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Lloyd's List Business Briefing: London

 

Topic video - Global sulphur cap 2020: making the shipping industry greener

 

Will the global sulphur cap make the shipping industry greener? How will the introduction of scrubbers affect the environment? And how will the industry 'square the circle' between how it deals with low sulphur fuel with greenhouse gas in the future? Our panel discussed all this and more at the Lloyd's List Business Briefing: London.

 

Don't have time to watch? See the full video transcript below.

 

 

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Video transcript

 

Just on a more general footing, shipping is not seen as a green industry. This is a measure that IMO is passing to make us greener. Do you think it's green enough and will this make us green enough? Will it turn the tide so people will start to think of shipping as a responsible industry Philip?

 

I think one of the reasons that IMO went for the 2020 decision is because of that perception that shipping is not green. The poor old IMO have been beaten over the head for years now over their response to the greenhouse gas, the Kyoto issue and it's not really the IMO’s fault. The IMO is the sum of its parts; it can only move as fast as its members want to. So, it has, I think, unfairly been criticised quite extensively that it's not green enough. Where they’ve been able to make progress, with the EDI and SIMPS 47:26 and all these sort of things, I think they’ve done a pretty good job and the MEPC thinks very hard about these things. But I think given the choice of doing it in 2020, or deferring for five years, I think the IMO really have no choice and it seems to me they have to get on with it, there is an issue with sulphur.

 

So, we're moving in the right direction?

 

Want more expert advice on the global sulphur cap 2020? Topics include compliance and enforcement; risks and challenges; and fuel management. Just click here!

Yes, I think they are. I think the perception is they're not and I think there are certain elements of other parts of the transport industry that have tried to paint shipping as being dirtier than it is and shipping is still a phenomenally efficient way to move goods. We use fuel which otherwise we would have to get rid of in some other way, which is not going to help the climate either. So, there we are and we do a good job and the fact that we all buy things from Korea and Japan and the Far East and China as cheaply as they are made here is because transport is so efficient. So, all that’s a good news thing. But the perception is that we have dragged our heels in relation to greenhouse gas and that’s a different issue and so, I think, the IMO have leapt at the chance to try to improve their green credentials.

 

What I fear is that, of course, that we'll get past this crisis, I think that’s the word that you started with, and then the IMO, bullied by the EU to some extent, will have to look at greenhouse gas and how we're going to deal with that. And what I think is going to be interesting is how they square the circle between how we deal with low Sulphur fuel and nitrous oxides with greenhouse gas. I think this crisis may well pale into insignificance in comparison to that one.

 

Do you want to follow that on?

 

I think probably the shipping industry has, certainly it is the most efficient way of moving cargo round the world. So, I think we get unfairly bad press for that, or perhaps the industry doesn’t do a good job of blowing its own trumpet. But then when you look at the EEDI regulations that are coming in, there are some significant step changes for the industry that will be a technical challenge to achieve and they will all move to improve the industry’s standing in terms of the rules around nitrous oxide and CO2 generation. I mean it's all heading in the right direction now.

 

I think the question that is on everybody's mind is are we going in the right direction at the pace which the planet can support? Global climate change is a fact and shipping is a part of the problem, we have to deal with that very, very quickly. Dele you were talking about the attitude in West Africa. It's going to be really hard, even harder for not only West Africans but South Americans, for instance, to move at the same pace as it is in other parts of the world.

 

When you look at it everything you look at in the first place is the attitude, what is the attitude of people towards the changing climate? What is the attitude towards this pollution we're talking about? When you look at the other parts of... Let me use Nigeria for example. Now a lot of people are talking about hybrid, hybrid cars, a lot of things are being hybrid, why, because they want to reduce the pollution, so that the environment can be at least healthier for people. When you go to the other parts of the world that we're talking about, people like South America that you talk about, and people are not yet changing to the terms of what is going on in Europe. People have not started looking at what is going on in Europe because now in, probably UK, they say, ‘Okay your car must be low fuel with the continent’. I think there was a thing about 20; was it 2020, or 2012 about coming to London, with a good car or something, I can't remember now that you had to. But in Africa there was no regulation to guide that, there was no regulation to properly guide your, what is it called? The carbon monoxide and the rest of it. All of these things that pollute the environment and so there is no regulation per se to guide that. So, that’s why I can say the attitude is probably what we are trying to contribute to.

 

It's also what is technically feasible. There's no doubt that this is a move in the right direction for greener industry but what is technically feasible at this stage? What kind of R&D is being made to a true alternative to fossil fuel based fuel? So, there you could perhaps argue that we lag behind and that is impacting the pace at which change can happen in the future but besides that, no doubt, it's a move in the right direction from a green…

 

The technology is not keeping up with the pace of our aspirations.

 

Not the technical R&D as I see it in the industry. The question then remains, if you can adapt, if you can transfer technology from other industries and kind of leapfrog into our industry; that remains to be seen.

 

Thank you. I've got time for one more question in this half. Katerina.

 

Richard, thank you. You asked the question why are shipowners reluctant to invest in scrubbers, and what we heard was a return on investment answer, but I will give you a different answer, and it's a bigger picture answer. Because if you look at the current technology that we have with scrubbers, we are shifting effectively atmospheric pollution into the water column by discharging sulphuric acid through the wash water, often open loop scrubbers, assuming it's an open loop scrubber. And anyone who's in the debate on greenhouse gas emissions knows that ocean acidification is a huge issue. So, why would we put more acid into the oceans? That is also something shipowners are thinking about when they're not investing in scrubbers when they're saying actually cleaner fuels have to be the answer. And I fully agree with Iain actually, that a multi-fuel future is what we're looking at, and it's probably for the best because it encourages further innovation. And we're very happy with some of these hybrid fuels that are coming onto the market now. We're seeing the issues with them, the issue that they're not compatible sometimes.

 

But I do have a question actually and that's what does the refinery landscape look like today? Because that’s very different now than it was maybe 10, 15 years ago? What percentage today of refineries producing green fuels are actually owned by energy majors? Because I think it's probably less than 50% and that will also have an impact I think on the availability, which is also, for us, I think a very, very real reality. And for us, it was great that IMO decided 2020 was the answer because finally we have certainty, not just for the shipowners but also for the refineries that are actually going to produce the fuel for us. They have a market coming, they know it's coming, let them figure it out. And as Iain said, we're not quite there yet, none of us are, we'll figure it out I'm pretty sure, and it will be multi fuel, there's not one silver bullet.

 

Thank you. Question for you on the refinery side.

 

I can only speak for ExxonMobil, I can't speak for the rest but it is one of the challenges that I think relates a little bit to the compliance question is: if you have a refinery in a country where it is run by the government, will they have the same appetite for investment to comply with these rules at the same pace as an entity like ourselves? I mean ExxonMobil has announced a year or two ago that we are installing, we're upgrading our Coker in Rotterdam and we're installing a new one in Antwerp. It's a significant investment but it does mean we'll be able to produce a lot more low Sulphur, diesel-type fuels going forward. So, that’s the kind of investment that you will see happening in the refining industry but that’s something in the order of a $2 billion investment. So, that’s the order of magnitude that’s needed to shift from the production of heavy fuels to completely distillate fuels.

 

So, that question will sort of feed into the availability in different places and also, the compliance, you know how will a shipowner manage if you simply can't buy compliant fuel in parts of their regular trading areas? So, that’s another question we'll have to wrestle with.

 

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