Don’t wait 30 years
Major shipping lines are facing agonising decisions concerning their choice of ship engines of the future and the concomitant fuel. In Hamburg we looked into the options’ pros and cons with Richard von Berlepsch, Hapag-Lloyd’s fleet management director.
Mr von Berlepsch, you’re not just a shipping man, but also an engineer and thus familiar with technical matters. What do you think of the ongoing ecological discussion?
Many different aspects are subsumed in the debate concerning the environment. Whilst many people are talking about a general reduction in greenhouse gases, which is a global social goal, maritime shipping has initially agreed to reduce sulphur emissions from fuel by 85%, through the IMO 2020 regulation, which entered into force on 1 January. This does not mean that all nitrogen or carbon dioxides are automatically also included.
So does this mean that many people are talking – but the maritime economy is delivering concrete measures?
Absolutely. In terms of reducing emissions, our industry is a hidden champion.
Are you paying a high price for this?
It’s true that compliance with IMO 2020 causes extensive costs. The entire maritime shipping industry is expected to face additional outlays of up to USD 60 billion on account of increasing fuel costs. Fuel producers are selling low-sulphur fuel at a USD 250 premium per tonne, in comparison with the price that prevailed three years ago.
What solutions has Hapag-Lloyd selected?
We’ve opted for low-sulphur fuels for the vast majority of the vessels in our fleet. We believe that, across Hapag-Lloyd, we’re facing added costs amounting to approximately USD 1 billion annually in an initial stage. Another aspect we’re exploring is retrofitting the containership Sajir for services run by LNG in dual operations.
How will you absorb these new costs?
Through the means of our marine fuel recovery (MFR), our general fuel charge, to begin with, which entered into force on 1 February 2019. On the basis of a transparent calculation system customers can see exactly what our price increases are based on and how large they are, and simultaneously benefit from lower fuel prices, which we also pass on. In addition to the MFR, the IMO 2020 transition charge (ITC) has applied since 1 December 2019 for FAK cargo and for the spot and ‘quick quotes’ business. Operational adjustment costs are also covered by the ITC.
What have the reactions been like?
The system is not only simple, as it is linked to indices, bunker prices and the size of vessels, it also does not represent a one-way street, as the costs can also be reduced quarter by quarter, for example if fuel prices fall. This will make us a few friends amongst the shippers. We additionally assume that the price for fuel with a 0.5% sulphur content will level off at a fair market price in the medium term.
What’s your assessment of other technical solutions, such as scrubbers?
Scrubbers require a very substantial amount of energy to clean the fuel emissions on board the vessel, which is why we’re banking on alternative solutions.
What about fuel cells?
This technology of transforming fuel into electrical energy is not mature yet for wide-scale deployment.
What about LNG?
90% of the fossil fuel LNG, a transition fuel, is made up of methane. Looking at the calorific value, the combustion of methane produces approximately 10 – 30% less CO2 than diesel fuel does, for example. So its represents an interesting technology. This is why retrofitting the Sajir is such a heartfelt measure for us. (See also page 11 of ITJ 23-26 / 2019).
What are the advantages?
Newbuildings with LNG-powered engines will only enter the market gradually – it will take decades until the last units with traditional engines are scrapped.
With the Sajir, a 15,000 teu vessel that we’re retrofitting with a dual-fuel engine, we’ll prove that you don’t have to wait 30 years to switch to LNG. We’re also testing numerous technical innovations in this prototype. For example, we’ve already attained values today that are 60% lower than the standards for specific CO2 emissions from freighters, as set down in the industry’s Energy Efficiency Design Index (EEDI).
What’s your opinion of SNG?
Synthetic natural gas (SNG) can be used in an LNG engine that has been set up accordingly. Many developers consider synthetic methane or the addition of hydrogen only the second-best solution, however, as the combustion of SNG in engines is less energy-efficient than other solutions that already exist. In my opinion this option represents a technically interesting approach, but it is not yet ready for the market or able to compete.
