All ships trading outside of sulphur Emission Control Areas (ECAs) will be required to use fuel with a sulphur content of up to 0.5 pct, a considerable reduction from the currently permitted maximum of 3.5 pct.
To comply, shipowners have to choose between scrubbers if they wish to continue burning high-sulphur fuel oil (HSFO), LNG as marine fuel, marine gas oil (MGO) and low sulphur fuel oil (LSFO).
Even though Scorpio continues to evaluate scrubbers, the company said that it does not see a “compelling argument to install them today.”
The installation of scrubbers can cost up to USD 5 million depending on the size of the ship and bigger ships have been identified as good candidates for retrofits, while for smaller ships there is an issue of space constraint.
Explaining its decision Scorpio said that regulatory, technological, and supply/pricing risks were key factors in deciding against scrubbers.
“The demand and fuel-efficiency stories are more relevant to the product tanker segment than the yes/no scrubber
decision,” the company added.
Scorpio is bullish on the increase in demand for product tankers stemming from the higher demand for LSFO as of 2020.
This is in part due to lack of investment in scrubbers on a global scale as well as companies taking the wait and see approach. What is more, the availability of scrubbers and the pace of their installation cannot nearly cover one quarter of the global fleet by 2020.
Due to the need for greater availability of low sulphur fuel across the globe product tankers are expected to benefit as they would need to transport the cargo to different locations worldwide. This is expected to result in new trade routes and increase the ton mile demand.
“By 2020, if 20 pct of the global fleet uses scrubbers or LNG, the remaining 80 pct would need to comply through consuming compliant fuels,” Scorpio estimates.
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