*Fuel trends
International experts revealed that the developments in the maritime fuel industry have become crucial for operators and cargo owners as fuel consumption accounts for a large share of the total voyage costs and can constitute a significant portion of the total transportation costs. For the shipping industry, it is not surprising then that fuel costs, and consequently oil prices, are among the main drivers of the implementation of new technology. Shipping will be forced to reduce emissions by regulations. It was expected that in the Sulphur Emission Control Areas (SECAs), which are North America, the Baltic Sea, the North Sea and the English Channel, the required sulphur content of fuel will be reduced from 1.5 percent to 1 percent starting July 1, 2010, and to 0.1 percent starting January 1, 2015. Worldwide, they also predicted that the highest permitted sulphur content of fuel will decline from 4.5 percent to 3.5 percent beginning January 1, 2012, and to 0.5 percent beginning January 1, 2020. Fuel grades in use on vessels fitted with sulphur scrubbers will still be permitted. Furthermore, increased environmental focus in today’s market and the simultaneous need for the shipping industry to become more accountable for its environmental footprint are influencing the decisions that shipping has to make in terms of fuel type selection. The growing scarcity and high price of oil will favour the use of renewable fuels. The IMO’s purpose is to reduce emissions to air from ships, and ship owners must comply in one way or the other. To a very great extent, the experts also urged that the variation in fuel oil prices is correlated to the movement of oil prices. If they compare the projections with current prices, they revealed that the forecasted price is consistent with current levels that have been sustained since late 2009. However, they believed that the price ranges between $400 per tonne and $1,550 per tonne ($10.6 to 41.4 per MMBtu). Prices have been as low as $170 per tonne ($4.5/ MMBtu) as March 2009, with an average that month of $350 per tonne ($9.35/MMBtu).
Moreover, Marine Gas Oil (MGO) with 0.1 percent sulphur or less is readily available and shares more or less the same properties as the diesel fuel used for high-speed diesel engines. MGO does not require any extra volume for storage tanks, and adjusting the engine to MGO requires in most cases only small investment costs. However, MGO fuel prices are higher than those of other heavy fuel oils due to its production process. In the projections used, MGO prices will range between approximately $500 per tonne ($12/MMBtu) and $1,500 per tonne ($37/ MMBtu) in 2015, and over $2,000 per tonne by 2035. It was also recorded that an increase in real terms in the price from $1,100 per tonne in 2015 to approximately $1,200 per tonne ($29.5/MMBtu) by 2030. The Experts also believed that in the past few years, LNG has become a more popular fuel for shipping. LNG availability differs from country to country and although the number of ships using LNG has been growing, LNG engines are not yet commonly used on commercial vessels. LNG has to be stored in cryogenic tanks which require much more space than traditional fuel oil tanks. This may reduce the cargo capacity, depending on the type of vessel and the potential to have an adequate and safe location for the LNG tanks on board. LNG is assumed to be available at a competitive cost, but the future price level is highly uncertain. Like gas prices, LNG prices vary greatly from country to country. Based on the EIA and IEA projections the predicted range in the price of LNG, which is probable to rise from the range of $300-800 per tonne ($7 to 17/MMBtu) in 2010 to the range of 400-1200 USD per tonne ($9 to 26/MMBtu) in 2035. The LNG price for marine use is likely to be on the high end of future price projections.
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Future outlook
The viability of many emission reduction technologies depends heavily on various fuel prices and their relative differences. This fact, added to the overall significance of fuel prices to the profitability of the maritime industry, makes monitoring the fuel markets and keeping track of their developments of vital significance. Analysis of the oil and gas trends shows that gas and oil prices are predicted to decouple and that shale gas is a game changer probable to grow spot gas availability in Europe. Following the new regulations, low sulphur fuel oil will be in great demand, which in turn will lead to a higher demand for alternative fuels.
