sulphur regulation in the baltic sea - NECL II

SULPHUR REGULATION IN THE BALTIC SEA
– SCENARIOS FOR THE MID NORDIC REGION –
THREATS AND OPPORTUNITIES
REPORT
2013-01-21
NORTH EAST CARGO LINK (NECL II)
WP 4 Activity 4.3

SULPHUR REGULATION IN THE BALTIC SEA
SULPHUR REGULATION IN THE BALTIC SEA
– SCENARIOS FOR THE MID NORDIC REGION –
THREATS AND OPPORTUNITIES
A report from the North East Cargo Link II (NECL II), WP 4, Activity 4.3
Part financed by the EU Baltic Sea Region Programme
Authors:
Gustav Malmqvist, MIDEK AB
Logistics, EU, IMO, Policy, Editor
gustav@midek.se
Bengt Aldén, Åkroken Science Park AB
Energy, Fuels, Technology
bengt.alden@akroken.se
Contacts: Hans Dunder, Activity leader, NECL II, Act 4.3
City of Sundsvall
Responsible for assignment
hans.dunder@sundsvall.se
Henric Fuchs Work Package leader, NECL II, WP 4
County Council of Västernorrland
henric.fuchs@lvn.se
Per-Åke Hultstedt
County Administration of Västernorrland
per-ake.hultstedt@lansstyrelsen.se
Project Manager, NECL II
Midnordic Green Transport Corridor
Distribution: City of Sundsvall
Norrmalmsgatan 4
851 85 Sundsvall, SWEDEN
Telephone: 060-19 10 00
Web access: www.midnordictc.net
Front page:
Status:
Loading of sawn timber in the Port of Sundsvall (Photo: SCA)
Approved for distribution 2013-01-21 by Per-Åke Hultstedt, Project Manager NECLII
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SULPHUR REGULATION IN THE BALTIC SEA
Table of contents
EXECUTIVE SUMMARY ........................................................................................................... 5
SVENSK SAMMANFATTNING .................................................................................................. 7
YHTEENVETO SUOMEKSI ........................................................................................................ 9
1 INTRODUCTION ............................................................................................................ 11
1.1 Background ................................................................................................................. 11
1.2 Aims and objectives .................................................................................................... 11
1.3 Methods ...................................................................................................................... 12
2 SULPHUR DIRECTIVE ..................................................................................................... 13
2.1 IMO MARPOL Annex VI ............................................................................................... 13
2.2 EU regulations ............................................................................................................. 14
2.3 Reasons for the IMO and EU decisions ....................................................................... 15
2.4 Environmental paradoxes ........................................................................................... 17
2.4.1 Paradox 1 – modal shift increases emission of greenhouse gases ........................ 17
2.4.2 Paradox 2 – longer transports replace shorter ...................................................... 17
2.4.3 Paradox 3 – surplus of high sulphur bunker oil ..................................................... 18
2.4.4 Paradox 4 – lowering SOx emission might accelerate climate change .................. 18
2.5 The size of the problem .............................................................................................. 18
3 TIME AND UNCERTAINTY .............................................................................................. 19
4 PERSPECTIVES FOR THE MID NORDIC REGION ............................................................... 21
4.1 Maritime perspective .................................................................................................. 21
4.2 Industrial perspective ................................................................................................. 22
4.3 Logistics perspective ................................................................................................... 23
4.3.1 Choice of transport mode ...................................................................................... 23
4.3.2 Different cost of transport for different cargo ...................................................... 25
4.3.3 Shift of transports from sea to rail or road ............................................................ 25
4.3.4 Logistic alternatives in the Mid Nordic Region ...................................................... 26
4.3.5 Trondheim as a logistic alternative ........................................................................ 28
4.3.6 Narvik as a logistic alternative ............................................................................... 30
5 HOW TO FULFILL THE NEW REGULATIONS ..................................................................... 31
5.1 Heavy Fuel Oil (HFO) with Exhaust Gas Scrubber ....................................................... 31
5.2 Marine Gasoil (MGO) .................................................................................................. 34
5.3 Liquefied Natural Gas (LNG) ....................................................................................... 35
5.4 Bio oil .......................................................................................................................... 39
5.4.1 How does it work? ................................................................................................. 40
5.4.2 Who are the main actors? ..................................................................................... 40
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SULPHUR REGULATION IN THE BALTIC SEA
5.5 Other alternative fuels ................................................................................................ 41
5.5.1 Methanol / DME .................................................................................................... 41
5.5.2 Hydrogen ................................................................................................................ 42
6 SLOW STEAMING .......................................................................................................... 43
7 FORECASTING FUEL PRICES ........................................................................................... 45
7.1 Forecast for year 2020 ................................................................................................ 46
7.1.1 Scenario 1 - 100 USD/barrel ................................................................................... 47
7.1.2 Scenario II - 150 USD/barrel ................................................................................... 47
8 MITIGATING THE CONSEQUENCES ................................................................................ 48
9 SCENARIO FOR 2020 ..................................................................................................... 50
9.1 Maritime perspective .................................................................................................. 51
9.2 Industry perspective ................................................................................................... 52
9.3 Logistics perspective ................................................................................................... 52
9.4 Threats and opportunities for the Mid Nordic Region ............................................... 53
9.4.1 Threats ................................................................................................................... 53
9.4.2 Opportunities ......................................................................................................... 54
10 SCENARIO FOR 2030 ................................................................................................... 55
10.1 Maritime perspective ............................................................................................... 56
10.2 Industry perspective ................................................................................................. 57
10.3 Logistics perspective ................................................................................................. 57
10.4 Threats and opportunities for the Mid Nordic Region ............................................. 58
10.4.1 Threats ................................................................................................................. 58
10.4.2 Opportunities ...................................................................................................... 58
11 CONCLUSIONS ............................................................................................................ 59
12 REFERENCES AND SOURCES ........................................................................................ 60
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SULPHUR REGULATION IN THE BALTIC SEA
Figures and tables
Figure 1: The geography of the Mid Nordic Transport Corridor ................................................................... 12
Figure 2: SECA area in Baltic Sea and North Sea. Source: Swedish Forest Industries Association ................ 14
Figure 3: Decided limits for Sulphur content. Source: Swedish Forest Industries Association ..................... 15
Figure 4: Uncertain or unknown factors in predicting the future cost of transport .................................... 19
Figure 5: Transport modes for forest products in Sweden ........................................................................... 22
Figure 6: Logging and industrial production values based on forest resources in Sweden and Finland. ..... 23
Figure 7: Basic factors for transport buyers’ choice of transport alternatives. Source: Magnus Swahn ..... 24
Figure 8: Transport links in the Mid Nordic Transport Corridor .................................................................... 26
Figure 9: Transport links in the Finnish part of the Mid Nordic Transport Corridor ..................................... 27
Figure 10: Transport links in the Swedish-Norwegian part of the Mid Nordic Transport Corridor .............. 29
Figure 11: Pros and cons with marine scrubber systems .............................................................................. 32
Figure 12: An installation of a seawater scrubber system from DuPont BELCO ........................................... 33
Figure 13: Suppliers of marine scrubber systems as members of EGCSA .................................................... 34
Figure 14: Emissions for alternative concepts for a typical Baltic Sea cargo ship. Source: DNV ................... 36
Figure 15: Existing and planned LNG terminals within EU. Source GIE (December 2012) ............................ 37
Figure 16: Existing and planned LNG terminals in Baltic Sea Area. Source: AGA September 2011 .............. 38
Figure 17: Correlation between ship speed, engine power and fuel consumption. Source: Wärtsilä. ......... 44
Figure 18: Price of crude oil the last 25 years (USD/barrel). (US Energy Information Adm. (EIA)) ............... 45
Figure 19: Predictions from various sources of future price of crude oil (USD/barrel) ................................ 45
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SULPHUR REGULATION IN THE BALTIC SEA
EXECUTIVE SUMMARY
The international agreement on lowering Sulphur (SOx) and Nitric Oxide (NOx) emissions,
from maritime transports, IMO MARPOL Annex VI, was decided first in 1997, was effective in
2005, and then revised in 2008 and 2010. After these agreements, the Baltic Sea and the
North Sea became a joint Sulphur emission control area (SECA), with stricter limits of
sulphur content in maritime fuel. There are also other SECA areas, e.g. in North America. The
limits to be applied are:
From 1.5 % to 1 % as of 1 July 2010 within the SECA in Baltic Sea and North Sea
From 4.5 % to 3.5 % globally from 1 January 2012
1 % also in the North American SECA 1 from 1 August 2012
0.1 % in SECA from 1 January 2015
0.5% in European waters outside SECA from 2020 (by EU decision 11 Sept. 2012)
0.5 % globally either in 2020 or 2025
In this report, on assignment the Baltic Sea Programme project “NECL II-Midnordic Green
Transport Corridor”, we study the consequences of the stricter sulphur limits in northern
Sweden, Finland and Norway. The study is based on known facts but also on analyses and
estimates from academy, industry and authorities.
The report covers three perspectives, Maritime, Industry and Logistics. The consequences,
threats, and opportunities are elaborated with the time scenarios 2020 and 2030, but
starting in the current situation 2012 and what most likely will happen in 2015.
Our prerequisite is that the stricter limit of 0.1% will be effective 1 January 2015 and we do
not think it will be postponed.
In 2015, shippers need to change to other types of fuel or install exhaust gas cleaning in
ships within the SECA area. Alternatives and their consequences are shown in section 5.
Most estimates show that this will increase the total cost of sea transports by between 25-
50%. If this increased cost cannot fully be charged to the customer, it will have effect on the
profitability in the shipping sector. This combined with the already harsh competition and
over establishment and some inefficiency might cause shipping companies go bankrupt or
move to other markets. On the other hand, the situation can be an incentive for the
remaining shippers to become more innovative and efficient. In general, there will be fewer
but bigger ships with better load factors running more slowly for saving cost of fuel. In the
short run, Marine Gas Oil or Diesel with SOx content below 0.1 % will be the most realistic
option. In the end, Liquid Natural Gas (LNG) will be more attractive, but it requires
retrofitting of ships or new ships and also a network of LNG storage and bunkering
terminals. There are also other fuel options, which are explained in detail in section 5.
1 200 Natutical miles from the cost of US and Canada (370 km)
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SULPHUR REGULATION IN THE BALTIC SEA
The consequences of the sulphur directive can be very dramatic for the forest industry
(paper, pulp and sawn timber) but also for the chemical and metal industry. These are all
major base industry in the Mid Nordic Region. These industries are already today exposed to
harsh competition from other countries. In Sweden, the price level is also affected by the
low Euro and Dollar currency rate towards the Swedish Krona.
This means that companies might be very vulnerable to raising costs of transports. Current
uncertainty on how much the cost will increase in 2015 put an obstacle already today to
investments decisions in many industries. It is likely that the Sulphur Directive will have a
negative impact on industries’ competitiveness and cause some factories to close down or
merge into bigger units.
Most of our sources estimate that there will be a so-called modal back-shift from sea
transports to road and rail. Some estimate that sea transports will decrease by between 10
and 21 % in 2015 and rail transports will increase by 5-11 %. Some estimate that road
transports will also increase by 5-6 %, causing more CO 2 emissions, which would be a
paradox. Others do not think road transport will increase because of the sulphur directive
causing a shortage of diesel and higher costs for road transports. Possible paradoxes
because of the SO x regulation is discussed in section 2.
The report treats possible logistic consequences but also opportunities. The higher cost of
sea transport will drive both technical and fuel innovation but also give incentives for
optimizing sea routes so ships goes as fully loaded as possible in all directions. A relevant
question for the project NECL II - Midnordic Green Transport Corridor is whether this will
create incentives for using Trondheim as a port hub for import and export to Sweden and
Finland. In a longer time perspective, this is quite possible, if current bottlenecks in the
infrastructure will be removed and that there will be logistic operators and industry that see
the opportunity and create viable business cases. For some cargo, this would be possible
already today. However, for the forest industry in the area of Sundsvall and Mid Finland,
which have established sea routes to markets in Germany, England and the Netherlands,
Trondheim is not an option. The logistic consequences are elaborated in section 4, 9 and 10.
Major industrial companies, associations, regions and other stakeholders are currently very
active in trying to get the governments to apply for postponing the implementation of the
directive in 2015. We do not think this is possible. What governments can do is to
implement mitigating measures for eliminating the consequences and stimulate the needed
change in ships, fuel technology and infrastructure. These measures should also be
coordinated between the countries in the Baltic Sea region.
There is a need for both investment grants and innovation support as well as for a time
period lower fairway charges. There is also a need for some active support to those industry
sectors most affected by the directive, i.e. forest, chemical and steel industry. The option
from the industries may otherwise be to close down or invest somewhere else.
A closed paper mill in Sweden or Finland remains a closed paper mill, and it will never start
up again when times have improved.
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SULPHUR REGULATION IN THE BALTIC SEA
SVENSK SAMMANFATTNING
Den internationella överenskommelsen om lägre gränsvärden för utsläpp av svavel (SO x ) och
kväveoxider (NO x ) från sjöfarten, IMO MARPOL Annex VI beslutades först 1997, trädde i
kraft 2005 och reviderades 2008 och 2010. Överenskommelsen betyder att Östersjön och
Nordsjön nu är ett gemensamt kontrollområde för svavelutsläpp (SECA), med lägre gräns för
svavelhalten i marint bränsle. Det finns SECA områden även i andra delar av världen, t.ex
runt Nordamerika. Gränserna för svavelinnehållet som gäller är:
Från 1,5 % till 1 % as från 1 juli 2010 i SECA-området
Från 4,5 % till 3.5 % globalt från 1 januari 2012
1 % också i det Nordamerikanska SECA 2 från 1 augusti 2012
0,1 % i SECA från 1 januari 2015
0,5% i resten av Europa från 2020 (EU parlamentets beslut 11 sept. 2012)
0,5 % globalt antingen 2020 eller 2025.
Denna rapport som är gjord på uppdrag av Östersjöprogramsprojektet “NECL II-Midnordic
Green Transport Corridor”, studerar konsekvenserna av de hårdare svavelreglerna i norra
Sverige, Finland och Norge. Den är baserad på redan kända fakta men också på analyser och
uppskattningar gjorda av forskare, industrin och myndigheter.
Rapporten är strukturerad kring tre perspektiv; Maritima sektorn, Industrin och Logistik.
Konsekvenserna, hot och möjligheter diskuteras och utvecklas i tidscenarierna 2020 och
2030, men startar i nutid och med vad som troligast händer 2015. Vi arbetar med
förutsättningen att gränsen 0,1 % svavelinnehåll kommer att träda i kraft 2015 och vi tror
inte att detta kommer att skjutas upp.
2015 måste rederierna byta till andra typer av bränslen eller installera rökgasrening i
fartygen som går i SECA-området. Olika handlingsalternativ belyses i avsnitt 5. De flesta
uppskattningar visar att detta kommer att öka kostnaderna för sjötransporter med 25-50 %.
Om denna ökade kostnad inte kan tas ut av kunden kommer kostnaderna att drabba
rederierna men minskad lönsamhet som följd. Detta kombinerat med en redan hård
konkurrens, överetablering och ineffektivitet kan förorsaka konkurser eller att rederier väljer
att trafikera andra marknader. Å andra sidan kan situationen för kvarvarande rederier
utgöra incitament att bli mer innovativa och effektiva. Generellt sett tror många att det
kommer att bli färre men större fartyg med högre lastfaktor och att de kör långsammare för
att hålla nere bränslekostnaderna. I det korta perspektivet är det mest realistiska
alternativet efter 2015 för de flesta att köra på Marin Gasolja eller Marint Diesel med en
svavelhalt under 0,1 %. I ett något längre perspektiv kommer flytande naturgas (LNG) att bli
attraktivt, men det förutsätter dels ombyggnad av fartyg eller nya fartyg samt ett nätverk av
LNG-terminaler. Det finns även andra bränslealternativ som beskrivs i avsnitt 5.
Konsekvenserna av svaveldirektivet kan bli mycket dramatiska för skogsindustrin (papper,
massa och sågverk) men också för kemisk industri och stålindustrin. Dessa är alla viktiga
basindustrier i Mittnorden. Denna industri är redan idag hårt konkurrensutsatt och i Sverige
påverkas den också av den starka kronkursen i förhållande till Euro och Dollar.
