As world events make the fuel market volatile, scrubber installations have been delayed. However, concerns exist over corrosion and breakdown incidents, causing safety issues on board
Nobody cares for the unpleasant concoction of long-chain hydrocarbons at the bottom of the distillation column. With a heavy sulphur content and inconvenient properties, heavy fuel oil (HFO) would have to be disposed of one way or another even if every ship had switched to liquefied natural gas (LNG) by the end of 2019.
At first, it was thought that a reduced reliance on HFO would prompt a major price decrease. Then, when relatively few vessels had fitted a scrubber, refiners warned that there would be little incentive for them to maintain supply chains; instead they would restrict to distributing HFO to large hub ports and raise the price.
At time of writing, HFO is almost the same price as every other fuel. This is because crude oil prices dropped below zero in April. The narrow differential between HFO and very-low-sulphur fuel oil (VLSFO) – hovering around USD50 per tonne throughout April, compared with USD300 per tonne in January – has prompted Scorpio Tankers and sister company Scorpio Bulkers to postpone scrubber installations until 2021. The former has delayed 19 installations while the latter has postponed 13.
With a spread of just USD50 per tonne between grades, it would take four years to pay back for the investment cost of an open-loop scrubber, and six years for a closed-loop scrubber. Speaking in reference to the Scorpio move, Alexander Yap, a senior analyst at Platts, said, “Platts Analytics previously projected 3,500 scrubber installations globally by the start of 2021, but this will likely not be met, with disruptions from coronavirus and cancellations due to the narrowing price spread between high- and low-sulphur fuel.”
This is an excerpt from a feature in the July edition of SAS, for more in-depth features and analysis please subscribe here.