Cost Management in Emission Control Areas (ECA) 2016

ECA Compliance Methods

The year 2015 has seen quite a few changes and challenges to the shipping industry including the reduction in oil prices, and currency fluctuations in South American countries such as the drop of the Brazilian Real and Mexican Peso. Arctic warming has opened up new routes while other areas suffer from global warming and its effects (rising sea levels, changed erosion and sedimentation patterns). Additionally, the Emission Control Areas (ECA) imposed a 0.1 % sulphur emission level and Low Sulphur Surcharge (LSS) at the beginning of this year. The effect of these changes and challenges are wide in range.

 Here are some options to consider when sailing in the ECA.

  1. Low Sulphur Marine Gas Oil (LSMGO): Widely used, it has been the fuel of compliance of late. Already widely known in the industry, it requires minimal investment for vessel infrastructure, has a well-established bunker supply chain and favourable price (in the past few months especially). LSMGO is especially popular with the container, bulkers and tankers. Key investors are Maersk Line, MSC, Eimskip, Tallink and Hurtigruten.
  2. Scrubber: Installing scrubbers removes or “scrubs” SO2 emission from the exhaust leading to lower sulphur emissions. The passenger and ro-ro categories within the industry have decidedly moved towards installing scrubbers,,although the drop in global oil prices seems to be impacting this adoption negatively in the recent months.
  3. Liquefied Natural Gas (LNG): While a decent percentage of the industry is leaning towards LNG, concerns regarding bunkering infrastructure, global price drop, and vessel retrofitting are inhibiting growth in the use of LNG. It is used mostly by the container and passenger category of the shipping industry and favoured by the Greeks, despite the fall in rates.

Note: Low Sulphur Surcharge will be applied according to the cargo and route taken by the vessel.

While the LSMGO seems to be the ideal option, come 2020 or 2025 when the global 0.5% sulphur emission limit gets enforced, a better, more efficient and permanent solution would be required. Perhaps one that is tailor-made to match every vessels requirement.

Why ECA Compliance

Initiated by the International Maritime Organisation (IMO), these rules come into effect under
the International Convention for the Prevention of Pollution from ships (MARPOL) Annex VI (Regulations for the Prevention of Air Pollution from Ships), specifically under regulation 14, which covers emissions of Sulphur Oxides (SOx) and particulate matter from ships. These requirements were adopted in October 2008 by consensus and entered into force in July 2010.

The Emission Control Areas (ECA) established under MARPOL Annex VI for SOx are the Baltic Sea area; the North Sea area; the North American area (covering designated coastal areas off the United States and Canada); and the United States Caribbean Sea area (around Puerto Rico and the United States Virgin Islands).

Sulphur emission contributes significantly to sulphur dioxide emission levels, both of which are known to be hazardous to human health. These measures are therefore in place to reduce the sulphur emission levels near ports and populated coastlines.

Enforcing ECA compliance falls under the remit of each European Union member country. The penalties could range from heavy fines to vessel detention.

PortPoint software allows quick access to port costs based on port, vessel and cargo. Observed data for terminals and berths in thousands of ports. For a free 7 day trial, visit www.portpoint.com.

Sources:
Ms Swati Pathak, MEC Intelligence
Karen Jacques, Dryad Maritime
Olga Lyakhovetskaya, Shapiro
International Maritime Organisation (IMO)
Harry Papachristou Athens, Tradewinds

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