The owners of 60,000 cargo ships are bracing for tighter emissions rules that are forcing them to make a multibillion-dollar choice: Start buying cleaner-burning fuel or invest in a device that treats the ship’s exhaust before letting it out. It isn’t an easy call. Retrofitting a vessel with a sulfur-trapping exhaust system called a “scrubber” costs as much as $10 million a ship, while cleaner fuels are about 55% more expensive than the ones shipping operators use now. Refineries say they will have enough cleaner fuel blends to meet demand, but many shipowners are opting not to wait and see. Scrubber manufacturers expect orders to total between $6 billion and $18 billion by 2026, from less than $300 million last year and just a few million in 2016. The lion’s share will go to big competitors such as Finland’s Wartsila Oyj, Sweden’s Alfa Laval AB and Norway’s Yara Marine Technologies. A study commissioned by the International Maritime Organization (IMO) says about 6.7% of the global commercial fleet, or around 4,000 ships, will be using scrubbers after 2020. Peter Leifland, Alfa Laval’s executive vice president, said a very large crude carrier, or VLCC, would spend $9 million a year using low-sulfur fuel mixes, but a $3.7 million scrubber system would cut the annual fuel cost to $7 million plus an annual service fee of as much as $75,000. Source: The Wall Street Journal, 3/20/2018, p. B1.

TCGR Note: This topic has been frequently covered here in CAP Communications and is now being covered in the Wall Street Journal and Bloomberg. The Bloomberg article highlights the benefits of the new rules to refiners. “80 percent of U.S. Gulf Coast refineries have coking units that can create transport fuels from the residual fuel oil from heavy crude.” “In the European Union, the rule change will raise refining margins by an average of 60 cents, to $8.10 per barrel in 2020.” Maersk, with a fleet of more than 770 vessels, expects that cleaner fuels will add around $2 billion to its average $3.3 billion fuel bill, but adds that using cleaner fuels is the preferred choice as it expects fuel costs to gradually decline.