Hughes left the IMO in February to set up a consulancy. Image Credit: IMO
Owners of scrubber-equipeed ships should not be concerned about an immediate wider imposition of bans on washwater discharge from open-loop models of the emissions-cleaning equipment, according to one of the key officials behind the IMO 2020 regulations.
Edmund Hughes oversaw the International Martitime Organization's emissions regulation policies for much of the last decade until early February, when he stepped down as the UN body's head of air pollution and energy efficiency to set up a consultancy.
In an interview with Ship & Bunker last week Hughes expressed doubt that the bans would spread to the regional or global level.
"There's always a risk, but not initially, no," he said.
"Not for a reasonable period of time that would allow you still to get a return on investment."
The implications are more operational, that you might have to carry three types of fuel.
Hughes suggested the restrictions on open-loop scrubbers at some ports were more of an operational risk than a financial one.
"Some countries are extending it to territorial waters as well, but it's still a relatively small part of the global ocean," he added.
"The implications are more operational, that you might have to carry three types of fuel -- 0.10%, 0.50% and high-sulfur.
"Ultimately, if a ship is going to operate mainly outside any areas that are prohibiting the discharge of washwater from open-loop scrubbers, if their fuel consumption is mainly still outside those restricted areas then there's still an argument to use one."
Turbulent 2020 for Scrubbers
Those shipping companies that invested in scrubbers as a means of IMO 2020 compliance have had a turbulent year so far, enjoying enormous discounts for their high sulfur fuel oil (HSFO) at the start of the year but seeing payback times for their investments extending now as this month's crude collapse narrows price spreads.
The spread between HSFO and very low sulfur fuel oil (VLSFO) -- representing the fuel bill saving ships with scrubbers can take advantage of -- has narrowed from as much as $298/mt at Rotterdam at the end of 2019 to just $74.50/mt on Wednesday, according to Ship & Bunker pricing.
"We're seeing unprecedented circumstances now with the price spread narrowing dramatically; no-one foresaw it at less than $100/mt," Hughes said.
"The viability of investments starts to come into question -- it's an issue with risks, you try to make as reasonable an estimate as possible, but it doesn't always work out that way."
HSFO Supply Squeeze
He also warned that any decline in adoption rates for scrubbers could ultimately prompt refiners further to reduce HSFO supply, diminishing the economic case for scrubbers -- in particular in the tramp trade, where operators are unlikely to have secured their HSFO supplies.
"There's no doubt about it that the downside risks are becoming more apparent for scrubbers, and from a point of view of operation it's becoming more challenging," he said.
"Shipowners want their ships to be able to operate anywhere, and so anything that prevents that leads to consideration of the most appropriate compliance strategy."
Hughes's new consultancy, Green Marine Associates, will provide advice to companies and organisations, mostly in the shipping industry, on policy and regulation relating to air pollution, decarbonisation and other marine environment risks.