2 200 sjömil från USAs och Canadas kust (370 km)
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SULPHUR REGULATION IN THE BALTIC SEA
Detta betyder att många företag kommer att vara väldigt känsliga för ökade
transportkostnader. Nuvarande osäkerhet om hur mycket kostnaderna kommer att öka år
2015, förhindrar redan investeringsbeslut för många företag. Det är mycket troligt att
svaveldirektivet kommer att a negativ inverkan på industrin och orsaka nedläggning av
företag eller sammanslagning till större enheter.
De flesta av våra källor uppskattar att det kommer att bli en överflyttning av transporter från
sjöfart till väg och järnväg. Några uppskattar att sjötransporter kommer att minska med
mellan 10-21 % 2015 och att järnvägstransporter kommer att öka med 5-11 %. Några tror att
vägtransporter också kommer att öka med 5-6 % . Andra tror att vägtransporter inte
kommer att öka på grund av ökade dieselpriser på grund av svaveldirektivet leder till brist på
diesel. Överflyttning av gods från sjöfart till väg och järnväg kan sägas vara en av flera
miljöparadoxer som diskuteras i avsnitt 2.
Rapporten behandlar möjliga logistiska konsekvenser men också vissa möjligheter. Högre
kostnader för sjötransporter kommer att driva fram nya innovationer inom teknik och
bränsle. Det kommer också att ge incitament för optimering av rutterna så att fartygen går
så fullt lastade som möjligt i alla riktningar. En viktig fråga för projektet NECL II- Midnordic
Green Transport Corridor är huruvida de ökade kostnaderna också ger incitament för att
använda Trondheim som in och utskeppningshamn för gods till och från norra Sverige och
Finland. I ett längre perspektiv är det fullt möjligt om nuvarande flaskhalsar avlägsnas och
om det finns logistikoperatörer och industri som ser detta som en möjlighet och utvecklar
hållbara affärskoncept med Trondheim som hamn. För vissa typer av gods borde detta vara
möjligt redan idag. Däremot är Trondheim inget alternativ för skogsindustrin omkring
Sundsvall och i Finland, vilka har etablerade rutter till marknaderna i Tyskland, England och
Nederländerna. Logistikfrågorna diskuteras i avsnitten 4, 9 och 10.
De större industriföretagen som berörs, företagsorganisationer, regioner och andra
intressenter är just nu mycket aktiva i att försöka få regeringarna att verka för dispens eller
uppskjutning av införandet av direktivet 2015. Vi tror inte detta är möjligt. Vad regeringarna
kan göra är att besluta om åtgärder och stöd för att lindra konsekvenserna och stimulera
den nödvändiga övergången till annan teknik, bränslen och infrastruktur. Det är också
viktigt att åtgärderna är samordnade mellan länder, åtminstone inom Östersjöområdet. Det
finns ett behov av både investeringsstöd och innovationsstöd och även för att sänka
farledsavgifterna åtminstone under en övergångsperiod. Det behövs också någon typ av
aktivt stöd riktat till industrin som riskerar att drabbas av direktivet, d.v.s. skogsindustrin,
kemisk industri och stålindustrin. Alternativet för industrin kan annars vara att lägga ner
eller att investera någon annanstans.
Ett nedlagt pappersbruk i Sverige eller Finland förblir nedlagt och kommer aldrig att starta
igen när tiderna blir bättre.
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SULPHUR REGULATION IN THE BALTIC SEA
YHTEENVETO SUOMEKSI
Kansainvälinen sopimus merenkulun rikin (SO x ) – ja typen oksidien (NO x ) päästöjen
vähentämisestä, IMO MARPOL Annex VI tehtiin ensi kerran 1997, astui voimaan 2005 sekä
tarkistettiin 2008 ja 2010. Sopimuksen myötä Itämeri ja Pohjanmeri kuuluvat rikkipäästöjen
yhteiseen valvonta-alueeseen (SECA), tiukemmilla rikkipitoisuusrajoilla merenkulun
polttoaineissa. Vastaavia SECA –alueita on myös muualla maailmassa, esim. Pohjois-
Amerikassa. Voimassa olevat rikkipitoisuusrajat ovat:
Pudotus 1,5 % :sta 1 %:iin alkaen 1. heinäkuuta 2010 SECA-alueella
Pudotus 4,5 %:sta 3,5 %:iin alkaen 1. tammikuuta 2012 globaalisti
1 % myös Pohjois-Amerikan SECA-alueella 3 alkaen 1. elokuuta 2012
0,1 % SECA-alueella alkaen 1. tammikuuta 2015
0,5% muualla Euroopassa alkaen 2020 (EU parlamentin päätös 11. syyskuuta 2012)
0,5 % globaali raja joko vuonna 2020 tai 2025.
Tässä raportissa, joka on tehty Itämeren maiden ohjelmasta rahoitettavassa hankkeessa
“NECL II - Midnordic Green Transport Corridor”, tarkastellaan tiukentuneen rikkidirektiivin
seurauksia pohjoisessa Ruotsissa, Suomessa ja Norjassa. Raportti perustuu todettuihin
faktoihin, mutta myös tutkijoiden, teollisuuden ja viranomaisten tekemiin analyyseihin ja
arviointeihin.
Raportti rakentuu kolmeen näkökulmaan: merenkulkuun, teollisuuteen ja logistiikkaan.
Seurauksia, uhkia ja mahdollisuuksia pohditaan ja kehitetään aikaskenaarioissa 2020 ja 2030,
aloittaen nykytilasta sekä mitä todennäköisesti tapahtuu 2015.
Lähtökohtanamme on, että 0,1%:n raja astuu voimaan 2015 emmekä usko, että sitä
lykätään.
Vuonna 2015 varustamojen tulee siirtyä muiden polttoaineiden käyttöön tai asentaa
savukaasupesurit niihin aluksiin, jotka liikennöivät SECA-alueella. Erilaisia
toimintavaihtoehtoja käydään läpi luvussa 5. Useimmat arviot osoittavat, että tämä tulee
kasvattamaan merenkulun kuljetuskustannuksia 25-50 %. Jos tätä lisäkustannusta ei voida
periä asiakkailta, vaikutus tulee näkymään varustamoelinkeinojen kannattavuudessa. Tämä
yhdistettynä alan kovaan kilpailuun ja ylitarjontaan sekä osittain tehottomuuteen voi
aiheuttaa konkursseja tai sen, että varustamot siirtyvät muille aluemarkkinoille. Toisaalta
tilanne voi kannustaa jäljellejääviä varustamoja innovatiivisuuteen ja tehokkuuteen. Yleisesti
ottaen aluksia tulee olemaan vähemmän, mutta ne ovat suurempia ja korkeammilla
lastauskertoimilla sekä kulkevat hitaammin pitääkseen polttoainekustannukset alhaisina.
Lyhyellä aikavälillä realistisin vaihtoehto on, että vuoden 2015 jälkeen useimmat ajavat 0,1
%:n rikkipitoisella meriliikenteen kaasuöljyllä tai dieselillä. Pidemmällä aikavälillä
nesteytetty maakaasu (LNG) kasvattaa suosiota, mutta sen käyttö edellyttää aluksen
osittaista uudelleenrakentamista tai uusia aluksia sekä LNG-terminaalien verkoston. On
myös muita polttoainevaihtoehtoja, joita esitellään luvussa 5.
Rikkidirektiivin vaikutukset voivat olla hyvin dramaattisia metsäteollisuudelle (paperi, massa
ja saha), mutta myös kemian- ja metalliteollisuudelle. Nämä ovat kaikki suuria
perusteollisuuksia Keskipohjolan alueella. Kilpailu on teollisuusaloilla jo tänä päivänä hyvin
3 200 merimailia USAn ja Kanadan rannikolla (370 km)
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suurta ja Ruotsissa alaan vaikuttaa myös Ruotsin kruunun vahva kurssi verrattuna euroon ja
dollariin.
Tämä merkitsee sitä, että monet yritykset ovat hyvin haavoittuvaisia kuljetuskustannusten
korotuksille. Tämänhetkinen epävarmuus siitä kuinka paljon kustannukset nousevat vuonna
2015, estää jo tällä hetkellä investointipäätöksiä monissa yrityksissä. On hyvin oletettavaa,
että rikkidirektiivi tulee vaikuttamaan negatiivisesti teollisuuden kilpailukykyyn sekä
aiheuttamaan yritysten lopettamisia tai yhdistymisiä suuremmiksi konsortioiksi.
Useimmat käyttämistämme lähteistä arvioivat, että kuljetuksia siirtyy meriltä maanteille ja
rautateille. Osa arvioi, että merikuljetusten määrä tulee vähenemään 10-21 % vuonna 2015
ja rautatiekuljetukset puolestaan kasvavat 5-11%. Joidenkin arvioiden mukaan
maantiekuljetukset tulevat myös kasvamaan 5-6%, aiheuttaen lisää hiilidioksidipäästöjä, joka
olisi paradoksi. Osa taas ei tähän usko, koska rikkidirektiivin myötä dieselin hinta nousee ja
sen saatavuus heikkenee. Kuljetusten siirtyminen meriltä maanteille ja rautateille voidaan
sanoa olevan yksi ympäristöparadokseista. Tätä käsitellään enemmän luvussa 2.
Raportissa käsitellään mahdollisia logistisia seurauksia, mutta myös mahdollisuuksia.
Merikuljetusten korkeammat kustannukset tulevat edistämään uusien innovaatioiden
syntymistä tekniikan ja polttoaineiden parissa. Direktiivi tulee myös kannustamaan
kuljetusreittien optimointiin niin, että alukset liikennöivät mahdollisimman täyteen
lastattuina kaikkiin suuntiin. Tärkeä kysymys NECL II- hankkeelle/Midnordic Green Transport
Corridorille onkin, kannustavatko kohoavat kustannukset myös käyttämään Trondheimia
tuonti- ja vientisatamana Ruotsiin ja Suomeen. Pidemmällä aikavälillä tämä on hyvinkin
mahdollista, jos olemassa olevat pullonkaulat poistuvat ja jos löytyy logistiikkaoperaattoreita
ja teollisuutta, jotka näkevät tämän mahdollisuutena ja tulevat kehittämään kestäviä
kauppakonsepteja. Tietyille tavaroille tämä voisi olla mahdollista jo tänä päivänä. Sen sijaan
Trondheimin satama ei ole vaihtoehto Sundsvallin alueen eikä keskisen Suomen
metsäteollisuudelle, joilla on jo etabloituneita reittejä markkinoille Saksaan, Englantiin ja
Hollantiin. Logistiikkakysymyksiä käsitellään luvuissa 4,9 ja 10.
Suurimmat teollisuusyritykset, yhdistykset, alueet ja muut sidosryhmät ovat tällä hetkellä
hyvin aktiivisia pyrkimyksissään saada hallitukset toimimaan direktiivin 2015
voimaanastumisen lykkäämisen puolesta. Emme uskon tämän olevan mahdollista.
Hallitukset voivat lähinnä päättää toimista ja tuista lieventääkseen seurauksia sekä
kannustaakseen välttämättömään muutokseen käyttää toisenlaista tekniikkaa, polttoöljyä ja
infrastruktuuria. Näitä toimenpiteitä tulisi koordinoida Itämeren alueen valtioiden välillä.
Sekä investointitukia että innovaatiotukia tullaan tarvitsemaan, kuten myös siirtymäajalla
väylämaksujen alentamista. Niiden teollisuusalojen, joilla on riski kärsiä direktiivistä, kuten
metsä-, metalli- ja kemianteollisuus, tulisi myös saada jonkinlaista aktiivista tukea.
Vaihtoehdot teollisuudelle ovat muutoin lopettaminen tai investoinnit jossain muualla.
Lakkautettu paperitehdas Ruotsissa tai Suomessa pysyy lakkautettuna, eikä tule
käynnistymään uudelleen, vaikka ajat muuttuisivatkin paremmiksi.
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SULPHUR REGULATION IN THE BALTIC SEA
1 INTRODUCTION
1.1 Background
In 2008, the International Maritime Organisation agreed on a revised version of the so-called
MARPOL Annex VI, which sets the limits on sulphur oxide (SO x ) and nitrogen oxide (NO x )
emissions from ship exhausts. In the new version which is gradually implemented from
2010, the limits for allowed content of sulphur in ship fuels are lowered, moderately on a
global scale (from 3.5% to 0.5% in 2020 or 2025) and much more (from 1.0 % to 0.1 % in
2015) within Sulphur Emission Control Areas (SECA).
The new regulation forcing the shipping sector to either use exhaust gas cleaning or to
switch to low sulphur fuels, will increase the cost of sea transports. This will have a negative
impact on both shipping companies and their customers, especially in northern Scandinavia
with the longest distance of transport within the SECA area. The regulation and the
subsequent EU directive (COM (2011)0439 amending the COM 1999/32/EC) have generated
an increasing number of protests from shipping companies as well as from the industries
and their associations. Hitherto the critics have urged the governments to postpone the
implementation of the low limits in the SECA area 1 January 2015. Besides increasing costs
for ship owners and transport buyers, the 0.1 % limit in SECA may have a negative impact on
competitiveness for industry in northern Europe since the global limit of 3.5% will remain in
the Atlantic coast and the Mediterranean until 2020.
This report is based on the assumption that the IMO decision and the subsequent EU
directive will be implemented as planned.
1.2 Aims and objectives
This study is made as part of the Work Package 4 in the project NECL II – Mid-Nordic
Transport Corridor, part financed by the Interreg IV B – Baltic Sea Region Programme. The
report aims to collect knowledge, recent studies on consequences from universities,
industry and authorities, and apply this on the Mid Nordic area, i.e. Finland, Sweden and
Norway. An overall objective is to highlight the consequences for the shipping sector and the
industry and also for the transport system as a whole in the Mid Nordic Region, with
scenarios for the years 2020 and 2030 with a baseline in 2015. For the maritime perspective
in the study, pros and cons with different fuel options and other technology are described.
Another objective is to provide a brief analysis of the consequences for the Mid Nordic
Region, for describing not only the threats of the sulphur directive, but also possible
opportunities for mitigating the consequences.
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 1: The geography of the Mid Nordic Transport Corridor
1.3 Methods
The report is based on an extensive study of articles and reports from universities,
authorities, shipping, ports and industry associations, and interviews with key persons from
these and other stakeholders.
A first case study meeting was arranged with the transport company SCA Transforest and
the Port of Sundsvall on the 8th of May 2012. On the 7th of June, a hearing was arranged
with invited speakers from stakeholders and industry in the Mid Nordic Region, and also
from universities with important research in the field.
The major ports in northern Sweden and Finland have been contacted and offered to give
their view on the upcoming regulation and its consequences. Repeated contacts have taken
place with the Swedish Government, Ministry of Industry and Transports, The Swedish
Transport Administration, The Swedish Maritime Administration, The Swedish ports
organisation, The Forest Industry Association and Chambers of Commerce. In several
meetings, the views of individual companies have been covered.
Further dialogue with stakeholders has been held at the NECL II project Mid Term
Conference in Vasa, Finland 15 August, at the Swedish Transport Administration Cargo
Council for Mid Sweden region in Sundsvall the 11 September, and at a project meeting with
the Bothnian Green Logistic Corridor (BGLC) in Pori, Finland the 13th of September 2012.
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SULPHUR REGULATION IN THE BALTIC SEA
2 SULPHUR DIRECTIVE
The so-called Sulphur Directive refers usually to the
regulation adopted by the International Maritime
Organisation (IMO) in 2008. However, this decision
was a change of the MARPOL Annex VI, first decided
in 1997. The decision in 2008 enforces stricter limits
of sulphur content in maritime fuel to be
implemented gradually between 2010 and 2020. 4
The European Union also decides on limits for
sulphur content in marine fuels, within the EU
territory. The first directive was decided in 1999 and
was changed in 2005. Recently, it was changed again
to be in line and in some respects stricter than the
IMO MARPOL Annex VI. The updated EU directive
was decided in the European Parliament the 11th of
September 2012 and finally decided in the European
Council the 26th of October. All EU member states
have to adopt the EU directives as a national law,
within 18 months from the council decision.
Facts about IMO
In 1948 the UN decided to establish IMO by
adoption of the IMO Convention. The first
meeting as an organisation was held in
1959.
