Business

Clyde & Co: An introduction to decarbonisation in shipping

Law firm examines various IMO and EU regulations which are due to come into force over the next few years and discusses legal considerations they raise for stakeholders.

Published

2 years ago

January 3, 2023

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International law firm Clyde & Co LLP on Thursday (8 September) published a market insight as part of a series of articles to examine various IMO and EU regulations which are due to come into force over the next few years with the aim of regulating and reducing shipping’s carbon footprint through various initiatives.

Associate Kirsten Cottrell-Conacher discusses the key practical and legal considerations they raise for owners, charterers, and other stakeholders:

IMO

There are two upcoming IMO measures directed at reducing greenhouse gas emissions from ships, both added to MARPOL Annex VI in 2021. The two new measures are the Energy Efficiency eXisting ship Index (EEXI), a one-off certification assessing the design, construction, and technical features of the ship; and the Carbon Intensity Indicator (CII), an ongoing measure of how environmentally friendly a ship’s operations are. The IMO’s stated goal is to reduce the carbon intensity of all ships by 40% by 2030 and 70% by 2050 (as against 2008 levels), and EEXI and CII build on existing measures to try and achieve this.

Energy Efficiency Existing Ship Index (EEXI)

EEXI is a one-off classification of the energy efficiency of a ship’s design, construction, and technical features, and seeks to impose a minimum standard on the global fleet. A wide range of ship-types are caught by the EEXI regulations (all existing ships of 400 GT and above falling under MARPOL Annex VI) and existing vessels will be required to have their EEXI technical files prepared by the time of their next International Air Pollution Prevention (IAPP) Certificate Renewal from 1 January 2023. Newbuilds will be required to do so by their initial survey before entering service. Information from various vessel documents is used to assist in preparing the EEXI technical file, including capacity plan/lightweight certificate, the trim and stability booklet, any sea trial reports, NOx technical files, the IAPP and, for newer vessels, the EEDI (Energy Efficiency Design Index) technical file.

There is not a single, universal EEXI figure for all vessels – rather, a “required EEXI” exists based on ship type, capacity, and engine and the “required EEXI” represents the minimum standard for each ship type. Each individual ship is then ascribed a calculated “attained EEXI”. The “attained EEXI” for that ship needs to be less than or equal to the required EEXI for that ship type in order to comply with the regulations.

The EEXI describes the ship’s anticipated carbon emissions, expressed per cargo ton and mile, taking into account factors like engine power, fuel oil consumption, and cargo capacity. These factors are all added into a formula which calculates the ship’s EEXI value. Improvements to the carbon intensity of the ship’s design and technical features will reduce its EEXI value.

While EEXI compliance does not necessarily require technical modifications to a ship, in practice this is likely to be required for many vessels in order to achieve the minimum required EEXI rating of “C” or above. The regulations do not prescribe any particular modifications or means of achieving compliance. The most popular choice of measures is Engine Power Limitation (EPL) and/or Shaft Power Limitation (SHAPOLI) as these are relatively cheap, quick, and straightforward to implement (though such modifications can have detrimental effects on speed and other performance metrics, with potentially adverse consequences for any warranties given to charterers, an issue which we will consider in greater detail in a future article in this series).

In 2021, BIMCO published a model EEXI transition clause for time charterparties, specifically addressing EPL/SHAPOLI modifications. Major charterers and/or shipowners also have their own bespoke clauses which we have seen being used, more than the BIMCO “standard” clause.

Other options which may enhance a ship’s EEXI classification include increasing cargo capacity, installing more efficient propellers and associated equipment, or potentially more radical (and expensive) alternatives such as switching to carbon-neutral fuel or introducing entirely green power technologies.

It is important to note that EEXI is a theoretical figure, based on a ship’s design and technical features, not an indicator of its actual carbon emissions. This aspect is covered by the CII.

