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INDUSTRY – FUELS AND LUBES Fuels pricing policy and risks* Due to anticipated shortage and price increase of low sulphur residual fuels in SECAs (Sulphur Emission Control Areas), some signs have already appeared in favour of the generalisation of distilled fuels (ie gas oils, diesel oils), the prices of which are much higher than the residual fuels used today. On the other hand, INTERTANKO has proposed to IMO that the industry should adopt a worldwide low sulphur regime. By narrowing the worldwide bunker consumption to just one type of fuel, starting with a higher price level than residual fuels used today, refineries and fuel suppliers will have a free hand to manipulate prices at their discretion. However, this may have an immediate knock-on effect of an increased cost of transported goods, and eventually to a huge growth in the economy, swallowing dragon inflation, which could trigger a 3rd worldwide war, if prudent people stay apathetic. Therefore, such a unilateral proposal for the use of only one type of fuel should not be accepted and totally rejected. We must not lose sight of the enormous burden put on the environment by the excessive emissions of CO2 in order to produce the 150 mill tonnes of low sulphur fuel, we estimate to be demanded annually by 2010, through the distillation of residual fuels, when the SECA areas are extended to the Mediterranean, North America and Canada, as anticipated. In a worldwide extension of SECA areas, which we trust will occur by 2012, the major environmental problem from CO2 Industry usually reacts with general measures when its free pricing policy is at stake. in desulphurising residual fuels can be commonly recognised. Residual fuels Most of the marine diesels are basically designed to burn residual fuels with a high sulphur content. Using low sulphur distilled fuels on these engines causes a complex problem to their lubrication with unforeseen wear, maintenance and repair costs. Ships deciding to use both high sulphur and alternatively low sulphur fuels in SECA areas, must also use two different types of Lubricating oils, that is TBN 70 and TBN 40. This will require avid attention by ships' engineers. It will also be risky to try to use TBN 70 at a reduced supply rate with low sulphur fuels, as some manufacturers have suggested. This is where the unforeseen wear problems may occur, as it will be impossible for the engineers to check and control the lubricant's film inside the cylinders while the engine is running. Comply simply and economically The Canadian exhaust gas cleaning system EcoSilencer, not only ensures a superior protection system for the environment than by using distilled fuels, but also allows the continued operation of vessels' engines and boilers with today's high sulphur residual fuels and lubricants for the whole life of a ship without a problem. The equipment's operation is simple and requires little or no maintenance at all. EcoSilencer is manufactured in austenitic stainless steel and cleans ships' exhaust gases of sulphur oxides, soot, carbon oxides, part nitrogen oxides, particulate matter, including nickel, vanadium, copper, lead, The exhaust gas scrubbing system ecosilencer manufactured in Canada. zinc, phosphor, calcium, sodium, total hydrocarbons and other harmful combustion compounds, through a proven seawater scrubbing process and other patented equipment by MES of Canada. The system's centrifugally collected sludge (ecoSilencer does not use filters or chemicals) of about 100 -600 kilos per week depending on the size of the engines, is easily collected by shore receiving stations together with other oily wastes from the ship. The water returned to the sea from the scrubbers complies with US EPA criteria. European directives The previous version of European Directive 1999/32 was unclear because it was defining all marine distilled fuels, as mgo without making any distinction between the various grades of marine diesel oils and mgo. From July 2000 when it entered force, ships were only allowed to use these marine distilled fuels with a maximum Sulphur content of 0.2% between European ports. The revised European Directive 2005/33, makes a distinction between mdo and mgo. According to the latest directive, the maximum sulphur mgo content will remain at 0.2% until January 2008, whereupon it will fall to 0.1%. The limit for mdo was raised from 0.2% to 1.5%, which enables vessels to use this fuel. This means that European members should ensure that mdo is not available on the market in their territory if the sulphur content exceeds 1.5% by mass. Although 1.5% sulphur mdo can be used to supplement cases where low sulphur residual fuel is not 08 TANKEROperator • March 2007
