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Chelsea Technologies: Scrubbers driving profits for VLCCs, but could create big costs

29 Apr 2021

With the Hi-5 spread continuing to rise in major bunkering hubs like Singapore, Fujairah, Rotterdam and Panama and scrubber uptake steadily growing in parallel, Adam Jolliffe of UK-based environmental sensing technology company Chelsea Technologies on Wednesday (28 April) published a summary the underappreciated risks to the profitability of exhaust gas cleaning systems:  

Scrubber owners have faced a turbulent few years. During 2019 and the last few months of 2020, the VLSFO – HSFO spread was so significant that a shipowner who had installed a scrubber could expect a rapid payback. That all changed in March of last year, as the COVID-19 pandemic and disputes within OPEC+ combined to drag the price difference between the two fuels to historic lows.

Times change quickly, and bunker prices are on the rise again. The market is changing once more, and scrubber savings have increased to roughly $5,000 a day for VLCCs. These savings are so significant that Gibson Shipbrokers recently said that 40% of VLCCs will install a system.

Despite the clear business case for installing a scrubber, and the fact that they represent a legitimate IMO 2020 compliance method, there has been persistent uncertainty about their future due to disputed claims about their environmental performance.

Over the past year, it is the prospect of regulatory change that will concern shipowners the most.

Any change in regulation that could make a scrubber system obsolete changes the maths for shipowners. An exhaust gas cleaning system represents a multi-million-dollar financial outlay – often via a loan – that needs to be paid back. Thus, owners must mitigate and manage this risk by future proofing their installation.

A focus on wash water

The IMO’s rules require scrubber installations to monitor the wash water effluent created by the system. This is to guard against any issues with a vessel’s engine or scrubber discharging contaminants like unburnt oil into the sea.

These regulations provide a comprehensive list of the kinds of pollutants that must be measured for and explain how these measurements must be taken. That is, with one exception: polycyclic aromatic hydrocarbons (PAH), the measurement standard for which currently diverges between different national standards.

PAH is a category of carcinogenic chemicals that have a detrimental impact on both human and marine life, and if left unchecked could damage aquatic ecosystems. In the context of a scrubber, PAH particles are created as a by-product of improperly burnt marine fuels which are often created as a consequence of an engine in need of a service. 

Current regulations vary based on which types of PAH particles must be measured for. The minimum required in the IMO rules see only measurement for the most common types of PAH, while some jurisdictions like the USA require full range PAH measurement.

As in any global shipping rules, regional variations create extra complications and costs. In this context, the IMO is currently seeking to harmonise the global regulatory regime on PAH standards for scrubber wash water testing. We could start to see real change as early as MEPC 76 later this year. 

Future proofing against harmonisation

A scrubber’s useable lifespan must be measured in years rather than months for it to deliver any profit for a shipowner. This means that owners are tasked with anticipating future regulatory challenges and cutting their exposure to these risks today.

All scrubber installations must include a wash water monitoring system, which must provide some level of PAH analysis. The best way of guarding against these risks is to select a scrubber wash monitoring system that delivers the highest possible level of analysis today. A system must use a proven, accurate methodology to provide a full-range PAH measurement.

Chelsea’s Sea Sentry system uses bespoke sensors and a user-friendly interface to provide this full-range lab accurate analysis. Installed in hundreds of vessels and certified by DNV-GL and ClassNK, Chelsea’s Sea Sentry is trusted by shipowners seeking to futureproof their vessels from impending regulation.

Scrubbers are already profitable for VLCCs, and are becoming a key differentiator in the charter market. They will become more profitable, especially as the VLSFO – HSFO spread continues to widen – so long as systems remain compliant. However, they also pose a risk; an owner could easily be left with huge unrecovered costs or a missed opportunity without proper wash water monitoring.


Photo credit: Chelsea Technologies
Published: 29 April, 2021

 

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