The IMO intends (under MARPOL Annex VI Regulation 25.3) to review the effectiveness of the EEXI measures by 1 January 2026 to assess their effectiveness, and will possibly make amendments to them once there is real-world data available on the effectiveness of the measures and their practical consequences (such as what steps owners take to ensure vessel compliance; what, if any, consequences vessels with poor EEXIs face; and whether the measures result in a significant reduction of shipping’s contribution to global carbon emissions).

Note: The full article can be viewed here while the podcast series accompanying the article series can be found here.

Photo credit: william william on Unsplash
Published: 3 January, 2022

Business

Shell MGO bunker heist: Bunker clerk pleads guilty to helping Sentek acquire misappropriated fuel

Wong Wai Meng, who received more than USD 286,000 from Sentek Marine & Trading for his assistance, pleaded guilty to 12 counts of intentionally helping the firm acquire the misappropriated marine gas.

Published

11 hours ago

December 2, 2024

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A bunker clerk, Wong Wai Meng, who received more than USD 286,000 (SGD 384,681) from Singapore-based Sentek Marine & Trading (Sentek) for his assistance, pleaded guilty to 12 counts of intentionally helping the company acquire misappropriated marine gas oil, The Straits Times reported on Friday (29 November).

The 58-year-old Singaporean was employed at the Sentek when he assisted in acquiring more than 28,000 metric tonnes (mt) of the misappropriated fuel worth USD 13.58 million (SGD 18.26 million).

Wong committed the offences over 46 occasions between August 2014 and December 2017.

Wong is among the three bunker clerks previously employed by Sentek, who were charged for offences under the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA) and the Prevention of Corruption Act (PCA).

Another bunker clerk among the three charged, Wong Kuin Wah, 61, was sentenced to seven years and six months’ jail on 18 November for his role in misappropriating more than 27,000 tonnes of gas oil worth around USD 12.8 million (SGD 17.2 million).

The third individual who was charged, Boo Pu Wen, reportedly passed away in July 2023 and had his charges abated following his death, meaning Boo’s court proceedings over his 19 charges at the time came to an end.

Former Shell employees, who were key members of a group who dishonestly misappropriated fuel from Shell Pulau Bukom, were sentenced to jail in court earlier.

Earlier coverage of developments by Manifold Times regarding the Shell MGO bunker heist can be found below:

Photo credit: Katrin Bolovtsova
Published: 2 December, 2024

Biofuel

Singapore: GCMD introduces new technique for FAME bio bunker fuel fingerprinting

Fingerprinting identifies feedstock origins of FAME-based biofuels used in shipping industry; can be used as a potential tool to detect fraud in marine fuel supply chains and ensure biofuel authenticity.

Published

11 hours ago

December 2, 2024

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Singapore: GCMD introduces new technique for FAME bio bunker fuel fingerprinting

The Global Centre for Maritime Decarbonisation (GCMD) on Monday (2 December) released its latest report, presenting a new technique that creates a fingerprint for Fatty Acid Methyl Esters(FAME) bio bunker fuels.

This fingerprint identifies the feedstock origins of the FAME-based biofuels used in the shipping industry.

GCMD said FAME fingerprinting is needed as the shipping sector is increasingly using biofuels, such as FAME, to reduce its GHG emissions. With that, concerns have arisen regarding the legitimacy of biofuels and whether they are truly sustainable.

Industry bodies are seeing a rising number of cases mislabelling biofuels purported to be made from recycled oils and fats, while suspicions persist that they might be produced from cheaper and less sustainable virgin oils.

“To address these concerns, FAME fingerprinting can be used as a potential tool to detect fraud in marine fuel supply chains and ensure biofuel authenticity. By providing a physical validation method that complements existing certification schemes, FAME fingerprinting can help justify the green premium with genuine environmental benefits and safeguard the integrity of marine fuels supply chain,” GCMD said.

FAME fingerprinting is based on the principle that the fatty acid profile of FAME is unique to its feedstock and can be preserved during feedstock transesterification to produce FAME. The "fingerprint" can then be compared against a database of known fatty acid profiles to identify the feedstock origin.

