New ‘sweet’ fuel to help sea freight become more environmentally shipshape

Shipping fuel is responsible for serious global pollution, but there are fears that switching to cleaner fuels could see costs rise for consumers. (AFP)
Updated 05 September 2019

New ‘sweet’ fuel to help sea freight become more environmentally shipshape

PARIS: Tens of thousands of cargo ships will have to use less polluting fuels in January, in a move that could raise bills for consumers.

The International Maritime Organization (IMO) decided in 2016 that sulfur levels in fuels for ships, currently 3.5 percent, would have to fall to 0.5 percent in 2020.

The idea is to reduce the emission of highly toxic sulfur dioxide — a health hazard responsible for acid rain — by the nearly 80,000 cargo ships which ply the seas.

The shipping industry is critical to the global economy but the pollution it generates is estimated to cause 400,000 premature deaths per year.

Shipowners have several options to meet the new regulations.

One is to continue with heavy fuel oil but install scrubbers that remove sulfur from the exhaust fumes. But these can be expensive, and some models dump the water used to clean the exhaust into the ocean.

A second option is for shipowners to convert their vessels to run on liquefied natural gas (LNG), which is less polluting, but few have chosen it as LNG fueling infrastructure doesn’t exist in all ports.

The easiest option for many is to switch to new fuels with low sulfur content or marine diesel oil.

Around 3.6 million barrels of oil per day (bpd) are used to produce the fuels used by the shipping industry. Around one-sixth of the total is expected to remain dedicated to production of high-sulfur content-heavy fuel oil for vessels equipped with scrubbers or those which do not immediately comply with the new regulations.

“That leaves about 3 millions bpd that needs to adjust to the 0.5 percent fuel regulation” said Chris Midgley, head of analytics at S&P Global Platts.

The International Energy Agency said recently that the oil products market is heading for its “largest ever transformation” as refiners “will need to adapt to a new demand landscape.”

The first impact on shipowners will likely be an increase in costs.

Fuels that meet the new regulations are more complex to produce and are “two times more expensive, but we could see an even larger increase with higher demand,” said Nelly Grassin of Armateurs de France.

 

 Cargo firms may be tempted to raise their rates to ship goods, which could eventually lead to higher prices for consumers.

Both Brent and WTI, two benchmark grades of crude oil that are heavily traded on the markets, are “sweet” in industry parlance, meaning they have a low sulfur content.

But crude pumped from many other areas is “sour,” meaning it has more sulfur, including hydrogen sulphide is more costly to process.

“Brent could rise and test $70, maybe break through $70 at the end of the year,” said Midgley, compared to under $60 per barrel currently.

The new IMO fuel regulations “will have a knock-on impact on all consumers who are buying gasoline or diesel,” he added.

For Alan Gelder, a vice president at the energy research and consultancy group Wood Mackenzie, “the general public will be impacted by the IMO regulation in two major ways — the cost of flights and the retail prices of road diesel.”

Any increases in airfares are likely to be more gradual as airlines usually lock in prices for several months in advance.

Decoder

Sweet and sour crude oil

Crude oil with high sulfur content is known in the industry as ‘sour,’ while low sulfur content oil is described as ‘sweet.’


Abu Dhabi carrier Etihad launches more fuel-efficient Boeing 787 Dreamliner

Updated 18 November 2019

Abu Dhabi carrier Etihad launches more fuel-efficient Boeing 787 Dreamliner

  • Etihad’s CEO Tony Douglas described the aircraft as a flying laboratory for testing that could benefit the entire industry
  • This year, Etihad flew the world’s first passenger flight using sustainable biofuel made from a plant that grows in saltwater

DUBAI: Abu Dhabi’s flagship carrier Etihad Airways announced on Monday it is launching one of the world’s most fuel-efficient long-haul airplanes as the company seeks to save costs on fuel and position itself as a more environmentally-conscious choice for travelers.
Etihad’s “Greenliner” is a Boeing 787 Dreamliner that will depart on its first route from Abu Dhabi to Brussels in January 2020. Etihad’s CEO Tony Douglas described the aircraft as a flying laboratory for testing that could benefit the entire industry.
With fuel costs eating up around a quarter of airline spending, Douglas said the goal of the Greenliner is to be 20 percent more fuel efficient than other aircraft in Etihad’s fleet.
“This is not just a box-ticking exercise,” he told reporters at the unveiling of the initiative at the Dubai Airshow alongside executives from Boeing.
Douglas said the aircraft “not only makes sense economically from a profit and loss account point of view, but because it also directly impacts the CO2 because of the fuel burn.”
Etihad has reported losses of $4.75 billion since 2016 as its strategy of aggressively buying stakes in airlines from Europe to Australia exposed the company to major risks.
Despite its financials, the airline continues to be among the most innovative.
This year, Etihad flew the world’s first passenger flight using sustainable biofuel made from a plant that grows in saltwater. It also became the first in the Middle East to operate a flight without any single-use plastics on board to raise awareness of the effects of plastic pollution.
Aviation accounts for a small but rapidly growing share of greenhouse-gas emissions — about 2.5 percent worldwide. But forecasters expect air travel to grow rapidly in the coming years.
Etihad says it plans to make the Greenliner a “social media star” to bring under sharper focus its developments and achievements worldwide. Douglas said anything that Eithad learns with Boeing from this aircraft’s operations will be open domain knowledge “because it’s about moving the industry forward in a responsible fashion.”
“We’re like a millennial and like all good millennials, they’re really focused on the environment and the sustainability agenda,” Douglas said, referring to Etihad’s 16 years in operation.
The Greenliner will be the only aircraft of its kind in Etihad’s fleet of Dreamliners. The company currently has 36 of the 787s in its fleet with plans to operate 50.
“This is a small step today, but in a very, very long journey,” Douglas said.