The IMO is defined as a UN Agency with 170
member states and its headquarter is
situated in London.
The role of IMO is to develop and maintain a
comprehensive regulatory framework for
shipping. This includes safety,
environmental concerns, legal matters,
technical co-operation, maritime security
and the efficiency of shipping. The work of
IMO is conducted through five committees
and these are supported by technical
subcommittees.
2.1 IMO MARPOL Annex VI
MARPOL stands for the International Convention for the Prevention of Pollution from Ships,
and was first adopted in 1973. Throughout the years, it has been amended with specialized
annexed for different issues such as oil pollution, harmful substances, sewage, and garbage.
The Annex VI, Prevention of Air Pollution from Ships, was adopted in 1999 and came into
force the 19 th May 2005. It sets limits on sulphur oxide and nitrogen oxide emissions from
ship exhausts and prohibits deliberate emissions of ozone depleting substances. The global
limit for sulphur content in marine fuel was set to 4.5%. Also designated emission control
areas (ECAs) were decided. The Baltic Sea came into force in 2006 and one year later the
North Sea and English Channel. This is now a coherent Sulphur Emission Control Area (SECA).
From the start, the limit for Sulphur content in this area was set to 1.5 %.
In 2008 a revised version of the MARPOL Annex VI was adopted which gradually lowers the
sulphur content, globally from 4.5% to 3.5 % 1 January 2012 and in the SECA areas from
1.5% to 1% 1 July 2010. The 1% level was also implemented in the North American SECA on
1 August 2012. By 1 January 2015, all SECA areas will have a sulphur level of 0.1 %, which will
dramatically change the prerequisites for shipping.
4 http://www.imo.org/OurWork/Environment/PollutionPrevention/AirPollution/Pages/Sulphur-oxides-
(SOx)-%E2%80%93-Regulation-14.aspx
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SULPHUR REGULATION IN THE BALTIC SEA
Sulphur Emission Control Area (SECA)
States with coastline within SECA
States with coastline partly within SECA
States with coastline outside SECA
Figure 2: SECA area in Baltic Sea and North Sea. Source: Swedish Forest Industries Association
2.2 EU regulations
The first EU decision on maritime fuels was the Directive 1999/32/EC, which addresses the
sulphur content of heavy fuel oil, heating oil and marine fuels. It incorporated the rules
adopted by the IMO into EU law, and thereby into national law. This directive was amended
by the Directive 2005/33/EC, which confirmed the IMO agreement on Sulphur Emissions
Control Areas (SECAs) and the associated stricter fuel standards. The maximum sulphur
content of sulphur in marine fuel was limited to a maximum of 1.5% for ships operating in
the Baltic Sea as from 2006 and in the North Sea and the English Channel as from 2007.
However, the EU decided in this directive on a few stricter rules:
Ships at berth or anchorage in EU ports have to use fuels containing max. 0.1%
sulphur.
Passenger ships on regular service to EU ports have to use fuels containing a
maximum sulphur content of 1.5%;
These rules went into force 1 January 2010. Within the SECA area 1 % limit applies from 1
July 2010 also for passenger ships.
Recently, on the 11 September 2012, the European Parliament decided on a second
amendment to the Directive 1999/32/EC, proposed by the EU commission the 15 July 2011
in COM(2011) 439 final. Some have hoped that this could be a chance at least to make the
rules equal within the EU territory. The problem is that the IMO regulation leads to
increased cost of shipping in the SECA area while the southern EU could wait to apply the
global rules until 2020, or possibly 2025. After negotiations between the commission the
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SULPHUR REGULATION IN THE BALTIC SEA
European Council and the parliament in May 2012, a compromise was agreed, which also
became the parliamentary decision. The amended directive aligns to the IMO regulation,
but the 0.5% will come into force 1 January 2020 for all EU sea territory, even if this limit on
global scale will be postponed to 2025. The commission had proposed that passenger ships
should follow the SECA limits of 0.1% also outside the SECA area from 2020. However, this
was not approved, and the current 1.5% limit be lowered to 0.5% in 2020 as for all shipping
within EU.
Globally
Southern EU from 2020 (globally if possible)
SECA areas
Figure 3: Decided limits for Sulphur content. Source: Swedish Forest Industries Association
It is worth mentioning that in the decision the parliament has explained its awareness of
possible consequences for shipping companies and industry, such as increased cost of sea
transports. The European Parliament stresses the need for limiting modal back-shift, i.e. that
considerable volumes of cargo will be transported on road or rail with negative
environmental effects. Member states are allowed to provide state aid, within certain limits,
for example to ship owners for retrofitting existing vessels to use other fuels or scrubbers.
2.3 Reasons for the IMO and EU decisions
Even though sea transports is one of the most environmental friendly modes of transport,
per tonne of cargo, there are substantial emissions from shipping. The main problems are
emissions of sulphur oxides (SO X ), nitric oxides (NO X ), particles and CO 2 . The IMO Marpol
Annex VI is mainly about SO X , and NO X . While the road transports, since long, have very hard
restrictions on the content of sulphur in diesel fuels (maximum 10 ppm = 0.0010 %), the
shipping sector has been allowed to use heavy oils with substantially more content of
sulphur.
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SULPHUR REGULATION IN THE BALTIC SEA
Generally speaking, SO X emissions are lowered with the use of other types of fuels, or
cleaning of exhaust gases. NO X emissions are eliminated with new types of engines or use of
some fuels such as LNG 5 or DME 6 . CO 2 - emissions might be lowered as a result of all these
measures, but some argue that quite the opposite could happen that some choices in reality
could increase the CO 2 - emissions. This report discusses mainly the consequences of
adapting to the SO X limits, and different alternatives are discussed in section 5.
The main reasons for the gradually stricter limits of sulphur content are to protect the
maritime environment, air quality and achieve health benefits for people. The decision of
the European Parliament as of 11 September says:
Source: Wikimedia Commons
“Emissions from shipping due to
the combustion of marine fuels
with high sulphur content
contribute to air pollution in the
form of sulphur dioxide and
particulate matter, which harm
human health and the
environment and contribute to
acid deposition. Without the
measures set out in this Directive,
emissions from shipping would
soon have been higher than
emissions from all land-based
sources.” 7
In an impact assessment made by the European Commission, before presenting the EC
proposal in 2011, the environmental and health effects of the stricter sulphur limits confirm
the cost effectiveness on a societal level. According to this, there will be an estimated €15 to
€34 billion in benefits to the EU in improved health and reduced mortality. The costs of
implementing the revision range from €2.6 to €11 billion. 8
Representatives from the shipping sector and industries we have been in contact with
generally agree that limiting emissions is necessary. The problem is that the current timeline
for implementing the stricter limits is too short, which make it impossible to adapt to the
regulations without increased cost of transports.
5 Liquified natural gas
6 Dimethyl ether (DME), also known as methoxymethane
7 European Parliament, (2012).
8 European Commission, 'Sec(2011) 918 Final
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SULPHUR REGULATION IN THE BALTIC SEA
2.4 Environmental paradoxes
2.4.1 Paradox 1 – modal shift increases emission of greenhouse gases
Some opponents to the directives argue that sulphur emissions are not so big a problem any
longer because emissions from industry and road transports have drastically decreased since
the situation 30-40 years ago. There is also an argument that if increased cost of sea
transports causes a modal back-shift towards more road transports, the total CO 2 - emissions
from the transport sector might increase.
The Swedish Maritime Administration
estimates an increase of road transport by 6
%, and rail transports by 5 %, as a result of
rising cost of sea transports. 9 A recent
report made by SWECO estimates an
increase of rail transports by 11%, but
actually a decrease of road transports by 8%
as a result of increased cost of diesel that
will affect both shipping and truck
transports. In the same report, sea
Photo: Barry Davis
transports are estimated to decrease by as much as 21 % in 2015. 10 In our view, there are
many reasons to be careful when trying to foresee the future, since there are many
unknown factors and complex connections. However, the obvious environmental paradox is
that sea transport is by far the most environmental friendly mode of transport, counted per
tonne, and should therefore be the preferred mode of transport. If shipping is not enough
competitive in the SECA area after 2015 and large volumes of cargo instead are transported
on roads, emissions of greenhouse gases will increase.
2.4.2 Paradox 2 – longer transports replace shorter
If some of the industries sensible to increased cost of transport close down because of loss
of market shares, it is possible that their share of the market is taken by other industries in
the same sector with longer transport distance to the market. For example are major
competitors to the Finnish and Swedish forest industry located in South America.
Competitors to the Swedish steel industry is located in the US, China and Japan. If
production for the European market, currently in Scandinavia, is replaced by production at
other continents, this may increase the emissions of CO 2 and SO x , because these shipments
need only to follow the 3.5 % sulphur content up until at least 2020. On the other hand,
there are also signs that the industry may choose to locate its production closer to the
market. Recently UPM Kymmene in Finland warned that they plan to move some of their
production of paper in Finland to central Europe, if the sulphur directive is implemented as
planned in 2015. 11
9 Swedish Maritime Administration, (2009).
10 Sweco Energuide AB, (2012).
11 http://www.industrinyheter.se/2012/09/upm-hotar-flytta-produktion
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SULPHUR REGULATION IN THE BALTIC SEA
2.4.3 Paradox 3 – surplus of high sulphur bunker oil
In 2015, the relative price of 3.5% bunker oil most likely will be lowered compared to low
sulphur fuels. When the global limits for sulphur content in marine fuels is lowered to 0.5%
in 2020 or 2025 there will be a surplus of high sulphur marine fuel, which will become even
more inexpensive. Some think that this high sulphur oil will then be used for energy
production, not least in Japan, which may switch from nuclear power to other sources of
energy production. With efficient exhaust gas cleaning, the emissions of SO x may be the
same or lower, but if not, there is a risk that the problem of emission at sea is moved closer
to populated areas. This would be another environmental paradox.
2.4.4 Paradox 4 – lowering SOx emission might accelerate climate change
Isomäki and Pettay, argue in a report 2011 that CO 2 -emissions and its cause of global
warming is by far the biggest problem. They say that there is a risk for increased emissions
of CO 2 as a result of some of the alternatives for shippers to deal with the sulphur directive.
One example is the use of LNG where there is a risk for leakage of Methane, which is a much
more harmful greenhouse gas (20-100 times) 12 . They also elaborate on a theory that sulphur
dioxide generates light aerosols and low clouds which have a counteractive effect on global
warming by reflecting the sun light. 13 Thus, that some emissions of sulphur dioxide are good
for the climate and a sudden stop of SO X could accelerate the climate change. We have not
evaluated the scientific validity of this theory, but if it were true that lowering emissions of
SO X would accelerate the climate change this would certainly be an environmental paradox.
2.5 The size of the problem
About 10 % of the global shipping trade volume is located to the Baltic Sea. In 2010 there
were 14 000 ships entering waters of the SECA region. Of these, there were 2200 ships all
the time within the region and another 2600 ships that were present more than 50 % of
their time. According to calculations by IHS Fairplay, 14 these ships consume around 12
million tonnes (2010) of fuel during the time they are in the SECA region. The share for Baltic
Sea is 3.3 million tonnes for transportation of 500 million tonnes of cargo. 15 Hence, when
discussing possible options for adapting to the stricter sulphur limits about 14 000 ships are
more or less concerned even though ships that travel all the time in the SECA area are the
ones most affected. Thus, it is very many ship owners that need to install scrubbers, retrofit
the ships for use of LNG, or change the engines of the ships so they can run on low sulphur
fuel or dual fuel options. A necessary option in the long run is to replace old ships with new
ones, when it is economically feasible. According to Christopher Pålsson at Maritime Insight,
the number of orders for new ships is not enough for meeting the needs. The new ships are
generally larger and replace several smaller ships. 16
12 The Greenhouse gas effect of Methane depends on the time span. Mesured directly it is about 100 times more
harmful, in 20 years 72 times and in 100 years approx 25 times more harmful to the climate. Most often the 100 year
perspective is used an Methane referred to as 20-25 times more harmful than CO2.
http://en.wikipedia.org/wiki/Greenhouse_gas#Greenhouse_gases
13 Risto Isomäki and Esko Pettay, (2011).
14 http://www.ihs.com/products/maritime-information/port/sea-web-ports.aspx
15 Danish Maritime Authority, (2012).
16 Christopher Pålsson, Maritime Insight, Lecture at Baltic Shipping Days, Sundsvall, 31 October 2012
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SULPHUR REGULATION IN THE BALTIC SEA
3 TIME AND UNCERTAINTY
The assignment in this report is to elaborate on the consequences of the sulphur directive as
scenarios for the years 2020 and 2030. For doing this we start with the current situation in
2012 for industry, transports, technology and cost of fuels. Secondly, the situation in 2015 is
covered, because that is the point in time when shippers, logistic operators, industry and
indirectly people, as consumers or work force 17 , first have to face the consequences of the
sulphur directive. Then we try to estimate or guess what possibly can happen in the years
2020 and 2030, based on existing knowledge.
The main challenge in describing the consequences of the sulphur directive 18 is that no one
knows for sure what is going to happen when shipping companies start to follow the stricter
limits. It depends on what options they choose in terms of using other types of fuels or other
technology, but also on competition, transports demand and customer’s ability to pay for
increased cost of transport. There have been quite a number of analyses of the
consequences to which we refer in this report, but some factors are unsure or unknown and
not even possible to guess, in the time scenarios we treat in this report. Some examples are
shown in the table below:
Factor Relevance Determinants
The general price level of oil
The increase of price of certain
types of oil as a result of
increasing demand
Dollar and Euro currency rate
Availability and demand of
alternative fuels.
Port infrastructures and other
technology
Capacity of rail, road and
terminal infrastructure
Determines the cost of different
fuels and influences the cost of
sea and road transports.
The price level of low sulphur
fuels such as diesel is sensitive
to shortage of these fuels.
Cost of fuels
Profitability in industry
Price sensitivity for industry
Determines what options
shippers have and the cost of
the options
Determines what options
shippers have and the cost of
the options
Determines the possibility/risk
for modal back-shift and the
cost of other modes of
transport
E.g. politics, regional
conflicts, wars, general
economic situation
Demand
Refineries production
Economic situation in Europe
and the rest of the world.
Politics
Incentives for investments
and innovation
Incentives for investments
and innovation
Infrastructure investments,
incentives for sea transports,
internalisation of
environmental costs.
Figure 4: Uncertain or unknown factors in predicting the future cost of transport
17 It is not likely that people as consumers will be affected by the Sulphur directive. The transport share of the price for
end consumer goods is generally very small. The consequences in the form of unemployment in the affected industry
sectors might be more obvious to people in some areas.
18 Hereinafter we use the term ”Sulphur directive” or short SD which refers to the IMO Marpol Annex VI as well as the
European Union application of this in the EU Parliament decision 2012-09-11.
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SULPHUR REGULATION IN THE BALTIC SEA
Uncertainties what regards the
factors above of which most of
them affects the cost of
transport to and from northern
Finland and Sweden, could be
devastating for the companies’
willingness to invest in increased
production capacity or more
efficient production. According
to Magnus Svensson, CEO at SCA
Transforest, there is a need for
increased revenues from
investments in paper pulp plants,
of about 24 % for covering the
increased costs of transport.
The conditions is even worse for Bollsta Sawmill, Sweden
Photo: Gustav Malmqvist
saw mills where an additional
revenue of up to 40% is needed for covering an investment with an estimated depreciation
of 25-30 years. 19 In addition to the uncertainty of the future cost of transports, the situation
today with harsh competition with a low Euro and Dollar currency rate versus the Swedish
Krona makes it very difficult to take new investment decisions in the forest industry.
Vivstavarv Paper Mill – discontinued in 2007 Photo: Henrik Sendelbach
With lack of investments,
there is a risk that these
industries’ competitiveness
are weakened and that some
(or many) will have to close
down, because of poor
profitability, resulting in loss
of employment both at
these plants as well as at
sub-contracting firms. Thus,
there is a big risk that the
implementation of the
sulphur directive in 2015 will
be the cause of increased
unemployment rates in
Sweden and Finland,
especially in areas where
forest industry is the
predominant industry.
