Decisions, decisions…..
Posted on | August 2, 2010 | No Comments
I know a shipowner who is fond of observing: “I have never had difficulty making decisions. Or mistakes.” As all shipowners know, regulatory requirements change. So does the market.
Somehow, these facts of life must be made to work alongside the need to maximise the commercial usefulness of each planned newbuilding, in light of the conditions referred to above. New ships require investment, and money is scarce (as are lenders) these days.
The demand for design flexibility has grown with the expanding need for regulation-compliant ships, on the one hand, and the commercial pressures imposed by markets that never stand still.
Shipowners, generally, aren’t dolts. Their aim must be enhanced commercial flexibility while keeping costs as low as possible.
This is hard and exasperating work. Decisions are difficult things. Planning the design of a ship, like business in general, is about anticipating, preparation and prediction.
A bulk carrier, for example, may be built in the expectation that it can trade for more than 20 years. However, many regulations and market forces are likely to change during that period.
The greatest dilemma is whether to opt for design flexibility, or for specialization, or a combination of both. The lesson of recent years has been that an investor must take account of potential regulatory change during the ship’s expected life, and the resulting impact on its value.
In framing the specifications for a new ship from an environmental standpoint, there are therefore many imponderables.
One of the problems lies with the vagaries of the regulatory process. The possibility of mandatory retrofits or even forced scrapping, obsolescence or retirement is particularly hard on the decision-maker who wants (a) to choose the right design, and (b) sleep well at night. When the U. S., in the Oil Pollution Act of 1990 (OPA 90) ordained the retirement or conversion of non-double-hulled tankers, some owners and their lenders were taken by surprise.
A good example now at issue is the uncertain future regulation of the sulphur content of vessel-generated air emissions. Emission control areas (ECAs) have been created in the North Sea and the Baltic, and have been designated for implementation in North America. A European directive mandates that only 0.1% sulphur fuel may be used, at berth or at anchor, in EU ports. The point is: how best to reduce the sulphur content of bunkers?
Marine engineers and architects have to tackle the problem with one eye on the present, and the other on what may happen in future. This requires some shrewd guesswork. Currently, the favoured way of reducing sulphur emissions in an ECA is by fuel switching.
The ability to use low-sulphur distillates, such as marine diesel oil (MDO) or marine gas oil (MGO), when a ship is trading in an ECA, requires versatility of design: the need to control fuel costs encourages the use of intermediate distillate fuels, costing about $450 per tonne, contrasting with low-sulphur marine diesel, at roughly $600 a tonne. The shipowner has an incentive to use intermediate fuel to the maximum extent possible, switching to low-sulphur distillate when operating within an emission control area.
The design dilemmas are clear, but not simple; fuel tanks with adequate isolated capacity for intermediate and distillate fuels will be required. Intermediate bunkers must be heated, while distillates do not need to be. Thermal shock and vapourisation effects must be prevented.
A decision: is it practical to develop two isolated fuel systems for the main engine? Should the planner decide on specialised equipment, or, instead, by restricting, no doubt for its useful life, how and where his ship will be operated?
A famous aircraft designer, Marcel Dassault, once remarked: “For the most part, my business is the avoidance of failure.”. But how does one know what choices will bring success?
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