GCMD worked with VPS who modified existing fuel testing methods to carry out sample analyses using a gas chromatograph with flame-ionisation detection, an instrument commonly found in fuel test laboratories.

The analysis takes about an hour, comparable to the turnaround time for current marine fuel quality testing in the supply chain.

“We have tested this method on a variety of FAME samples from different suppliers, including virgin oils, used cooking oils, palm oil mill effluent, beef tallow and food waste and were able to identify the feedstock origins for each sample,” GCMD added.

Manifold Times previously reported Captain Rahul Choudhuri, President, Strategic Partnerships at marine fuels testing company VPS, forecasting the use of finger printing technology today will likely establish a blueprint of how future alternative bunker fuels’ feedstocks are authenticated.

Captain Choudhuri said this when he gave an update of VPS’ biofuels finger printing trials with GCMD.

Note: The full report, titled ‘Rapid forensic analysis of FAME-based biofuels: Potential use of its fingerprint as a fraud detection tool’, can be downloaded here.

Photo credit: Global Centre for Maritime Decarbonisation
Published: 2 December, 2024

Methanol

PLAGEN to produce and supply green methanol bunker fuel with Latvia plant

Korean firm’s MoU with AE Risinājumi will see construction of Latvia’s first commercial-scale green methanol production plant, which will supply green methanol to ships in EU’s maritime fleet.

Published

11 hours ago

December 2, 2024

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PLAGEN to produce and supply green methanol bunker fuel with Latvia plant

South Korean clean energy firm PLAGEN on Friday (29 November) signed an MOU with Latvian company, AE Risinājumi, for the production of green methanol in Latvia at the “2024 Latvia-Korea Business Forum” hosted by the President of Latvia.

The agreement will result in the construction of Latvia's first commercial-scale green methanol production plant, which will supply green methanol to ships in the EU's maritime fleet, contributing to the reduction of greenhouse gas emissions from maritime transportation.

PLAGEN's MoU aims to produce 20,000 metric tonnes (mt) of green methanol per year and will begin feasibility studies in the first half of 2025, and full-scale production will begin in 2028.

With 53% of Latvia's land area covered by forests, timber production and wood processing make a significant contribution to Latvia’s economic production, which generates a large amount of forest residues and wood wastes. In addition, Latvia also has an abundance and low price of renewable electricity from wind power.

Latvia is one of the most competitive countries in the European Union, as it can produce clean methanol at a competitive price by using abundant wood waste as a raw material and renewable electricity from cheap wind power.

The use of abundant forest residues and wood wastes as a feedstock and cheap renewable electricity from wind power makes it possible to produce green methanol with a competitive price, making Latvia is one of the most competitive countries in the EU.

In the European Union, the European Emissions Trading Scheme (EU-ETS) will come into effect in 2025, requiring shipping companies to purchase carbon credits for their greenhouse gas emissions.

In addition, the EU is implementing FuelEU Maritime, which aims to reduce greenhouse gas emissions by 2% below the 2020 average by 2025 and 80% by 2050. This is expected to result in an energy transition to green methanol.

In July 2023, the International Maritime Organization (IMO) adopted a revised strategy that calls for reducing greenhouse gas (GHG) emissions from ships to net-zero by or around 2050, and plans to introduce full-scale regulations from 2027, and shipping companies have begun ordering methanol-powered ships fueled by green methanol, a carbon-neutral fuel.

“We expect to start producing green methanol in Latvia in 2028, which will reduce greenhouse gas emissions from EU maritime transport vessels and contribute significantly to the revitalization of the Latvian economy and national energy security,” said John Kyung, CEO of PLAGEN.

In November 2024, PLAGEN completed the purchase of an industrial complex and received a government permit for the construction of the country's first green methanol plant in Dongjeom Industrial Complex in Taebaek City, Gangwon-do.

The project, which will produce 10,000 mt per year, is scheduled to begin construction in the first half of 2025 and begin production in the second half of 2027.

Photo credit: PLAGEN
Published: 2 December, 2024