19 Magnus Svensson - presentation at Hearing in Sundsvall 2012-06-07
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SULPHUR REGULATION IN THE BALTIC SEA
4 PERSPECTIVES FOR THE MID NORDIC REGION
4.1 Maritime perspective
The different options for the shipping sector for adapting to the new rules in 2015 are
described in section 5. They all have their pros and cons, but one thing they have in
common: All of them increase the operational cost of transport and most of them need
substantial investments either in retrofitting existing ships or in new builds. Only the socalled
“slow steaming” has the possibility to be cost neutral or even lower the cost.
Already today, shipping companies go bankrupt every now and then. According to
representatives from the sector we have been in contact with, there is a harsh competition
and low profit margins. This causes modal imbalances and inefficiencies. Some shipping
companies have full ships from the northern part of the Baltic Sea but are empty or half
empty on the way back. These are for example the ones transporting wooden products,
paper and pulp. Other ships are fully
loaded on the way up north but are
empty in the southward direction, for
example ships transporting bulk material
to the steel and chemical industries in the
region. In both cases, the shipping
companies have to cover the two-way
route with the payment for cargo in just
one direction. The example is simplified
but it is a fact that the filling grade on
return transports is low for many ships.
Ship loading sawn timber
Photo: SCA It is also a fact that ship owners will face
increased costs for retrofitting engines or
tanks, and rising price of fuel if they have to use marine diesel or marine gas oil in the short
run. With low efficiency and low profitability, they have no other option than to let the
customer pay a higher price for the transport, if they cannot increase the efficiency or
profitability any other way. We will return to that in section 5 and the scenarios.
Ships that go on transcontinental routes for example between Rotterdam and China are not
so much affected by the stricter rules in 2015, since the distance within the SECA areas is
very short compared to the distance at which they can use cheaper fuel with maximum 3.5
% sulphur. Ships that transport cargo only within the SECA area for example feeder ships
between the Mid Nordic Region and Germany, Rotterdam or England are hit much worse by
increasing cost of fuel. In addition, shipping companies with heavy cargo with low value per
tonne are worse out than those transporting high value cargo or passenger ferries. Popular
passenger ferry lines can compensate for the increased fuel cost by a slightly raised ticket
price.
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SULPHUR REGULATION IN THE BALTIC SEA
4.2 Industrial perspective
The industry structure in the Mid Nordic Region is heavily dominated by production of
wooden products, paper and pulp but also chemical, metal and mechanical industries. All
these are very dependent on sea transports either for exports of their products, for import
of supply of material needed for the production or both. As seen in the picture below,
shipping is by far the most predominant mode of transport, for the Swedish forest based
sector.
Figure 5: Transport modes for forest products in Sweden
If the shipping sector has to charge most of the 25-40% increased cost of transport to the
transport buyers this would have a direct negative impact on the wood-based industry.
According to the Swedish Forest Industries Federation, the profit margins in the paper and
pulp industries are depressed and even more so for sawmills.
Many of these companies are currently subject to harsh competition from others parts of
the world. For the Swedish companies it is also a problem that the Dollar and Euro currency
rates are low, since they normally are paid in these currencies. The forest industry in Finland
is not affected by currency rates but have another problem, namely that they are in practice
totally dependent on sea transports for reaching their export markets.
Both for Finland and Sweden low profit margins in natural resource based industry, at the
moment, makes them vulnerable to changes in the cost of transports. To this should be
added insecurity of general level of oil price and fluctuations in economic cycles.
Even though the current economic situation is problematic for the natural resource based
industries in Sweden and Finland, their contribution to economic growth and prosperity is
still substantial. In Sweden more than 85 % of the production of paper and pulp, and 70 % of
sawn wooden products, is exported. The total production value is more than 200 Billion SEK,
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SULPHUR REGULATION IN THE BALTIC SEA
and the sector represents 10-12% of the total industrial production in Sweden. 20 In Finland,
the production value is at the same level, in 2011 just above € 20 Billion, out of which a
value of €11.2 Billion was exported. 21 For the exports from Finland to almost all end markets
there are no other option than sea transport. Sweden has the alternative to use railways and
roads, even though it would be impossible to move the very big volumes of this cargo to
railways and road transports.
Figure 6: Logging and industrial production values based on forest resources in Sweden and Finland. 22
4.3 Logistics perspective
4.3.1 Choice of transport mode
Choices of transport mode are very complex and depend on many factors such as type of
cargo, location of production and markets and available transport alternatives. For bulky and
heavy cargo it is easier, more economical and also more environmental friendly to use sea
transport. For small units of high value cargo even air transports could be the best option.
For some types of cargo, such as food, time is a critical factor for it to be preserved in the
right way. The higher value of the goods, the more time dependant because the transport in
itself otherwise binds capital for both the producer and the buyer. An example of this is that
20 Source: The Swedish Forest Industries Federation: http://www.skogsindustrierna.org/branschen/
21 Source: The Finnish Forest Industries Federation: http://www.forestindustries.fi/statistics
22 Åf Infraplan, (2010).
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Weighted importance
SULPHUR REGULATION IN THE BALTIC SEA
Boliden AB use railway for transport of copper between its smelter mill in Skellefteå and its
major customer Elektrokoppar AB in Helsingborg, even though both industries are
conveniently located close to seaports. Rail transport is preferred because copper is too
expensive to ship by sea since the value of a fully loaded ship would bind too much capital
for a longer time. By the same logic, Boliden’s production of gold is transported in small
units on roads.
Besides natural prerequisites for choice of transport mode, there are also a number of basic
factors, which has to do with the transport in itself, regardless of which mode it is. This was
studied 2006 in a report by Magnus Swahn, for Naturvårdsverket. 23 The figure 6 below
shows transport buyers preferences on what is important when choosing transporter or
mode of transport. Security is the primary important factor, delivery precision the second
and price was the third most important.
Factors important for transport choice
Share
Security Delivery Price Information Time Environment Flexibility
precision
Figure 7: Basic factors for transport buyers’ choice of transport alternatives. Source: Magnus Swahn
In the same survey, transport suppliers were asked on their belief of the buyers’
preferences. The order was then different and the transporters thought that price was more
important than delivery precision, while in reality price was less important for the transport
buyers, than security and delivery precision, as shown in the Figure 7.
Applied to the context of sea transport with the expected cost increase after 2015, the most
important factors, according to the referred study, are security and delivery precision. For
many types of shipping cargo with huge volumes, the demands for security and delivery
precision cannot easily be met by road or rail, if there would be a modal back-shift. With
bottlenecks in the rail infrastructure, risks for congestion and delays in roads and railways,
shipping would have an advantage for the factors most preferred by the transport buyers.
23 Magnus Swahn, (2006).
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SULPHUR REGULATION IN THE BALTIC SEA
4.3.2 Different cost of transport for different cargo
As mentioned before the relative cost of transport is high on heavy cargo with low value per
tonne, and at the same time for these types of cargo, sea transport is the most economical
and sometimes the only option. The share of the price representing cost of transport per
unit (weight or volume) is less the more refined the products are and it is very small per unit
in high value consumer products. Thus, the heavy export of paper, pulp and wooden
products as well as iron ore and steel is more vulnerable to changes in transport costs, than
the import of consumer products. For high value consumer products, e.g. from Asia, the
share of the price representing transport cost is very small per unit.
This relation would also imply that the more cost of transports rises, for the natural resource
based products, the more beneficial it would be to refine these domestically into products
with higher value. For example in the future with high cost of transports it might be more
profitable to produce refined wooden products instead of exporting logs, even though there
may be many other factors such as competition and cost of work force that influence these
choices. The essential issue that may hinder such a development would be that it is very
costly to set up new production units, and a major obstacle is also the very reason why
consumer products are mass-produced in Asia, i.e. the cost of labour force.
4.3.3 Shift of transports from sea to rail or road
We repeat in several parts of this report the risk for the so called modal back shift, i.e. that
transport buyers or logistics operators choose long distance transports by road or railway
instead of sea transports. As mentioned in section 2.4 sea transports cause less emissions of
CO 2 per tonne than road transports. For many types of goods, it would also be difficult to
move it to road or rail due to capacity constraints. For others, such as container cargo or
when the connection between production and the markets are convenient by road or rail it
is quite possible that more modal back-shift will occur in the years after 2015.
For environmental reasons it would be preferred that the estimated volumes shifted would
be shifted to rail before road. One train with 20 waggons has the same capacity as 52 trucks
and on a regular route of once a week, the train saves 7000 tonnes of CO 2 emissions per
year.
Several train operators and logistic companies have existing regular rail routes from
northern Sweden to central Europe, such as Scandfibre Logistics and TX Logistics. Scandfibre
Logistics, which is owned by five major forest industry companies, estimates that their
owners’ share of rail transports will increase in 2015. Today 40% of their production is
transported by rail, 40 % by sea and 20 % by road. In 2015, they estimated that 60 % would
be transported by rail, 25 % by sea and 15 % by road. 24
24 Presentation by Mats Erken, Scandfibre Logistics AB at Baltic Shipping Days, Sundsvall 30 October 2012.
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SULPHUR REGULATION IN THE BALTIC SEA
This confirms the scenarios pictured by The Swedish Maritime Administration 25 , Entec 26 ,
SWECO and others, that substantial volumes will shift from sea to land transports. The study
by Entec, which is an assessment of five reports (including the Swedish and Finnish
mentioned above), estimates a total modal back shift from sea to land of 3-50% in volume
but with significant variations between different routes. The Sweco report estimates that
sea transports will decrease as much as 21 %, while rail transports will increase by 11 % and
road transports decrease by 8 %. 27
As we see, there are lots of scenarios and guesswork on the modal shift effects. What is
important is that there seem to be a consensus that modal shift will occur. There are also
two other important conclusions regarding the consequences of modal back shift.
1. Modal shift from sea to road will have negative impact on CO 2 emissions as well as
road congestions and road safety
2. Modal shift from sea to rail will not have so much impact on emissions but will cause
congestions and capacity problem on railway infrastructure.
4.3.4 Logistic alternatives in the Mid Nordic Region
Options for cargo transports in the Mid Nordic Region are foremost determined by the
geographic location of industries and availability of infrastructure. For the heavy export
industries in the middle part of Finland, there are no other options than shipping. 90 % of all
export and 70 % of all import goes via seaports in Finland.
Figure 8: Transport links in the Mid Nordic Transport Corridor
Only a very small part (1%) of cargo is transported by rail to northern Sweden and Norway.
There are much more cargo flows by rail between Finland and Russia, even though there are
lots of administrative obstacles and some missing railway links. The possibility of increased
transport by rail from the Mid Nordic Region to Asia is also studied in the NECL II project.
25 Swedish Maritime Administration, 'Consequences of the Imo's New Marine Fule Sulphur Regulations'.
26 Entec Uk Limited, (2010)
27 Sweco Energuide AB (2012)
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 9: Transport links in the Finnish part of the Mid Nordic Transport Corridor
Despite current administrative obstacles at the borders and some insecurity of railway
transports through Russia, it could very well become a realistic option in the future for some
types of cargo. In 2020 or 2025 when the global IMO regulation of 0.5 % sulphur limit will be
implemented the relative competitiveness of the land route from Scandinavia to China may
increase.
Substantial amounts of cargo are today transported by road between Finland and Sweden
via ferry connections. A small amount via the route Vasa-Umeå but the main flows goes via
Turku-Stockholm and Helsinki-Stockholm. Finland has also a frequent cargo flow via the
ferry connection Helsinki-Tallinn.
At the Swedish side most of the heavy export cargo from the forest industry is shipped by
the shipping company SCA Transforest, which connects to several ports along the coast of
northern Sweden with routes to Lübeck, Rotterdam and Tilbury in England. Their ships will
be affected by the sulphur directive because they have to switch from fuels meeting the 1%
limit today to fuels with 0.1 %. They say that the most likely option is that they will have
fewer but bigger ships, which will drive slower (see slow steaming in section 6). With larger
ships, they will need more cargo, also from competing industries. 28 This could be possible as
long as the forest-based industries are prosperous and maintain a high production. The
paradox will be if some paper, pulp or saw mills close down as a result of increased cost of
transport. According to Magnus Svensson, CEO of SCA Transforest there is an obvious risk
that the forest industry cannot take investment decisions in the current situation with such
high level of uncertainty regarding what will happen with the fuel prices and cost of
transport after 2015.
28 SCA Transforest is 100% owned by the forest company SCA.
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SULPHUR REGULATION IN THE BALTIC SEA
There are considerable amounts of cargo transported by rail from northern Sweden. Some
train companies have routes from Piteå, Umeå and Sundsvall among other places with
transports of wooden products to Germany, France and Italy. Other hauliers have regular
routes from this area to the Port of Gothenburg. Even though the capacity at the railways is
limited, an increase of these transports could be an alternative for some cargo after 2015.
The logistic company Scandfibre Logistics says that they are prepared to increase their
frequency of trains from northern Sweden to central Europe (and/or Gothenburg) after
2015. Whether this will happen depends on many uncertain factors, mentioned before, such
as the price of fuel, but also on the cost of the train transports. The railway fees in Sweden
will increase gradually from 2012 to 2020 up to four times what it has been.
4.3.5 Trondheim as a logistic alternative
In this study, the question has been raised if cargo transports from east to west along the
Mid Nordic Transport Corridor could be an opportunity for avoiding the effects of the
sulphur directive. The port of Trondheim is not affected by the Sulphur directive because it is
outside the SECA area. According to Magnus Svensson at SCA Transforest, this is, at the
moment, not an alternative for SCA, for several reasons. They already have a shipping
infrastructure and a network of terminals in Lübeck, Rotterdam and Tilbury which all lies
within the SECA area. A shipping route from Trondheim to these terminals would only use
relatively short distance outside the SECA area. In addition, this would result in more time
consuming transhipments between different carriers. The latter may not be the case for
industries in Jämtland, closer to Trondheim where transport of wooden products to
Sundsvall for shipping within the SECA area could be less attractive in the future.
The intermodal terminal in Ånge is currently under construction and there are also longterm
plans for a new terminal in Östersund 29 . These are essential as connecting hubs to the
ports in the Trondheim area, for a future increase of transports in the Mid Nordic Transport
Corridor.
Port of Trondheim
Photo: Trondheim havn
29 Krister Frykberg, (2012).
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 10: Transport links in the Swedish-Norwegian part of the Mid Nordic Transport Corridor
The Port of Trondheim says that it is already today possible to transfer some cargo from
Sweden, looking at the port capacity. However, there are several bottlenecks. One is the
cargo terminal in Trondheim, which has reached its capacity limit. Another is the Meråker
railway line, in Norway, which is not electrified and not optimal for large amounts of cargo.
When this is electrified it is possible to more than double the amount of cargo at this route,
but the capacity at the Trondheim rail freight terminal cannot handle this increase at the
current location. 30
The planning for a new intermodal terminal has been going on in Trondheim for a number of
years, but there is no final decision on location yet. The Norwegian Railway Administration
proposes a separate terminal south of Trondheim, away from the port, while the Port
Authority of Trondheim would like an intermodal terminal integrated with the port. The
latter alternative includes a relocation of the cargo port away from its current location close
to the city centre. According to Daniel Flathagen at the Port Authority of Trondheim it may
take up to more than 10 years before a new terminal and a new port has been built. 31
Even if Trondheim becomes an important alternative for cargo transports to and from
Sweden and Finland, it is not an option for SCA and their products. The reason is that their
products are destined mainly for the European market and the main part of the routes will
still be within the SECA area. Trondheim is still interesting for other cargos and destinations
outside the SECA area. Among the possible opportunities are:
Import and export of consumer goods between markets outside the SECA area and the Mid
Nordic Region, including Sweden and Finland.
Export and import of other industrial and natural resource based products to markets outside
SECA areas.
Import of LNG from Norway to Sweden and Finland
30 Vectura, , (2012).
31 Daniel Flathagen, presentation at Hearing in Sundsvall 7 June 2012.
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SULPHUR REGULATION IN THE BALTIC SEA
Among the prerequisites for developing Trondheim as a logistic hub outside the SECA area in
this way are:
Improved railway hinterland connection to Sweden (Meråker line)
Improved capacity in port and terminals
Commercially viable logistic business cases
Already today, it would be possible to use Trondheim as an alternative to the Port of
Gothenburg or Rotterdam, in a small scale. However, for this to happen some industries and
logistic operators have to see the opportunity and set up a working logistic chain.
