IEA Says Any Switch to Diesel For Ships is Costly
Date: 14-May-07
Country: SINGAPORE
The International Maritime Organisation (IMO) is considering options that could be implemented by 2012 to improve the environmental footprint of the shipping industry, seen as a major source of greenhouse gas, sulphur and particulate emissions, including switching to cleaner but more costly diesel.
"The impact on global warming may be the opposite of what is intended and the impact on prices could be dramatic," the IEA said in its monthly Oil Market Report.
It said previous case studies showed converting refineries to produce enough diesel for shipping demand would produce at least an extra 53 million tonnes a year of CO2, whereas emissions from ships if using diesel would only fall by 27 million tonnes.
The loss of a large shipping market for fuel oil growing 5-7 percent as trade expands and the additional diesel demand would have massive implications for the refining sector, including potential extra investment of US$100-$150 billion, it said.
"It may also require an additional 2 million barrels per day of crude runs, which would be the equivalent of finding another Kuwait," the West's energy watchdog said.
The price of fuel would also be higher. The cost of a 20-day voyage from a Middle East oil producer to a Japanese refinery using marine diesel instead of fuel oil would rise by about US$500,000 to more than US$1.1 million, Reuters data show.
On the other hand, the Paris-based agency said supporters of a forced move to switch fuel saw several benefits, including reducing direct emissions from ships and minimising any competitive disadvantage to the shipping industry.
"No ship operator is likely to adopt distillate fuels if it results in lower profitability," the report said.
Other options include treating exhaust gas onboard to remove particulates and sulphur, blamed for lung problems and acid rain.
Oil tanker owners have urged the IMO to lay out a plan by next year. As governments worldwide attempt to curb pollution, the shipping industry, which contributes up to 7 percent of airborne sulphur emissions, faces a potentially confusing array of disparate national regulations.
The IMO already requires ships in the Baltic Sea to burn lower sulphur fuel oil to reduce emissions, while the North Sea will face similar regulations from November. But more than 90 percent of the world's trading fleet runs on high-sulphur fuels.
Despite this, the IEA said the shipping industry already achieves a high standard of CO2 emissions per tonne-mile of goods moved, compared to truck haulage or the airline industry.