The International Maritime Organization has set a sulphur cap of 0.5% for shipping emissions by 2020. This has been described by leading fuel suppliers as arguably one of the industry’s most defining moments since the shift away from coal.
In order to comply with this requirement, which will take effect in less than 24 months, the shipping industry has started to search for viable options to reduce sulphur emissions. These include the following:
- Burning cleaner bunker fuel;
- Fitting scrubbers; or
- Burning a different and cleaner fuel altogether, principally liquefied natural gas (LNG).
In the run up towards 2020, we anticipate that shipowners may choose either to use cleaner fuels or fit scrubbers in their vessels. Ultimately, the way forward will depend on whether their vessels are suitable for scrubbers, and whether the advantage of continuing to use cheaper bunker fuel through retrofitting the scrubbers can outweigh the cost of switching to an entirely new fuel system.
However, if shipowners choose to adopt LNG, their future choice of port of call will definitely be affected by whether LNG and bunkering facilities are available.
Unless we are prepared to cater to this fuel switch, Hong Kong risks losing the capability to serve the new wave of LNG-powered vessels, including container ships of up to 22,000 TEUs and large cruise liners.
A number of major cruise companies have ordered mega liners that will be powered by LNG. It is estimated that there are some 17 such vessels on order, with the delivery of the first of these expected in December. Most of these ships are planned for deployment in Europe as that is where LNG bunkering facilities are currently available.
Many ports and groups are actively considering the need to become LNG-ready. These include the Hong Kong Shipowners Association and the Kai Tak Cruise Terminal, as well as the LNG Bunkering Port Focus Group formed by the Maritime and Port Authority of Singapore, and SEA\LNG, a global multi-sector industry coalition.
We believe that Hong Kong should not wait, but move quickly to ensure that we remain the most competitive shipping and logistics hub in Asia.
In urging the Government to speed up the provision of the requisite infrastructure, we suggest that the following three “P”s will be key in enabling Hong Kong’s port for bunkering LNG-fuelled vessels:
- Physical Infrastructure: Ensure that suitable barge facilities and designated bunkering areas are in place;
- People: Determine whether sufficient trained personnel are available, and if not, what are the appropriate measures to increase supply; and
- Policies: Assess whether Government policies are conducive to the transport and transfer of fuels and if any incentives should be provided.
We note that two power companies in Hong Kong are in active talks with the Government on the proposal to set up a Hong Kong Offshore LNG Terminal. This will be based on Floating Storage and Regasification Unit (FSRU) technology to receive, store and deliver LNG for local power generation.
The Chamber is pleased to work closely with the Government to support and sustain the competiveness of Hong Kong’s port. This includes the pursuit of a clean and sustainable environment in the place where we work, do business and call home.