4.3.6 Narvik as a logistic alternative
In the sense of avoiding shipping distance in the SECA area, the port of Narvik is already
today a realistic alternative for shipping to Asia either southwards or with some expensive
limitation along the arctic north-east passage. 32
There are already today several daily cargo trains to and from Narvik to southern Norway via
Sweden. It would be possible to use capacity at these trains also for cargo to and from
Sweden and Finland. As in the case of Trondheim, somebody has to take the logistic
initiative and build a viable business case for this. For new trains to and from Narvik there is
a very big capacity problem at the Malmbanan line, which will soon be even worse because
of a rapid expansion of the mines in northern Sweden and Finland.
However, there could be opportunities for some types of cargo, such as coal or other
minerals to steel works. This is today transported on the Baltic Sea to northern Sweden and
Finland. It could be imported via Narvik, outside the SECA area and transported by empty
Iron ore waggons to Sweden.
LKAB Iron ore train between Port of Narvik and Kiruna
Photo: David Gubler
32 Summertime it is possible to go with ships north of Russia to Asia but it is connected with expensive fees to Russia
and it is necessary to be accompanied by an ice breaker ship with medical resources on-board.
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SULPHUR REGULATION IN THE BALTIC SEA
5 HOW TO FULFILL THE NEW REGULATIONS
There are different ways to fulfil the stricter regulations on sulphur emissions in the SECA
area. All alternatives will increase the costs for the ship owners.
In the short term, there are two main alternatives, to either continue on Heavy Fuel Oil
(HFO) with an exhaust gas scrubber system installed or switch to low sulphur fuel, for
instance Marine Gasoil (MGO). When the infrastructure for Liquefied Natural Gas (LNG) is in
place this will also be a realistic alternative. Other alternative fuels that might be suitable for
shipping are methanol, dimethyl ether (DME) and bio oil.
5.1 Heavy Fuel Oil (HFO) with Exhaust Gas Scrubber
Cleaning sulphur emissions with a Scrubber is conventional technology on land. Scrubber
installation on ships is however fairly new, but has the potential of becoming an attractive
solution to meet the stricter regulations by
IMO and still continue to use high- sulphur
HFO. Scrubber systems can be installed as
retrofit on existing ships, but also on new
build ships.
Facts about HFO (LS380)
Energy content, kWh/liter
Density, kg/m 3 11,2
990
Among the first vessels to have a scrubber
system installed was MT Suula, a Finnish
tanker owned by Neste shipping. Installation
was made during 2008 of a freshwater
scrubber system with test measurements
being made during two years. The results
showed that sulphur emissions were
reduced significantly, well below the IMO
limits valid from 2015. The conclusion made
Sulphur content, %
Tonnes CO 2 /m 3
Price (Rdam July 2012), $/ton
Price $/kWh
Fossil liquid fuel
max 1
3,2
645
0,057
by the four companies involved was that marine fresh water scrubbers was ready to be
introduced on the market (ref Wärtsilä).
Since then an association has been formed to act as an impartial platform for the
manufacturers of marine scrubber systems called Exhaust Gas Cleaning Systems Association
(EGCSA) (www.egcsa.com). Now EGCSA has eight members using different technology,
operating principals, design and power requirements. Orders and installations of scrubber
systems are increasing, but still the number of reference installations is limited. According to
the company Det Norske Veritas (DNV) the scrubber industry is now maturing and reliable
systems are entering the market (ref DNV). The biggest retrofit installation so far was made
public April 23 2012 by Wärtsilä Hamworthy Ltd announcing a multi stream scrubber system
to be installed at the beginning of 2013 on a RoRo ship (28 MW) owned by Wallenius
Wilhelmsen ASA (ref www.hamworthy.com).
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SULPHUR REGULATION IN THE BALTIC SEA
One of the first vessels to have a retrofit scrubber installed was the DFDS ferry Tor Ficaria
(21 MW). The installation was made by Aalborg Industries in 2009, but has only been
operational with high reliability since December 2011, after several problems related to the
environment onboard a ship (ref Sjöfartstidningen 3/2012).
Among the ship owners there seems to be a common opinion that the scrubber technology
has to be further developed to operate satisfactorily in a marine environment. There are
simply too few reference installations made yet with a high reliability and functionality.
Nevertheless, manufacturers ascertain the functionality of their scrubber systems and offer
a guarantee of reducing the sulphur emissions to requested level, comparable to 0.1 % fuel
sulphur content for the SECA area.
Advantages
Sulphur removal rate > 95 %
Particle removal 30 - 80 %
Disadvantages
Addition of chemicals (freshwater system)
Sludge into the sea (seawater system)
Sludge to the port (freshwater system)
HFO can still be used
Retrofit installation possible
on most ships
Increased fuel consumption
Need space reduced cargo capacity
Figure 11: Pros and cons with marine scrubber systems
Costs for maintenance
The scrubber is mounted near the chimney, in the funnel, but space is also needed for the
water pumps and water cleaning system. This has an impact on the maximum loading
capacity of cargo which will be somewhat reduced for retrofits.
Most marine scrubbers are designed for seawater systems, also called open system. The
sulphur oxides SO 2 is washed out of the exhaust gas purified to some extent and finally
pumped into the sea after cooling. Extra power is needed for the pumps, which increases
the fuel consumption by 2-3 %.
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 12: An installation of a seawater scrubber system from DuPont BELCO
There are also scrubber systems with a closed system using freshwater to clean the exhaust
gases. After passing the scrubber, the dirty freshwater is cleaned by chemicals, such as
caustic soda (NaOH), before entering the scrubber again. In a closed system, there could
anyway be effluents pumped into the sea, but zero discharge is also possible when required.
The collected sludge will be disposed at facilities in port. Extra tanks are needed for the
chemicals and for the sludge. In some cases, existing fuel or water tanks can be used. Extra
power is needed for the water pumps, which increases the fuel consumption by 0.5-1 %.
Cost for chemicals equals to around 2 % of the fuel cost (ref Arnauld Filancia, Wärtsilä
Corporation). Some manufacturers have developed hybrid systems, which can operate on
seawater when suitable and switch to freshwater in a closed loop system when this is
required.
Cost for installation of a scrubber system on an existing ship differs due to technology and
complexity of the installation. An average cost of freshwater scrubber system from Wärtsilä
is 300,000 euro/MW (ref Wärtsilä, Kullas-Nyman).
Pay-off time for scrubber installations on existing ships is estimated to be between
2-5 years when running on HFO compared to the higher costs of changing to low-sulphur
fuel as MGO 33 . Extra costs for sludge deposition in port and reduced turnover for less cargo
space is hard to estimate and therefore not included in the calculation. For vessels with an
engine power over 10 MW operating most of the time in SECA areas the pay-off time can be
even shorter. Scrubber installations on new build vessels have shorter pay-off than retrofits
due to the lower investment (ref Alfa Laval).
33 The calculated price difference is 400 – 540 USD/ton (Wärtsilä, Kullas-Nyman)
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SULPHUR REGULATION IN THE BALTIC SEA
Company, Country
Alfa Laval Aalborg, Denmark
Clean Marine, Norway
Couple Systems, Germany
DuPont BELCO, USA
Green Tech Marine, Norway
Marine Exhaust Solutions, Canada
Wärtsilä Hamworthy, UK
Wärtsilä, Finland
Exhaust Gas Scrubber system
PureSOx - Hybrid system
Hybrid system
Dry system
Seawater system
Hybrid system
Seawater system
Seawater system, hybrid system
Freshwater system
Figure 13: Suppliers of marine scrubber systems as members of EGCSA
5.2 Marine Gasoil (MGO)
The easiest way to comply with the new sulphur regulations is to change fuel from HFO to
Marine Gasoil (MGO) with sulphur content below 0.1 %. Investments required are minimal.
However, this will give a significantly higher fuel cost over time. The price difference
between HFO 34 and MGO is around 250 USD/ton (ref Wilhelmsen, July 2012). This is in the
same range as the average price difference for 2015 predicted in the consequence report by
Entec. 35 Thus, they already in 2009/10 predicted the price difference for the year 2015. With
an increased demand for MGO and
decreased for HFO the difference will be Facts about MGO
even higher in 2015 (see chapter 7).
Energy content, kWh/liter 10,0
For ships spending most of their time in the
SECA area, this will increase their fuel costs
significantly. For ships being only part time in
SECA, this will be an option if they arrange to
hold two types of fuel on board, so called
dual fuel. When leaving SECA they will
change from MGO to HFO 36 . When stricter
sulphur emissions is applied also outside
SECA the change of fuels has to be between
MGO and Marine Diesel Oil (MDO) with a
sulphur content below 0,5 %. However, price
Density, kg/m 3
Sulphur content, %
Ton CO 2 /m 3
Price (Rdam July 23), $/ton
Price, $/kWh
Fossil fuel
840
max 0,1
2.8
895
0,075
difference is here much lower and what could be an attractive option before 2020 might
change after 2020. Beside much lower sulphur emissions when changing to MGO, also
particle emissions will be reduced with about 20 % (CNSS).
34 With LS = low sulphur 1,5 %
35 Entec Uk Limited, (2010)
36 Until 2020 or 2025, to be decided in 2018.
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SULPHUR REGULATION IN THE BALTIC SEA
5.3 Liquefied Natural Gas (LNG)
Maybe the most attractive alternative to meet the requirements of low sulphur emissions is
natural gas in liquid form, called LNG (Liquefied Natural Gas). Natural gas, which mainly
consists of methane, is widely used around the world by industries, power plants, for
heating purposes and for transportation on
land and sea. By cooling it down to -163 °C, Facts about LNG
the natural gas becomes liquid, containing
more energy (600 times more) per litre and is
easier to deliver in the transportation chain.
Energy content, kWh/liter
Density, kg/m 3 6
450
LNG is the cleanest fossil fuel and will reduce
the sulphur emissions down to zero when
used as marine fuel. In addition, other
emissions will be significantly reduced 37 , se
figure 13 below. Even though LNG is a fossil
fuel it contains less carbon than oil and
therefore it will reduce CO 2 emissions with up
to 25 % compare to bunker fuels (ref
Innoship).
Sulphur content, % 0
Ton CO 2 /m 3 2.3
Price, $/ton 530
Price, $/kWh 0.04
Fossil liquid fuel (at – 163 °C)
As of today, there is a fleet of about 350 ships globally using LNG as marine fuel (ref Baltic
Sea Journal). Norway, as the only producer of LNG in Europe, is a frontrunner and will at the
end of 2012 have a fleet of around 45 and steadily increasing (ref Dag Stenersen,
MARINTEK). These ships are all new buildings, but it is possible to convert a conventional
engine to a dual fuel engine running on both LNG and conventional fuel. A recent example is
the LNG tanker Bit Viking that was the first ship ever to be converted to run on LNG. This
was finalized in Oct 2011 (ref www.wartsila.com). This is a flexible solution when the
availability of LNG is uncertain for instance due to lack of LNG bunkering stations. Beside
Wärtsilä, also engine manufacturer MAN can offer dual fuel-engines (ref BPO).
Another engine concept is lean burn gas engine, which only runs on LNG. It is simpler to
install on board and suitable for waters where there are many LNG bunkering stations.
Manufacturers of such engines are Rolls-Royce and Mitsubishi (ref BPO).
Making such a conversion will however need space, which will reduce the cargo loading
capacity even to a higher extent than when installing a scrubber system (ref Wärtsilä, Britt-
Mari). The fuel tanks have to be doubled for LNG compare to conventional fuel if carrying
the same energy content. One way to overcome this is to have smaller fuel tanks, which
have to be filled more frequently. Otherwise, this could be a big obstacle and make a
conversion physically impossible or uneconomic for many existing ships. For this reason, it is
more likely that LNG will be used in new ships.
37 Dnv (Høvik, 2010).
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 14: Emissions for alternative concepts for a typical Baltic Sea cargo ship. Source: DNV
According to MARINTEK, a new LNG ship will cost 10 – 15 % more than a conventional ship,
but is likely to have around 35 % lower operational costs during the first 10 years compare
when using MGO and even lower during more years of operation (ref BPO). In a recent
report from the Danish Maritime Authority (DMA) they are considering six different
scenarios of the price difference between MGO and LNG. In most cases the payback time for
new buildings are around 2 years, and in one case up to 4 years. For ships being converted
to LNG the payback times are a bit longer, but still within the range of 2-4 years (ref DMA).
When it comes to safety Norway has a long experience with over 50,000 bunkering
operations made during 2003-2010 with no serious leaks of methane reported (ref
MARINTEK).
Therefore, there seems to be many reasons for the shipping industry to start moving
towards using LNG as a marine fuel, both environmental and economical, especially in new
buildings using dual fuel engines. As mentioned before very few ships use LNG as a fuel or
are prepared to do so when available. A main reason for this hesitation could be the still
undeveloped infrastructure for bunkering LNG in the Baltic Sea Region, see figure 15.
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 15: Existing and planned LNG terminals within EU. Source GIE (December 2012)
As seen in the figure there are several LNG terminals planned in the Baltic countries, but
very few in the northern part of Scandinavia. 38 An updated and complete map of existing
and planned LNG terminals within EU and Norway can be found at
www.gie.eu/index.php/maps-data/lng-map.
In Sweden the first LNG terminal opened last year in Nynäshamn with a capacity of 20 000
m 3 . A bigger terminal is under construction on the west coast in Lysekil that will start
operation beginning of 2014. Skangass will then annually deliver 200 000 tonnes of LNG to
Preem refinery for use in the refinery, but also aimed for other potential customers within
industry or shipping.
Almost any port in Sweden could have an LNG terminal of the smaller size, means up to
10 000 m 3 (ref Energigas Sverige). The port of Gothenburg has recently started to cooperate
with the port of Rotterdam with the common goal to offer bunkering of LNG in both ports
before 2015.
38 The big Statoil LNG terminal “Snøhvit” in Hammerfest in northern Norway, with a storage capacity of 200 000 M 3 is
not shown on this map, and neither are the about 40 small LNG receiving stations along the coast of Norway.
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SULPHUR REGULATION IN THE BALTIC SEA
Figure 16: Existing and planned LNG terminals in Baltic Sea Area. Source: AGA September 2011
Several other ports in the Baltic Sea Region have serious plans of building LNG terminals. The
project LNG in Baltic Sea Ports initiated by The Baltic Sea Ports Organisation and coordinated
by the Port of Helsingborg and partly financed by the EU TEN-T programme, started in 2012
and will contribute to the planning of LNG infrastructure for a number of participating ports.
(www.lnginbalticseaports.com). It should also be noted that Norway has more than 40
smaller LNG terminals in operation along the coastline (ref MARINTEK).
The first big LNG passenger ship in the Baltic Sea is the cruise ferry Viking Grace. It will start
sailing between Turku and Stockholm in January 2013. It will be regularly fuelled from a LNG
bunker ship in the centre of Stockholm.
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SULPHUR REGULATION IN THE BALTIC SEA
Viking Grace, the first big passenger ferry driving on LNG (Source: Viking Line)
Conversion from HFO to LNG has a big potential and is supported by many ports and
communities in the Baltic Sea region, as well as by several EU funding programmes.
However, it has just started and will not have a big impact to 2015. If planned LNG terminals
will be built, together with a replacement of old ships into new LNG vessels, a substantial
share of the Baltic Sea fleet could be running on LNG year 2020 and even more until 2030.
What must be kept in mind is that LNG is a fossil fuel and there might be restrictions on
reducing GHG 39 for the marine sector in the future. To meet these possible demands, LNG
can be mixed with liquefied biogas (LBG) and even replaced, though it could be uneconomic
due to limited volumes of biogas and a correlated high price.
In order to reach the estimated reduction of CO 2 with 20-25 %, as previously mentioned, it is
of greatest importance to minimize the leakage of methane in the whole distribution chain.
Methane is a very strong GHG with 20 times 40 more impact on global warming than CO 2 .
With a 1 % leakage in the distribution chain LNG will have the same impact on global
warming as oil and even worse with a leakage higher than 1 %.
5.4 Bio oil
In times of increased awareness of climate change
and GHG emissions there will be an increased
demand for biofuels used for transportation on land
and on sea. One such fuel is bio oil from pyrolysis of
biomass. The process has been under development
for over 20 years in North America and is just
getting commercial with the first full-scale plants to
be built in Europe.
