Ananth Srinivasan, Vice President, V-TIC
Imagine that you just bought this huge refrigerator. Your new buy is almost twice as big as anything out there. It is beautiful but is heavier than the Samsung model that your wife liked. You seemed to have done your due diligence, you ran your spreadsheet model and most importantly, the brochures of this huge, heavier fridge showed all the advantages of this model. Yes, you paid about the same as a regular fridge, but surely this one, though heavier and larger, is worth it. The one thing you have to figure out is how to get it into the house.
You call up your architect friend and he gives you an easy way to bring in the refrigerator through the back of the house. You will have to break the back entrance of the house, use a forklift to bring in the fridge, and rebuild the back entrance. How do you explain to your family that you didn't account for the cost and time needed for the installation process?
to calculate the True Total cost, one has to also account for the dry dock time
In the last few weeks, we have had several meetings with clients about our Horizontal Scrubbers. In almost all cases, our clients were impressed with the innovation the horizontal scrubbers. They realized that the Vertical Scrubbers in the market were like the large refrigerator example above. Although comparable in price, when they accounted for the installation costs, the price almost doubled.
However, to calculate the True Total cost, one has to also account for the dry dock time. It is not enough to account for just the installation costs, but one has to also account for the time the ship remains idle and not chartered. A typical Vertical Scrubber needs about 30-45 days of dry dock time for a VLCC. A horizontal, skid-based system, can be installed in less than 7 days of dry dock time. At $30,000/day of a typical VLCC charter, a difference in dry-dock time alone could lead to an extra expense of $1.2MM for Vertical Scrubbers!
From the above table, we can determine that the total cost is more than the equipment cost or the equipment and installation cost alone. The lack of utilization during dry docking results in tangible losses which should be accounted for.
A typical Horizontal Scrubber has 50% of the weight of a Vertical Scrubber and occupies 50% of the space
A typical Horizontal Scrubber has 50% of the weight of a Vertical Scrubber and occupies 50% of the space. In addition to the installation costs and the wasted dry dock time, one should also account for the extra power and additional fuel consumption the heavier Vertical Scrubber will cost through the life of the ship. A ship fitted with a Vertical Scrubber will result in a ship carrying lesser cargo compared to a lighter Horizontal Scrubber.
In summary, our clients have taken a total-cost approach in determining which scrubber to use. While it important to choose a quality product and focus on minimizing the price of the product, they realized that it was important to account for the intangible costs as well. Once they accounted for the total costs in their models, they were more inclined to use Horizontal Scrubbers.
One client accounted for the items below in their model and was able to convince his management to use the newer, more efficient horizontal scrubbers compared to the larger, heavier, and older design Vertical Scrubbers. He made the case that the time had come in the Marine industry to get efficiencies in every aspect of the ship, and a scrubber was no exception.