INDUSTRY – MARKETS available, the resulting lubrication and wear problems to main engines should not be forgotten. European Involvement The involvement of a European committee on marine environmental issues is appreciated, but when it comes to duplication of decisions by the IMO, it creates misunderstandings and confusion in the marine industry. For example, the different SECA implementation dates. IMO is managing environmental issues very well and the best that the European committee on marine matters would do is to harmonise its efforts and decisions with those from the IMO. We must not lose sight of the facts that we are striving for a safe environment, but that we also need a simplified understanding of the rules and economical transport of goods. The so called 'free world' would also appreciate the same happening from the US Environmental Protection Agency (EPA), as well as from similar organisations. We all live on a single planet and the better we can do with respect of environment preservation is to exercise our efforts to harmonise our decisions and actions on a worldwide scale, irrespective of political, religious or economical differences or interests. For achieving this goal our considered opinion is to "let IMO lead the way". *This is the second of two articles written by George Kaminis of Kamenco. The first article appeared on page 28 of the January/ February edition of TANKEROperator. Oversupply leading to a downturn? This year, overall marine transport of oil is expected to be essentially unchanged from last year. However in the years following, rates are expected to decline until 2010-2011 when they are expected to firm again. The decline will be as a result of a general slowing of the global economy, which will temporise overall oil demand, having a knock-on effect on transportation demand said McQuilling Services in its recently published report Tanker Market Outlook 2007-2011. This report is produced biannually and looks at five major tanker types and trades. The analysts have expressed their forecasts in timecharter equivalent terms, which have been calculated by estimating spot rates on 10 major tanker trades using a round trip voyage scenario and assuming future voyage costs, such as port and canal expenses, will be taken care of in future increases in the WS100 tariff rate. A bunker price of $320 per tonne was used in the calculation. Taking VLCCs as a starting base, this sector should see 5% growth this year over 2006. This is due mainly to the stunted demand last year bought about by the lingering effects of hurricanes Katrina and Rita and an excessively large refinery maintenance programme in the west. Suezmax demand is expected to increase by just 2%, boosted by incremental light sweet Atlantic basin crude demand, due to another deep refinery maintenance cycle in the US. However, dirty aframaxes and panamaxes are forecast to decline this year, driven by trade changes, while clean products trades are expected to be flat. McQuilling said that its clean products forecast for this year is on the conservative side and demand may be greater, especially in the medium range sector, where increased arbitrage trading could influence the forecast. Basically, the clean sectors are expected to outperform the dirty sectors in the short term. Even with demand growth in certain sectors, there exists a growing tonnage supply overhang, which will become more and more difficult to overcome as newbuilding orders continue. This tonnage supply picture is completely different from the one only six months ago as an ordering spree encouraged by TCE Revenues Forecast by Trade ($ 000/day) Vessel/trade 2007 2008 2009 2010 2011 VLCC 280,000 Ras Tanura/LOOP 41.9 36.4 26 31 41.9 Suezmax 130,000 Bonny/Philadelphia 40.3 32.4 21.9 24.5 35 Aframax 70,000 Jose Terminal/Texas 35 33.4 28.7 30.3 31.9 MR 38,000 CPP Aruba/New York 22.1 22.1 20.4 23.8 28.9 Source: McQuilling continued investment attractiveness in the tanker sector, coupled with newly disclosed orders for relatively prompt delivery and increased Chinese shipyard participation, has dramatically changed tonnage supply expectations in the 2007- 2011 time frame, McQuilling said. Today asset prices are double what they were in 2002. Forecasted freight rates contained in the report, however, generate less free cash flow than in previous six monthly reports. This may lead to a slackening of the ordering spree seen recently and as a result shipyard prices may fall this year. Significant uncertainty still surrounds the IMO 13-G induced tonnage reduction in 2010. A rebounding world economy may increase oil demand and corresponding oil transport demand to absorb the additional tonnage on order. However, should events conspire to limit demand growth and allow an exit scenario closer to a lenient single hull phase out assumption where older tankers survive for a few more years, the pressure on rates will be substantial. In conclusion, the report states that a downward trend is forecast through 2009, due primarily to oversupply of tonnage with increases seen in 2010-2011, also on the back of supply TO considerations. March 2007 • TANKEROperator 09
Page 1 and 2: TANKEROperator MARCH 2007 Features:
Page 3 and 4: TANKEROperator Vol 6 No 2 Digital S
Page 5 and 6: INDUSTRY - NEWS Letter to the Edito
Page 7 and 8: INDUSTRY - NEWS Karl Lumbers - Redu
Page 9: A more technologically advanced tug
Page 13 and 14: Material costs Scheduling Productiv
Page 16 and 17: INDUSTRY - CYPRUS REPORT Limassol
Page 18 and 19: INDUSTRY - US REPORT Is shipping a
Page 20 and 21: INDUSTRY - US REPORT Cash in the ba
Page 22 and 23: INDUSTRY - CMA/INTERTANKO REPORT It
Page 24: INDUSTRY - CMA/INTERTANKO REPORT ch
Page 27 and 28: Winner - Sea Trade, Dubai Internati
Page 30: INDUSTRY - SHIPMANAGEMENT employmen
Page 33 and 34: TECHNOLOGY - NAVAIDS What’s the l
Page 35 and 36: TECHNOLOGY - NAVAIDS Integrated bri
Page 37 and 38: in marine fuels Sorry we couldn’t
Page 39 and 40: One pump One tank One supplier Fran
Page 41 and 42: TECHNOLOGY - SHIP TO SHIP TRANSFER
Page 43 and 44: CAPITAL LINK FORUM Invest in Intern

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