Facts about bio oil (upgraded)
Energy content, kWh/liter 10.8
Density, kg/m 3 970
Sulphur content, % < 0.05
Ton CO 2 /m 3 ~ 0.8
Price, $/ton
n/a
Renewable liquid fuel
39 GHG = Greenhouse gases, most often referring to CO 2 , but also Methane and a number of others
40 Methane which is the content of LNG has on average 20 times (measured in 100 years perspektive) stronger
climate effect than CO 2 . Thus LNG is more dangerous to the athmosphere if there are leakages in the handling of the
fuel, e.g. at production, storage or when bunkering.
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SULPHUR REGULATION IN THE BALTIC SEA
The bio oil itself can already now replace fossil oil in modified burners for heating, but needs
to be upgraded for use in diesel engines. As a fuel for marine diesel engines, the upgrading
process will be easier and less costly in comparison with fuel for vehicles on land where
standards and quality demands are higher. Within 2-3 years such an upgrading process are
likely to get commercially viable.
5.4.1 How does it work?
The process is called fast pyrolysis. Dry biomass is heated to 500 °C and then condensed to
bio oil when cooled, all within 2 seconds. The produced bio oil consists of many different
substances, but also about 30 % of water. From 1 tonne of dry biomass, there will be around
700 kg of bio oil, but also 150 kg of bio char (ref Envergent). The process is energy efficient
and not as costly as gasification. The energy content is about half of conventional oil, but
increases when upgraded.
5.4.2 Who are the main actors?
Ensyn (Canada) has over 20 years’ experience of fast pyrolysis with seven commercial plants
in North America. The standard capacities offered are 200 and 400 tonnes per day of dry
biomass. The marketing of the technology is done in Envergent Technologies, a joint venture
between Ensyn and UOP (USA). UOP is owned by Honeywell Inc. and does the upgrading of
the bio oil. The first commercial plant in Europe is now under construction in Italy where the
bio oil is to be burned to produce green electricity. Other plants are underway in both
Sweden and Finland.
A pilot plant to demonstrate the whole chain from wood to liquid transportation fuel, also
for marine applications, will be ready for start-up end of 2013 (ref Monique Steff, UOP).
Dynamotive (Canada) has built two commercial plants in Canada using their developed
pyrolysis technology. The second plant has a capacity of 200 tons/day of dry biomass. They
have recently started cooperating with IFP Neuvelles in France for the upgrading processes.
They claim the upgraded fuel to be identical with diesel, jet fuel and gasoline. All three fuels
will be produced when upgrading the bio oil (ref Dynamotive).
Metso (Finland) has since 2007 together with VTT, Fortum and UPM developed a pyrolysis
process, which is integrated in a CHP 41 plant for better efficiency. A pilot plant has been
tested successfully and the first industrial scale plant is now under construction in Finland by
Fortum with a planned start-up in the autumn 2013. The investment is totally EUR 30 million
with a capacity of 50 000 tons of bio oil. The group of companies are working on upgrading
the bio oil to chemicals and transportation fuels (ref Fortum).
41 CHP = Combined Heat and Power
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5.5 Other alternative fuels
To meet stricter emissions standards at sea also other alternative fuels could be viable as
marine fuels, which are not yet tested in ships, but is used in vehicles to some extent. Below
are some interesting projects with such fuels.
5.5.1 Methanol / DME
Methanol 42 as a marine fuel will be tested in an
on-going project in Gothenburg, called SPIRETH.
Two tracks will be demonstrated. One is using
methanol directly in a modified diesel engine in
a laboratory.
The other demonstration will be made 2013 on
a ro-ro ship owned by Stena Line, see picture.
The ship bunkers methanol, which is then
converted to a DME by a unique process
developed by Haldor-Topsoe called OBATE 43 .
DME is an excellent fuel for modified diesel
engines and gives very low emissions.
Conversion costs for the engine are expected to
be much lower than costs for converting to
LNG. (ref SSPA, Ellis).
Facts about methanol
Energy content, kWh/liter 4.5
Density, kg/m 3 791
Sulphur content, % 0
Ton CO 2 /m 3 1.3
Price, $/ton (July, Methanex) 430
Price, $/kWh 0,075
Fossil liquid fuel
Renewable methanol under development
Partners in the SPIRETH project are, beside those mentioned, Wärtsilä, Methanex, SSPA,
Lloyds Register and ScandiNAOS. The project ends March 2014. If the project is successful,
this could be an attractive alternative to LNG with lower costs for infrastructure and engine
conversion.
Both methanol and DME can be produced from fossil and renewable feedstock, where the
latter is under development and not on the market. DME is now tested in 10 Volvo-trucks in
Sweden, where the DME is produced from renewable black liquor from the forest industry.
42 DME= Dimethylether
43 OBATE = On-Board Alcohol to Ether
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Ship to be used for Methanol/DME in the SPIRETH project (Photo: Bo Randstedt, Creative Commons)
5.5.2 Hydrogen
There are examples of piloting use of Hydrogen as source of energy for ships. For example,
Hydrogen (H 2 ) will be used to generate electricity from a fuel cell on the ship M/V Cellus in
Germany in an on-going project ending in 2014. It will not power the propulsion but
everything else on the 90 m vessel. The hydrogen is generated from a liquid fuel that could
be produced from fossil or renewable feedstock. For more information, see www.e4ships.de
Germanischer Lloyd SE has studied the potential to use hydrogen for shipping, generated by
excessive power from offshore wind farms. According to their studies, as much as 30 per
cent of an offshore wind farm’s potential energy output is lost because it cannot be fed into
the grid. Based on these estimates, a 500 MW wind farm could produce up to 10,000 tonnes
of liquid hydrogen per year by using this surplus power to serve the bunkering needs of up
to five feeder vessels of the size described above. 44
Even though the concept of using surplus energy from wind farms is very interesting, it may
require more study and tests before it would be possible to draw any conclusions if this
would be a realistic alternative for shippers.
44 http://www.gl-group.com/en/group/25617.php
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6 SLOW STEAMING
Slow steaming means deliberately reducing the vessel speed in order to save fuel and cut
fuel costs. It is not a way of fulfilling the sulphur directive, but should anyway be included in
this report for two reasons:
1. it has a significant impact on fuel savings, especially on long routes and
2. it is a new method and, as such, needs to be communicated to become more known
and practiced.
When adapting to the sulphur directive the cost of shipping in SECA region will increase for
all alternatives mentioned in chapter 5. Slow steaming could then be a possible way of
lowering the costs, and it is already in practice by many shipping companies.
It all started by Maersk in 2007 when fuel prices were extremely high and something had to
be done to cut costs. The solution they tested was to drive slowly on the long routes from
Asia to Europe. By going down from 24 knots to 12 knots, they could save thousands of tons
of bunker fuel on one trip. These tests were so successful that in 2009 the entire container
fleet of 500 ships were practicing slow steaming. The year after, 73 % of the Maersk fleet
were driving on engine loads below 40 %, which is possible by reducing the speed below 80
% of full speed (see figure 15). During this year, Maersk reduced their CO 2 emissions by 2
million tonnes which equals to savings of about 700 000 tonnes of bunker fuel (ref Maersk).
Since then slow steaming is now common practice by many carriers on the long transcontinental
routes.
Another benefit besides reduced fuel consumption and reduced CO 2 emissions is an
increased reliability in goods delivery. Before, the ships were going on full speed with tight
time schedules and were sometimes delayed due to storms or other unforeseen events. The
freight now takes a bit longer time (for Maersk 23 days instead of 21), but if a delay happens
they can speed up and yet be at the destination in time. (Cnf. section 4.1.2 about the
advantage of shipping regarding delivery precision)
The figure below shows the correlation between speed, engine power and fuel
consumption. For instance a ship that goes down 40 % units in speed, from 100 % to 60 %,
will reduce the fuel consumption by as much as 85 %. A reduction of 15 % from full speed
will reduce fuel consumption with almost 50 %. However, these are calculated values. The
actual values depend on a number of external factors, such as loaded cargo, vessel trim,
weather conditions and so on (ref Wärtsilä Technical Journal).
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Figure 17: Correlation between ship speed, engine power and fuel consumption. Source: Wärtsilä.
Slow steaming is obviously much more than an option for dealing with increasing cost of
shipping because of the IMO regulation. As shown in the example above it can be used in
transcontinental shipping, even if high sulphur fuel is used, for lowering the fuel
consumption and saving the costs. The cost of shipping is lowered and as a spin-off effect
reliability of the transport is increased and CO 2 emissions are lowered. Within the SECA
areas, it would be necessary for lowering the increased cost of fuel when shippers have to
use MGO, after 2015, with a much higher price.
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7 FORECASTING FUEL PRICES
The price of oil set the scene for many other products, not only within the fossil fuel sector.
Therefore, it is of greatest importance to make good predictions of future oil prices in order
to predict the impact on prices for other products, for instance marine fuels. However, this is
very difficult since there are many different variables involved. Looking at the figure below
the price during the last ten years has varied dramatically due to financial crisis, increased
demand (especially from Asia) and depletion of conventional oil fields.
Figure 18: Price of crude oil the last 25 years (USD/barrel). (US Energy Information Adm. (EIA))
The previous mentioned consequence reports regarding the IMO decision from 2008 were
all made during 2009 and 2010 when the oil price was unusually low and very volatile.
Predictions of the oil price with special focus on marine bunker fuels were therefore
extremely difficult to make. However, official statements these days in Sweden still refer to
those reports and the conclusions made in these.
In this report, we refer to the predictions available from the official reports, the actual
situation today, and from that we make some forecast of future prices for 2020 and 2030.
Admittedly, our discussion about the future price of oil and maritime fuel is as vague and
unsure as all other attempts to foresee the future.
Source, year 2015 2030 2035 2050
Swedish Maritime Administration, 2009
Three scenarios
1) 60
2) 100
3) 150
International Energy Agency 2008 100 120
International Energy Agency 2012 150 45 125
Swedish Transport Administration, 2012 115 115
Hearing Sundsvall, 2012 132 192
Figure 19: Predictions from various sources of future price of crude oil (USD/barrel)
45 If necessary investments for the MENA region (Middle East and North Africa) during 2011-2015 will be one-third
lower than the $100 billion per year required.
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In the table above is included a poll at the NECL II hearing arranged on June 7, 2012 in
Sundsvall, Sweden. The group of invited experts and participants contributed with their
estimates on future oil prices. It is obvious that the people present at the hearing expect an
overall higher oil price than the referred studies, but all agreed that the price of oil is
impossible to predict.
The Finnish study made by Turku University for the Ministry of Transport is not included
above. The oil price was not mentioned, only the prices for marine bunker fuels based on an
average of the prices during a period of the present three years (2006 – 2008). 46
The study from the Swedish Maritime Administration was based on the oil price in Oct-Nov
2008, which was 60 USD per barrel (scenario 1). Then the price of HFO was 365 USD/tone
and for MGO it was 662 USD/tonne. The base scenario for 2015 was the same figures, which
would make an increase of fuel costs of 81 % when changing from HFO to MGO. The same
increase of 81 % was calculated for the two other scenarios, but based on higher oil prices
(ref Swedish Maritime Administration).
Since then, the price of crude oil has increased with 75 % to 105 USD/barrel 47 with
fluctuations between 90 – 120 USD/barrel. The main reason for the fluctuation is the
economic crisis in Europe.
The price of HFO 48 has also increased the same magnitude as crude oil in almost four years
to 620 USD/tonne (July 16). However, the increase for MGO does not follow the same route
as the assumptions once made in 2008. The price for MGO at July 16, 2012 was 860
USD/tonne, an increase of 30 %. What seems of great importance to these calculations is the
price difference between HFO and MGO. During the last four years, the difference has been
fairly constant, between 250 – 300 USD/tonne with an exception for some months in 2008
with extremely high oil prices where the difference was as high as 600 – 700 USD/tonne (ref
www.bunkerworld.com).
7.1 Forecast for year 2020
In this report, we elaborate on the possible price increase by changing from HFO to MGO
based on two scenarios for the assumed oil price. The earlier prediction made by Swedish
Maritime Administration for their scenario 2 and 3 is used, but for year 2020 instead of
2015. This means 100 USD/barrel (scenario I) and 150 USD/barrel (scenario II). These
predictions are well in line with the forecast made by Professor Kjell Aleklett at Uppsala
University who is an expert in this field and chair of ASPO (Association for the Study of Peak
Oil) since many years. His opinion is that the world economy cannot bear a higher oil price
than 150 – 160 USD/barrel, which then sets the roof. Future oil price will vary between 90 –
160 USD/barrel (ref Kjell’s blog –mars 2012).
46 Juha Kalli, Tapio Karvonen, and Teemu Makkonen, (2009)
47 Average for Brent crude oil during the period May-July 2012.
48 HFO/LS380 Rotterdam July 16, 2012. (Ref www.wilhelmsen.com)
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Another variable, which could cause lower demand of oil, and then lower the price for some
time, is if subsidies for fossil fuels will end. According to The International Energy Agency
(IEA) these subsidies, which are very common in Asia and Africa, were estimated to 523
billion USD only for 2011. This is six times higher than subsidies to renewables (ref IEA).
As the dramatic effects of climate change will be more obvious to each and every one the
opinion to end these subsidies for fossil fuels will become stronger, and instead promoting
support to renewables. This will likely be a reality before 2020, which could make the oil
price go down from a higher level to the same levels as of today.
7.1.1 Scenario 1 - 100 USD/barrel
The situation is basically the same as presently in 2012. Price of HFO (380LS) is now 665
USD/tonne and MGO is 995 USD/tonne (Oct 16, 2012). The difference is 330 USD/tonne.
However, in the year 2020 all countries within EU must fulfil the stricter sulphur regulation.
There will be a great demand in MDO and MGO, but the only demand on HFO will be for
vessels with a marine scrubber installed. The demand is very hard to predict, but taking into
account that only a handful of vessels now have scrubbers installed and that frequent big
orders from the shipping industry still seems to be missing, and the capacity of the few
scrubber manufacturers are likely to be limited the first years, we assume that there will less
than 500 ships with scrubbers installed within EU at 2020.
The demand for HFO will therefore be very low, which will be reflected in the price. The
price difference between HFO and MGO will then increase, maybe to the same level as in
the summer of 2008 i.e. 500 USD/tonne. This discussion ends up in a predicted price of HFO
of 500 USD/tonne. With a calculated price difference of 500 USD/tonne MGO will cost 1000
USD/tonne. The increase will be 100 %.
7.1.2 Scenario II - 150 USD/barrel
Following the historic figures, the price of HFO (380LS) will be 50 % higher than today, which
is 930 USD/tonne and MGO will be about 300 USD/tonne higher, meaning 1230 USD/tonne.
The discussion above set a difference of 500 USD/tonne, which lowers the HFO and
increases the MGO price. The assumption for HFO is then 700 USD and MGO 1200
USD/tonne, which is an increase of 70 %.
The increase for changing fuel with these assumptions will be between 70 – 100 %. The fuel
cost is considered to be 40 – 50 % of the total cost for sea freights. 49 Increase of freight costs
would then be 28 – 50 %.
The actual fuel change will be made at 2015 when the difference likely will be lower due to
higher volumes of HFO available on the market.
49 Swedish Maritime Administration, 2009
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8 MITIGATING THE CONSEQUENCES
The decisions in IMO and EU on the sulphur directives is a result of a long process starting
with the adoption of the first MARPOL convention in 1997 and the EU Directive 1999/32/EC
in 1999. Hence, rumours that decision makers were not aware on what they were deciding
upon could not be correct.
Some argue that the consequences of the IMO and EU directives have not been thoroughly
analysed before the decisions. The Impact Assessment made by the European Commission 50
has indeed analysed the environmental and societal cost effectiveness, but it has not
considered the effects on the already cost sensitive industry also affected by harsh
competition. Nevertheless, this assessment proposes possible measures member states
could use for mitigating the consequences for ship owners, ports and industry, such as state
aid for investments and innovation support. Then it remains to be seen to what extent
member states really apply any mitigating measures. The EC assessment also states that
mitigation measures have to be synchronized across member states in the Baltic Sea Region
because otherwise transport flows may shift from one port to another or between states.
