Industry News: Ferry Bunker and other Fuel surcharges

Ferry Bunker and other Fuel surcharges, feature at Short Sea 2013 Paris conference.

While Bunker fuel surcharges have been a feature of the unitised sea freight business ever since the first oil crisis, the imminent arrival of the European Special environmental Control Area (SECA) is now giving rise to serious thought and actions by Shipping Lines and Ports. At the Short Sea 2013, held in Paris in March and chaired by Glenn Murphy of the IMDO, the issue was set out very starkly. Northwest European waters have been divided into two zones, an outer zone with its eastern boundaries, a line between Land's End in England and Brest in Brittany and enclosed by a line running from the northwest corner of Scotland, west of Shetland and to a point half way up the west Norwegian Coast. The area enclosed, basically the English Channel, the North Sea and the Baltic, has been designated as a Special Environmental Control Area (SECA) due, mainly, to the high population densities in the countries bordering the seas and waterways within it. From 1st January 2013 the permissible level of sulphur emissions from ships and barges within the SECA has been set a 1%, but, 20 months from now this limit will be brought down to 0.1%.

The Paris conference was told that currently, at any one time in the European SECA, there are approximately 2,500 ships operating, and these would burn about 12 million tonnes of heavy fuel oil a year. By 2015 this level of pollution will have to stop completely. The solutions proposed include switching fuel to LNG and fitting "scrubbers" to clean the emissions en route to the funnel. At the time of writing there are 37 LNG fuelled ships in service in the area and another 31 on order, while only two vessels have had scrubbers fitted.

It's quite clear that the switch to either of these technologies is going to be far too slow to meet the deadline and that a third option, that of burning low sulphur fuel in existing engines is the most practical answer. It is interesting, by the way, that the estimated cost of retro-fitting "scrubbers" is €2.5 million per vessel which, in many cases, would be what the vessel was worth, while current LNG technology means that the much larger fuel storage tanks required needed to carry any reasonable amount of fuel, reduces the cargo carrying capacity of the vessel significantly. Whether or not the recent announcement by the US based Lockheed Martin Company that it was going to apply the technology and production facilities that it used to build the booster fuel tanks for the US Space Shuttle launches will enable vessels to used compressed natural gas, thus saving on space produces a game changer remains to be seen.

From 2020 vessels operating in European waters outside the SECA which now operates to a maximum pollution level of 3.5% will have to take that figure down to 0.5%.

The limits set out above have been put in place by the EU Authorities and, though it may run counter to public perceptions, this is not something where Europe leads and the US lags. The US East and West coast waters became subject to tough Sulphur emission limits from August 2012, while the US/Caribbean sea are adopts similar limits from January 2014. This is important for a number of reasons, the two most important, perhaps, being that it is extremely naive for the European shipping industry to think that the deadlines can be postponed or some sort of derogation would be put into place and, because switching ship's engines to running on low sulphur fuel, basically, diesel, will hugely inflate the cost of that product and, with it, the cost of all modes of land based transport.

To view the full ezine go to http://www.irishexporters.ie/

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