Shipowners stand a decent chance of benefiting cost-wise from installing scrubbers to meet the International Maritime Organization’s new global sulphur cap for bunker fuel at 0.5% from 2020, said some bunker industry participants, even though those onboard abatement systems appear expensive initially.

Those remarks, made during the CMA event, came as just a limited number of owners planned to spend $2m-$5m per vessel to install systems that allow them to continue using 3.5% sulphur fuel oil by ‘scrubbing’ pollutants from exhaust emissions. An earlier UBS survey showed just 19% of owners wanted to install scrubbers. Most research institutions, including the International Energy Agency, have expected owners to consume low-sulphur marine gasoil to meet the new regulations.

The reason for owners’ reluctance for accepting scrubbers is mainly due to concerns over initial costs, described by Pyxis Tankers chief executive Valentinos Valentis as prohibitively expensive. Such thinking might have not fully taken into consideration that the global refining industry will still produce a large amount of high sulphur oil after 2020, which would result in deeper discounts of those “residuals fuels” naturally derived from the refining process compared with marine gasoil, however. “Residuals are not just going to disappear,” OceanConnect Marine trader James Hoffman said.

Based on the IEA figures, residual oil products looking for buyers might amount to as much as 2m barrels per day if refineries and bunker suppliers do not further invest in facilities to reduce sulphur content. “The premium of marine gasoil to residuals will increase,” said a Glencore bunker marketer, who did not want to be named. “There will be more displaced residual oil.”

While studies show that scrubbers need at least two to three years of utilisation to break even, the payback period could be shortened if residual oil prices turn out to be lower than expected. “There will be a rush to put scrubbers onboard,” said 20 | 20 Marine Energy senior partner Adrian Tolson, who reckoned that the industry is still unprepared for the new sulphur cap regulations. “There will be one, two, or three years of adjustment.”

Simms Showers’ partner Steve Simms, who handles bunkering issues, expects there will be insufficient marine engineers to meet demand for scrubber installation. “Owners will be smart to act” earlier to enjoy the cheaper residual oil, he suggested.