In 2009, one year after the IMO decision, the Swedish Maritime Administration issued a
report, with consequence analyses made by the VTI institute in 2009. 51 It is still the most
cited source concerning anticipated increased cost of sea transports. In addition, the Finnish
Ministry published a report made by The Centre for Maritime Studies at University of Turku
with thorough analyses of the cost consequences for different parts of the shipping sector. 52
Both these reports were made shortly after the IMO decision, for use by authorities as well
as the shipping sector, to prepare for the implementation of the directive. However, up until
now not very much has happened.
Additional analyses and estimates has been made by the Swedish and Finnish federations of
forest industries and several other industry associations including the Swedish Shipowners
Association and the Baltic Ports Organisation (BPO). All of these have come up with
important facts and estimates on what can happen in the worst case for the shipping sector
and for the industry, and resulting consequences for economy and growth in the Baltic Sea
states. They have also along with several research reports from universities listed different
alternatives for the shipping sector for technically adapting to the directive.
Hitherto the shipping companies have not taken very many measures, such as retrofitting
ships for LNG. On the other hand, why should they have done that? There are no places in
Finland to bunker LNG and only one small place in Nynäshamn in Sweden. The issue of
starting up use of LNG for shipping is an “egg and the hen” situation. For investing in new
LNG ships, you need the storage and bunkering infrastructure and for investing in the latter,
you need ships as customers. Therefore, it seems to be a good idea to combine the
50 European Commission, 'Sec(2011) 918 Final
51 Swedish Maritime Administration, 2009
52 Kalli, Karvonen, and Makkonen, 2009
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SULPHUR REGULATION IN THE BALTIC SEA
infrastructure with LNG use in industry or energy production, which is the case in
Nynäshamn. 53
The European Union opens up both for the EU commission and member states to take steps
for mitigating measures. In the parliament’s decision of 11 th September 2012, it says: “The
costs of the new requirements to reduce sulphur dioxide emissions could result in modal shift
from sea to land-based transport and could have negative effects on the competitiveness of the
industries. The Commission should make full use of instruments such as Marco Polo and the
trans-European transport network to provide targeted assistance so as to minimise the risk of
modal shift. Member States may consider it necessary to provide support to operators affected
by this Directive in accordance with the applicable State aid rules.”
The Swedish Maritime Administration, in their report 2009, displays a list of possible
measures the government can take for mitigating the consequences for the shipping sector
and industry. These are not proposals from this authority but from representatives in their
expert groups 54 :
Transport subsidies to ports in e.g. Bothnian Sea and Gulf of Bothnia.
Increased funding for research and development of alternative fuels, better purification
methods and development of more efficient engines.
Investment grants with same focus as above.
Reduced fairway charges (requires increased grant to Swedish Maritime Administration).
Fully internalise the environmental effects for all modes of transport.
Tax-free shore side electrical supply to ships.
With some exception, neither the Swedish nor the Finnish governments have yet made
decisions to implement measures from this list. However tax-free shore side electrical
supply has been implemented in Sweden and the Finnish government has recently
appointed an investigation on possible changes of fairway fees. Both governments are
expected to present new maritime strategies shortly. In Sweden, this will be in January 2013
and in Finland later in 2013.
A most relevant question is whether it would be necessary that the states around the Baltic
Sea coordinate their possible support to investments or other mitigating measures. For
example, what happens if just one country lowers the fairway fees? Then there is a risk that
the conditions for the industry as buyers of transport will be skewed within the SECA area, in
addition to the already known competitive disadvantage to competitors in the southern part
of EU and worldwide which are not affected by the 0.1 % sulphur level in 2015.
Already today, there are differences in the conditions for the shipping sector between the
countries around the Baltic Sea, such as the so-called tonnage tax, which is implemented in
some countries but not in Sweden. However, we have not studied this issue further in this
report.
53 AGA Magasinet 2012/1
54 European Parliament, (2012)
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9 SCENARIO FOR 2020
It is extremely difficult to estimate the future consequences of the increased cost of sea
transports after five years of the implementation of the 0.1% level of sulphur content in
maritime fuel. One thing is the actual cost difference between different sorts of fuel and
another is the general cost level. The general cost level could be determined e.g. of:
Price of crude oil
General world economic situation
Wars and regional conflicts
Currency rates, of SEK, EURO and Dollar
All of these are interdependent of each other and dependent on many other factors.
The price difference between low sulphur MDO/MGO and HFO/LFO is affected of e.g.:
Demand of MDO/MGO related to refineries ability to adapt to new market
conditions and increasing supply of low sulphur fuels
Availability of other alternatives such as e.g. LNG, Methanol, Scrubbers 55
Most of the representatives we have talked to during this study, experts and stakeholders,
shippers, researchers and other stakeholders, come up with almost the same conclusion on
the choices for shippers in the short run:
Use of Marine Diesel and Marine Gas Oil with a sulphur content below 0.1 % is the
most realistic alternative.
LNG is the best option, which is also realistic, if there will be enough bunker
possibilities at new LNG terminals. Biogas (LBG) can be used as well but the supply
will be very limited.
Scrubbers is not yet a mature technology for use in maritime environment and not
yet economical for retrofitting.
Methanol, hydrogen and other alternatives will be tried on an experimental basis.
The scenarios for 2020 and 2030 elaborated in the following sections should be considered
as qualified guesswork, as always when trying to foresee the future, but they are developed
from some facts known today and others estimates and/or guesswork. Nevertheless, there
is a possibility that some of the predictions will come true.
55 In the short run alternatives are not likely to have any significant effect on the price difference and is just another
side of the demand/supply factor.
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9.1 Maritime perspective
The shipping fleet, which frequently serves the Baltic Sea, was in 2012 compared to the
world average rather old. There was a need for ordering new ships but insecurity of the
consequences of the sulphur directive made it difficult for investment decisions. Thus, the
number of orders for new ships was fairly low. Nevertheless, the orders for very large
container ships increased, initiated by Maersk with their first 18000 TEU ship, “Prius of the
Seas”, that was launched in 2013.
Maersk Line first Triple-E 18,000 TEU container ship
Generally, the transcontinental ships were renewed at a faster pace than the feeder fleet in
the Baltic Sea. Thus, the main option for the latter was to make retrofitting for using
MDO/MGO and becoming fully dependant on vulnerable price levels of these fuels.
In 2020, the price of MDO/MGO and diesel for cars has risen dramatically. The increased
price also affects trucks and private cars because of the additional tax effect for these. The
implementation of the 0.1% limit in 2015, not only in the Baltic Sea but also along the US
Coast, increased the demand for diesel. Before 2015, there was a surplus of diesel in the US,
which was exported to Europe. This has almost ceased in 2020 and the demand for gasoline
cars has increased as a result, but it also has sky-rocketed the demand for plug-in hybrid
cars.
Some shippers went bankrupt shortly after the implementation of the sulphur directive in
2015 and parts of their market shares were taken over by others. Because of a certain
degree of modal backshift, the total volumes shipped in the Baltic Sea decreased. Those who
survived, got much stronger incentives for optimizing their routes, recruited more return
transports and are now applying slow steaming. These were also the ones ordering or
leasing new bigger ships.
Because of the worsened conditions for shipping and some companies leaving the market,
the competition decreased and made it possible for the remainders to charge the increased
cost of transport to the customers.
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In 2020, Liquefied Natural Gas (LNG) has gained some market especially for the ferries. The
first large ferry, Viking Grace has been followed by other newly build both by Viking Line and
Stena Line and others. Still there is a need for more LNG Terminals. In Sweden, the first one
was in Nynäshamn, followed by Gothenburg, Lysekil and Helsingborg. Some more is planned
in northern Sweden (Gävle, Sundsvall, Umeå and Luleå). In Finland, the first LNG terminal
was built in Pansio close to port of Åbo and opened in the beginning of 2015. It has then
been followed by terminals in the Helsinki area and some more are planned in the ports of
Pori, Vasa and Kokkola.
In 2020, scrubbers have mostly been implemented in newly built transcontinental ships, as a
preparation for the strengthened limit 0.5% sulphur content at the global market in 2025. 56
The number of orders for old ships as retrofits has hitherto been limited. As a result, the
ports in the Baltic Sea have been slow in building infrastructure for taking care of the waste
from ships with scrubbers. In Sweden, there are facilities for scrubber waste treatment in
the ports of Gothenburg, Stockholm and Gävle. In Finland, there is only the Port of Helsinki
that has this kind of facility.
Other alternative fuels such as Methanol, Hydrogen and Bio-oil are used still on
experimental basis. Out of these, Methanol seems to be the most promising.
9.2 Industry perspective
In the years before 2015, the forest and steel industries in Sweden and Finland were
struggling against harsh competition from other parts of the world. The Swedish export
industry was also affected by the strong currency rate for the Swedish Krona, which made
their products even more expensive compared to competitors.
Under these conditions, some of the sawmills could not compete and went bankrupt already
before 2015. Some of the bigger ones could survive but in the years before 2015, they did
not make any bigger investments because of the insecurity of what the market conditions
and cost of transports would be after 2015.
In 2020, the forest industry has undergone even more restructuring towards bigger units.
Still the level of investments for increasing production is very low. Instead these companies
are making investments in their production plants in central Europe, US, Asia and South
America. Some of the Finnish forest industry plants moved a large part of their production to
central Europe in the years after 2015.
9.3 Logistics perspective
A positive side of the strict sulphur limits in the Baltic Sea in 2015 and increased cost of
transport was that shipping companies started to change their routes and recruit more
return cargo. Even though the number of ships has decreased, the capacity is sufficient and
the remaining shipping companies have been able to return to a price level the customers
56 In 2018 there will be an evaluation if the global limit will be implemented in 2020 or 2025. We do not beleive that
such a late evaluation in 2018 can result in the implementation of this limit earlier than 2025. Nevertheless the
transcontinental ships benefits from using Scrubbers when traveling within the SECA areas (Baltic Sea, North Sea and
US coast).
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can pay, even though it is higher than before. The degree of generalization had increased
which means that more ships have been converted to multi-purpose ships allowing for more
flexibility. 57 The containerization has also continued to increase as a way to allow for more
flexibility.
In 2020 there has also been a specialization trend regarding feeder transports. More
transcontinental ships are going directly to Gothenburg instead of Rotterdam and reload to
some short sea LNG driven feeder ships but also the railway transports to and from
Gothenburg has increased to the limit what the Swedish railway can stand. There is also a
growing interest from Finland to use ferries and short sea ro-ro shipping to Sweden and use
railway towards Gothenburg.
The number of cargo commuter trains from northern Sweden has increased and they have
started to use longer trains. These are trafficking Gothenburg but the number of trains to
central Europe along the so-called Rail Freight Corridor 3 (Stockholm-Palermo) has also
increased. At this line both the Öresund Bridge and Stora Belt Bridge has started to become
bottlenecks. The construction of the Fehmarn Belt Tunnel started in 2015 and is expected to
open in the end of 2021. This will further increase railway transports from Sweden to central
and southern Europe.
Because of the serious bottlenecks in the Swedish north-south railways, there is a growing
interest in shipping to and from Trondheim, and the number of cargo trains has increased on
the Mid Nordic Line and Meråker Line. There are plans to use Trondheim also as an
alternative to Rotterdam for transcontinental ships but the terminal capacity is not
sufficient. Plans are now decided for a new port and intermodal terminal in Trondheim. In
2020 the electrification and reconstruction of parts of the Meråker Line has just begun and
the effects is expected in the years to come.
9.4 Threats and opportunities for the Mid Nordic Region
9.4.1 Threats
The biggest threat for the Mid Nordic Region in the time perspective 2015 is closing down of
basic export industries, which are heavily dependent on high capacity cost efficient
transports. Even if the general price level of oil remains at around $100/barrel the estimated
price difference between high sulphur oil and diesel will be dramatic for the cost of
transport. 58 With a higher general price level, it will be even worse.
If currency rate of the Swedish Krona will remain as high as in 2012, it will further contribute
to decreased competitiveness of the industry in Sweden compared to Finland. The forest
and steel industries are the ones most affected by this, since both are heavily dependent on
sea transports. In addition, the chemical industries and the aluminium smelter in Sundsvall
will face harsh times in 2015. Metal industries, which are not dependent on sea transports,
such as gold and copper industry in Skellefteå will not be very much affected by the sulphur
57 J. Woxenius, (2010).
58 Even though the difference will be between Low Sulphur Oil (LGO) below 1% and low sulphur MDO/MGO below 0.1
%, it will still have a substantial price effect exaggerated by a shortage of diesel.
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directive. Likewise, the iron ore mining will manage because Narvik, which is the main out
shipping port, is situated outside the SECA area.
There is a risk that the Mid Nordic Region, with fewer mines and more woods, will be worse
out than the northernmost regions, concerning the risk for closure of major industries
because of the increasing cost of sea transports.
9.4.2 Opportunities
There is a possibility that the fuel prices will stabilise when enough infrastructure for use of
LNG has been built and the refineries have converted to production of more diesel and other
suitable low sulphur fuels. The time up until 2020 may be too short for this to have full
effect, even though the conditions and price levels in 2015 will certainly be an efficient
trigger for that. In the same way, the price levels of fuel will be a strong trigger for
innovation of new fuel products (e.g. hydrogen), engines that are more efficient and other
environmental friendly shipping technology. 59 For boosting these triggers to have an effect
in the short run financial support from national governments and/or the EU will be needed.
Now in 2012, the governments’ intention for this is not at all clear.
With the sulphur regulation in full effect in the SECA area in 2015, with increased cost of
transport, bottlenecks at the north-south railways which in Sweden also has increased their
price for usage (track fees) four times until 2020 it seems that it would be wise to use as
short routes as possible. Therefore, Trondheim could be a choice for out-shipping of wooden
products as well as in shipping of containers with consumer goods. Unfortunately, the
infrastructure is not sufficient in the Port of Trondheim and hinterland connections. The port
in itself can handle more cargo but there is limited capacity at the nearby terminal. The
railway between Östersund and Trondheim is planned to be electrified but no final decision
is made. In parts, it has also limited capacity (close to Trondheim) but along most of the
distance, it is actually possible to more than double the number of trains.
Even though there are bottlenecks at the moment for using Trondheim as an alternative to
Gothenburg, it may be interesting for the right types of cargo provided that some logistics
operators see this as a realistic opportunity. For the forest industry close to the coasts of
Sweden and Finland, with established shipping routes to Germany, Rotterdam and England,
it is not likely that out shipping via Trondheim will be an opportunity. 60 The loading and
unloading of the goods in several steps take more time, and cost, than what the gains would
be. It may be different for other types of cargo were the alternative is a long transport to
southern Sweden.
59 For exampel also putting sail (spinnaker) on convential ships is considered as a way to lower the fuel consumtion.
60 Referring to statement from Magnus Svensson, CEO of SCA Transforest at hearing in Sundsvall 7 June 2012.
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SULPHUR REGULATION IN THE BALTIC SEA
10 SCENARIO FOR 2030
The scene may have changed quite much between 2020 and 2030, looking at the conditions
for transports and industry. Keeping in mind that 2030 is 18 years from 2012, all estimates of
the future is only possible to make on basis of known facts and then spice them with quite
much guesswork. In 2030, there are not so many facts from 2012 that are still valid and
more complicating factors might have turned up during almost two decades. Nevertheless,
some basic estimates might be more or less valid:
General level of crude oil has increased because we have passed the point of peak oil
and/or persistent regional conflicts in oil producing countries cause the oil price to
increase. However, the effects of a higher oil price are more or less equal globally,
rising general price levels.
The effect of peak oil and increased price of oil has triggered innovation in transport
and fuel technology and bio fuels or other alternatives may have become a reality in
larger scale.
More and more obvious signs of climate change have triggered innovation of new
transport and fuel technology even further.
Globalisation has continued as a trend with more production of consumer goods in
Asia. 61
For some goods, there may have been an opposite trend towards more local
production, e.g. food.
Some factors are impossible to neither estimate nor guess, such as:
Currency rates. We do not know even which currencies we use in 2030. Eighteen
years ago there were D-mark, Franc, Finnish mark, Lira, Pesetas and Drachma in
Europe.
The political situation, neither in European countries nor in the US or Asia.
The economic situation in different countries, such as those European countries
currently in financial troubles.
