costs.

Moreover, refinery renovations might have a long gestation period, which may last longer than the window for taking advantage of the LSFO-HSFO price gap. On the other hand, HSFO conversion technology can be deployed faster and with less capital, resulting in a quicker return on investment.

Furthermore, the main goal of cracking HSFO is to maximise the production of higher-value goods like diesel and petrol, which might not be in line with the particular requirements of the marine industry. The production of compliant marine fuel is the specific goal of direct conversion to LSFO, which guarantees a more effective and economical option for the shipping sector.

Looking ahead

The development of HSFO conversion technology offers the maritime sector a huge chance to enhance operational effectiveness and lessen its environmental effect. This technology might be a significant step towards a more sustainable future for the maritime industry, even though the possible effects on global warming need to be carefully considered. The ASEAN region may benefit from a cleaner and more effective maritime sector in the years to come as a result of Singapore's aggressive effort to maritime decarbonisation and developments in fuel conversion technologies.

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