Complying with the 2020 global sulphur limit

Abstract

International Maritime Organization (IMO) has decided that the global sulphur limit in ship emissions shall be decreased from 3.5% to 0.5% in year 2020. This is a major change for the shipping industry which can have a large economic impact. There are numerous different compliance methods that ship owners can invest in before and after 2020. Two of these compliance methods are scrubber systems and fuel-switching operation. Scrubber systems allow ships to continue operating on HFO (heavy fuel oil, 3.5% sulphur) which is a relatively cheap bunker fuel. Fuel-switching is when ships switch between operating on ULSFO (Ultra low-sulphur fuel oil, 0.5% sulphur) and MGO (Marine Gas Oil, 0.1% sulphur). HFO is cheaper than MGO and ULSFO which makes operative costs lower, but the installation of scrubber systems is associated with a higher capital cost. Ship owners must decide what type of compliance method their vessels will use after 2020. This thesis presents total lifespan costs for scrubber systems and fuel-switching systems on two types of newbuilt vessels after 2020. This thesis also presents break-even number of years for the scrubber, compared to the fuel-switchning compliance method. The results indicate that the scrubber option is always cheaper for a specific container vessel and a tanker vessel after a 15-year lifespan. The break-even point is reached around 3-5 years for both vessels.