One thing is known for sure: All predictions of the future will be more or less wrong because
they have been so in the past. Nevertheless, it is useful and often necessary to estimate the
future in order to plan and make decisions that we need in the future. Infrastructure and
transports are good examples. The railways we use today were mainly established in the
19 th century and the approximate lifetime of a container ship is 26 years. 62 Today we decide
on what we will use in 2030!
61 Referring Christopher Pålsson at Baltic Shipping Days in Sundsvall 31 October 2012.
62 http://www.worldshipping.org/about-the-industry/liner-ships/container-ship-design
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10.1 Maritime perspective
In 2030, the conditions for shipping are globally a bit more equal. In Europe, the 0.5%
sulphur limit was implemented in 2020 and globally the same limit came into effect in
2025. 63 Transcontinental ships and ships trafficking European waters outside the SECA are
using either a blend of fuel oil (LFO) and diesel to reach the allowed level of 0.5%, or they
are using HFO with scrubbers. The demand for HFO for shipping has decreased 64 and the
heavy fuel is now instead used for power production, with the use of efficient scrubbers, not
least in Japan and Germany, who have closed all their nuclear power plants.
LNG has become a major fuel for short sea shipping in the SECA areas and a sufficient
number of LNG terminals are established in the Baltic Sea Region. Methanol and other
alternative fuels are increasing but are used mainly for short sea shipping, in areas where
there are established bunker terminals for these fuels.
Even though the demand for diesel has increased for blending LFO into 0.5% fuel the price
gap between MDO/MGO and LFO has decreased since 2020, because:
The price level of diesel has made it unattractive as car fuel for which gasoline 65 has
made a renaissance but to an even higher extent electricity and bio fuels.
The refineries have converted to produce more distillates (MDO/MGO) specifically
for the shipping.
Triggered by the NO X –regulation included in the IMO MARPOL Annex VI convention all new
ship engines built after 2016 were much more environmental friendly. The technology for
limiting Nitric Oxides also triggered better technology for energy efficiency and reducing
pollution, which made them more fuel-efficient. The Scrubber technology has developed
very much and is now a common alternative within the SECA areas.
The price of sea transport is in 2030 higher than in 2012, but not as much as expected,
because most ship owners have deliberately invested in more efficient fuel technology as
well as improved transport efficiency such as optimized routes and combinations of either
flexibility or specialisation.
63 It IS possible that the 0.5 limit will be implemented globally in 2020 on the basis of a study to be made by IMO in
2018. However, we as authors of this report do not believe that a decrease from 3.5% to 0.5 can be implemented with
such short notice as two years. The effects on the demand for diesel would be dramatic.
64 Estimates by PIRA (www.pira.com), presented by Johan Brauhn at Baltic Shipping days in Sundsvall 31 October
2012, show that the demand for HFO in shipping will decrease to 1/3 between 2020 and 2025.
65 In 2012, diesel was a residual product from producing gasoline. In 2030 gasoline could be a residual product from
production of diesel.
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10.2 Industry perspective
Unfortunately, a number of sawmills and paper and pulp mills closed down in the years
between 2015 and 2025 due to harsh competition and raised cost of transport. In 2030, the
competitive conditions are somewhat more equal than in 2015. Long distance shipping has
also got their stricter of limits for sulphur content in fuels and emissions, which affect these
transports.
The problem in 2030 is that a closed paper mill remains a closed paper mill. The investments
for starting up new production units are so huge that no one will take that risk. However,
the remaining forest industry, which survived the critical years between 2015 and 2025, has
experienced new possibilities to expand their business and invest in increased production
capacity.
10.3 Logistics perspective
Because of the rising price of maritime fuels, but also at the same time rising cost of diesel
for road transport and raised fees for railways, there have been very strong triggers for
optimizing transport flows. In 2030, it is barely defendable to run a transport, regardless of
which mode, filled in only one direction. This has created a market for “forth level logistic
brokers” which optimize the flow in a way that the customer, the logistic operator and the
transporter will all be winners. As a result there are not so much room for an over
established transport market.
The rail infrastructure is still lagging behind. It takes time to build railways. However, some
improvements in infrastructure and logistics have happened at the time of 2030.
The Meråker line was electrified and straightened shortly after 2020 and the
capacity problem close to Trondheim was removed. This line is now used for an
increasing number of cargo trains as well as passenger trains.
Trondheim has a new main seaport, with a complete intermodal terminal close to
the port, 66 which attracts both incoming transcontinental shipping and out-shipping
of cargo from Sweden.
For good and bad, because of the climate change the North-East passage north of
Russia is in 2030 a secure route for shipping to Japan and China, which is used for
long distance shipping from Narvik as well as from Trondheim.
The Fehrnmarn Belt Tunnel was inaugurated in the end of 2021 and the number of
trains with industry products from Sweden and Finland on the Rail Freight Corridor 2
(Stockholm-Naples) has increased. There are still some bottleneck problems at the
Öresund Bridge.
66 This prophecy might be wishful thinking from the authors of the report since one of the main alternatives is to
establish the new intermodal terminal south of Trondheim, away from the port.
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10.4 Threats and opportunities for the Mid Nordic Region
10.4.1 Threats
If the scenario will come true that many production units in the forest industry will not
survive through the critical years 2015-2025, it will be very negative for the Mid Nordic
Region. There are many saw mills, paper and pulp mills, which perhaps not by themselves
have so many employees as they had 50 years ago, because they are very efficient and
automated. However, they are main drivers for other sectors in the region. These base
industries generates large amounts of local and regional transports, e.g. of timber. They
generate a lot of maintenance and supporting service work locally and regionally and they
are drivers for regional innovation.
If some of the forest industries close down or move their production to central Europe there
is a big risk for negative demographic effects in the Mid Nordic region.
10.4.2 Opportunities
As mentioned before, during the probably turbulent time between 2015 and 2025 there will
be an unequal competitive situation between production in the SECA area and central and
southern Europe. This will specifically threaten forest industries, but not so much the mining
in northern Sweden and Finland.
Nevertheless, the situation might be a strong trigger for innovation of different kinds.
Innovation in ship and fuel technologies may for example make the Finnish company
Wärtsilä a quite prosperous industry, since they are among the world leading companies in
that business. It may also trigger innovative business concepts and logistic opportunities
which were not as attractive to consider before the critical increase of cost of sea transport
occurred.
The new situation may also, in 2030, have opened up the competitiveness for underutilized
routes in the transport system. One is the Port of Trondheim for both import and export to
Scandinavia, as an alternative to Gothenburg and Rotterdam. Another is the railway route to
Asia from Finland, for certain types of cargo from Scandinavia, which may become more
competitive.
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11 CONCLUSIONS
The consequences of the implementation of the Sulphur directive in 2015 are likely to be
dramatic for the industry in the Baltic Sea states, and especially in the northern part of
Scandinavia. Already today, the insecurity of what will happen with price level of oil,
currency rates and competition are devastating factors, which may affect some industries’
decisions not to invest in increased production.
The issue of the IMO agreement on SO x emissions (MARPOL Annex VI) has politically been
treated as an environmental issue, which it is, because the very reason for the agreement
was to lower the emission and improve people’s health. When the consequences in terms of
the transport sector’s adaptation to the new regulation, change of fuels, ship technology,
the need for new infrastructure and risk for modal back-shift, it turned politically into a
transport policy issue. There it still is, waiting for some good Maritime strategies from the
Swedish and Finnish governments. What is needed is some mitigating measures such as:
Lowering the fairway fees in the Baltic Sea at least for a period of time
Investment grants for LNG infrastructure
Transport subsidies to ports in e.g. Bothnian Sea and Gulf of Bothnia.
Increased funding for research and development and innovation for the shipping sector.
The governments in the Baltic Sea Region need also to talk to each other and synchronize their
efforts.
The next step is that the Sulphur directive will turn into an issue for the ministers of industry,
but this has not happened yet. When we have talked to the Swedish ministry we have got
the message that “they will follow the issue”. Today, companies from the base industry in
both Sweden and Finland are protesting loudly against the SOx directive trying to explain the
consequences. The next step for them is that they take the consequences. The decisions on
investing or not in northern Scandinavia, or investing in production units in other countries,
lies in the hand of the industry. The industry and industrial associations still hope that there
is a possibility to postpone the SOx directive. There is no way to change the EU directive,
which is a result of the IMO declaration. Theoretically it is possible to renegotiate in IMO an
exception or postponement. We are certain that this will not happen, for several reasons:
The IMO agreement is a UN declaration that all EU member states + Russia+US have already
signed. Renegotiation is a complicated time consuming process also hindered by strong
environmental interests.
The IMO agreement needs unified efforts from all the Baltic Sea States since it is related to the
co-operation in HELCOM. There is currently a joint proposal from HELCOM to IMO to approve the
Baltic Sea as a NECA area (NOx Emission Control Area).
The time is too short.
The only realistic alternative is concerted actions from the governments on mitigating
measures so this paradigmatic change of the transport systems in the SECA area can be
handled, with reasonable consequences.
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12 REFERENCES AND SOURCES
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Alfa Laval (2011), Brochure on PureSOx scrubber
Baltic Ports Organization. (2011), Future environmental regulation for shipping in the Baltic Sea area and
their consequences for the seaports
Baltic Maritime Outlook 2006, Goods flows and maritime infrastructure in the Baltic Sea Region.
Baltic Transport Journal (2011) The best solution is LNG – article by N Kai-Cheong Chan, DNV (4/11)
Clean North Sea Shipping (CNSS) (2011), A review of present technological solutions for clean shipping
Cleantech Magazine. (2009), Marine Exhaust Gas Cleaning Systems, Anne McIvor
Danish Maritime Authority (2012), 'North European LNG Infrastructure Project',
DNV (Det Norske Veritas) (2010), 'Greener Shipping in the Baltic Sea', (Høvik)
DNV (2011), Stricter sulphur regulations are coming – is shipping ready?
DNV (2010), Greener Shipping in the Baltic Sea
Energigas Sverige, (2011), Utbyggnad av infrastruktur för flytande natur- och biogas
Entec UK Limited (2010), 'Study To Review Assessments Undertaken Of The Revised MARPOL Annex VI
Regulations - Final Report July 2010',
European Commission (2011), White paper – Roadmap to a Single European Transport Area
European Commission (2011), 'SEC(2011) 918 final: COMMISSION STAFF WORKING PAPER, IMPACT
ASSESSMENT - Accompanying the document, Proposal for a Directive of the European Parliament
and of the Council amending Directive 1999/32/EC as regards the sulphur content of marine
fuels'.
European Parliament (2012), 'European Parliament legislative resolution of 11 September 2012 on the
proposal for a directive of the European Parliament and of the Council amending Directive
1999/32/EC as regards the sulphur content of marine fuels (COM(2011)0439'.
Fortum (2012), Press release March 7 – Fortum invests EUR 20 million to build the worlds first industrial
scale integrated biooil plant
Frykberg, Krister (2012), 'NECL II Activity 3.7, Intermodal terminal in Östersund area - Study of technical,
economic and market conditions for establishment', (Östersunds kommun)
GLE (Gas LNG Europe) (2011), Position paper: GLE’s views on small-scale LNG
Institut für Seeverkehrswirtschaft und Logistik (2010), Reducing the sulphur content of shipping fuels
further to 0,1 % in the North Sea and Baltic Sea in 2015: Consequences for shipping in this area
Isomäki, Risto and Pettay, Esko (2011) SHIPS, SULPHUR and CLIMATE - Is it a good time to Reduce the
Sulphur Emissions from Shipping, Into Publishing www.into-ebooks.com
International Energy Agency (IEA) (2011), World Energy Outlook
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Kalli, Juha, Karvonen, Tapio, and Makkonen, Teemu (2009), 'Sulphur content in ships bunker fuel in 2015 -
A study on the impacts of the new IMO regulations on transportation costs', Helsinki: The Centre
for Maritime Studies, Turkku University by assignment of the Finnish Ministry of Transport and
Communications
Linde Group. (2012), Presentation by Olof Kallgren at LNG day in Stockholm (Feb 7)
Maersk (2011), Slow steaming – the full story
MARINTEK. 2012, Presentation by Dag Stenersen in Sundsvall on June 7
Mikkelsen,M. Nilsson,A. Westberg,J.(2010) Bränsleövergångar - Miljölagstiftningarnas inverkan på
fartygsdriften, Kalmar: Linnéuniversitetet, examensarbete.
North East Cargo Link (NECL) II. 2012, Corridor Cargo Flow and Passenger Statistics.
OECD (2012), Environmental Outlook to 2050 - The consequences of inaction
Purvin & Gertz Inc. (2009), Impacts on the EU refining industry & markets of IMO specification changes.
Shortsea Promotion Centre Finland (2012), Transport and the Environment
Sjöfartstidningen (2012), Scrubber stuck at test stage, article by Fredrik Davidsson (nr 3)
Swahn, Magnus (2006), 'Decoupling för att minska transportlogistikens negativa miljöpåverken - Från teori
till verklighet', (Naturvårdsverket)
SWECO Energuide AB (2012), 'Effekter av svaveldirektivet - En rapport till Svenskt Näringsliv,
Augusti 2012',
Swedish Maritime Administration (2009), 'Consequences of the IMO's New Marine Fule Sulphur
Regulations',
Trafikverket (2012), Transportsystemets behov av kapacitetshöjande åtgärder
Vectura (2012), 'Report, North East Cargo Link (NECL II) Activity 3.1 “All pieces in place”', (Trafikverket)
Woxenius, J. (2010), 'Flexibility vs. specialisation in European short sea shipping'.
Wärtsilä (2010), Exhaust Gas Scrubber installed onboard MT “Suula”
Wärtsilä (2009), Reducing Emissions from Shipping, Presentation of Dir Arnauld Filancia
Wärtsilä (2010), Technical Journal, Slow steaming – a viable long term option?
ÅF Infraplan (2010), 'Supply of Raw Materials, Transport Needs and Economic Potential in Northern
Europe', (Report on the mission of Swedish Ministry of Enterprise and Infrastructure)
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Acknowledgments
We want to thank all those who have contributed to the content of this report,
with all their knowledge, expertise, experience, thoughts and worries. Some of you
are cited in the text but all of you have provided us with background for making it
possible to condense complex and uncertain issues of the consequences of the
implementation of the sulphur directive. Among others, we want to direct our
gratitude to the experts who participated in the NECL II hearing in Sundsvall the 7
June 2012, from Gothenburg University, Baltic Institute, of Finland, Trondheim Port
Authority and MARINTEK in Norway and the Association of Ports of Sweden. A
special thanks to SCA Transforest AB for numerous contacts and several fruitful
meetings on this issue. We are also equally thankful to many organisations and
authorities for providing information and facts, such as all of the ports in northern
Sweden and some in Finland, Swedish Forest Industries, Chambers of Commerce,
Swedish Transport Administration, Swedish Maritime Administration, ministries in
Sweden and Finland and several EU projects in the field of transports. Moreover,
we want to thank all the many companies, which have shared their expertise as
well as worries and expectations, SCA, SSAB, LKAB, Wärtsilä, Alfa Laval, Preem,
Stena Line, Wallenius Wilhelmsen and many more. Last but not least, we are
thankful for all the interest for the issue that many people have shown throughout
the period of this study.
The authors
Gustav Malmvist and Bengt Aldén
Page 62

NORTH EAST CARGO LINK II PROJECT
Development project in Baltic Sea Region Programme 2007–2013.
Duration: 2010–2013
Budget: approx. 2,7 M€.
22 partners from all Midnordic regions, Sweden, Finland and Norway.
Expected results
Close cooperation with national transport authorities and industry and
other related projects and transport corridors.
Affect the infrastructure planning in various countries in the direction of
investment promoting the Midnordic transport corridor.
A fully working operational ICT-system for transport operators and cargo
owners.
Remove border obstacles that inhibit trade and transport between
countries.
A valuable base for environmental efforts towards a transition from road
to rail and marine transport, which will improve the environment.
Better transport service and improved goods transport solutions for
region´s existing companies.
www.midnordictc.net
Contact information – Lead Partner
County Administrative Board of Västernorrland,
SE - 871 86 Härnösand, Sweden
+46-611-34 90 00 E-mail: vasternorrland@lansstyrelsen.se