Japan’s Cosmo Oil has decided to hedge its 2020 compliance by fitting half of its operated VLCC fleet with scrubbers whilst running the other half on marine gas oil (MGO)
The decision, announced in Tokyo this week, reflects the huge uncertainty in the market over whether to burn expensive MGO or pay out up to $5m, in the case of a VLCC, to fit a scrubber in the hope that heavy fuel oil will still be available and at a lower price than MGO.
Cosmo operates a dedicated fleet of six VLCCs from Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK) and Kyoei Tanker.
The first to be fitted with a scrubber will be a VLCC newbuilding jointly owned by NYK and Kyoei which is scheduled to roll out of Japan Marine United’s Ariake shipyard in December 2019 just days before the new 0.5% sulphur limit kicks in.
It is understood an open-type scrubber system from Wartsila will be deployed on the vessel with the Japanese oil company paying out the initial capital expenses. The financial burden will eventually be shared with owner through the charter rate.
The other two ships to be equipped with scrubbers will be existing ships but it has not yet been decided which ships will be retrofitted.
The number of ships which are likely to be fitted with scrubbers remains limited.
Classification society DNV GL, in a report issued this week, estimates that there is likely to be no more than around 1,000 to 1,500 vessels opting to fit scrubbers and continuing to burn heavy fuel oil by the 2020 deadline.
Based on that assumption high-sulphur heavy fuel oil will represent less than 5% of the marine fuel oil used by the shipping industry.
When the IMO earlier looked at fuel availability it estimated around 4,000 ships would be fitted with scrubbers by 2020.
With such a low demand, DNV GL questions whether refiners will make heavy fuel oil available.
DNV GL said: “This raises the question as to whether high-sulphur fuel will even be available any more if only 4,000 or even less ships can use it. The next question is at what price high sulphur fuel will be available.”
The decision on whether to fit a scrubber has been complicated by the IMO’s recent announcement on reducing carbon emissions.
