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IMO2020 Related Claims Starting to Appear: Marine Insurer

Protection and indemnity club Gard has said it is beginning to deal with claims related to the International Maritime Organisation (IMO) 0.5% sulfur cap.

Although cap is still some months away, the club has said it has around 100 claims on its books that are linked to the sulfur rule change in bunker fuel.

The nature of disputes vary, according to the club’s chief executive Thore Roppestad, but include disputes between owners, charterers and bunker suppliers.

“We also have a couple of claims related to machinery damages due to the quality of fuel which is not compliant to the engines and we also have loss of hire incidents, which we will have more of due to scrubber malfunction and other issues”, the executive was quoted as saying by maritime news provider Lloyd’s List.
Machinery damages may start small but can end up big by becoming groundings or major accidents, he added.

Roppestad was participating in an industry panel event in Oslo. P&I clubs cover third party risks in shipping. Engine-related issues are covered by hull and machinery insurance.

Source: Ship & Bunker


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SHIP SCRUBBERS

Following a lengthy process, the International Maritime Organization’s (IMO) member states finally agreed in April to require international shipping to decarbonize and at least halve its greenhouse gas emissions by 2050.

The agreement includes strengthening design requirements for each ship type, a relative reduction of 40 percent in CO2 emissions by 2030, and at least 50 percent reduction by 2050, and subsequently a path toward a complete phase-out.

Although the members agreed on the goals, concerns were raised over the lack of any clear plan of action to deliver the emissions reductions.

Kirsi Tikka, Executive Vice President, Senior Maritime Advisor, at the American Bureau of Shipping (ABS), in an interview with World Maritime News said that collaboration by all stakeholders as well as sufficient investment in technology development are needed.

“To meet the targets established in the initial IMO strategy for GHG reduction will require considerable development time and financial investment that may not deliver returns in the short term.”

Since the experiences of early adopters of technology in complying with environmental regulations have not always been positive, the industry “is unlikely to adopt new GHG reduction technologies until there is a full proof of functionality and ideally a cost/benefit analysis.”
Kirsi Tikka, Executive Vice President, Senior Maritime Advisor, ABS
Kirsi Tikka, Executive Vice President, Senior Maritime Advisor, ABS

Tikka continued that financing the R&D needed to deliver on the schedule established by the IMO strategy “will be a challenge for the industry – something of which the IMO is well aware.”

WMN: Would you agree that the compromise on the 50 percent reduction was the best the IMO could do for the moment?

Tikka: Given the apparently high degree of disagreement on strategy between member states going into the meeting it was a very positive result for the IMO, the industry and potentially, the environment. By agreeing to establish a global target for CO2 emissions reductions, the IMO has produced a result in line with the Paris Accords and has sent a clear message that eliminates the need for regional target setting.

Shipowners will start to collect emissions data according to the IMO Data Collection System in January 2019 and this data will provide the foundation for IMO discussions on the final shape of the GHG strategy from 2023, Tikka continued.

Despite the headlines concerning 50% reductions of 2008 levels by 2050, the targets for the greenhouse gas reduction “are not finalized and IMO will use the output from the IMO DCS and the fourth IMO Greenhouse Gas Study (in 2020) to further refine the targets.”

In the meantime, shipowners are probably more focussed on the implications of 2020 in terms of fuel strategy and operational profile, Tikka said.

“The IMO GHG agreement raises a lot of questions, to which there are for the moment, few answers: what kind of technology will be available? What fuel strategy – conventional or alternative – should they choose and what propulsion system will offer the best option?”

SHIP SCRUBBERS

WMN: What is your take on the available solutions on the market? What is the way forward: alternative fuels, scrubbers or maybe innovative ship designs?

Tikka: I agree that there is a need for significant system and service development to transfer some of today’s promising technology into solutions that can be implemented and applied. These include fuel cell and battery technology, wind and solar power assistance and new fuels such as Gas-To-Liquids, methanol from biomass and other biofuels, but few are ready to go on the kind of scale needed to meet the GHG targets.

Vessel designs have already been optimized for economic efficiency in recent years and a step change in efficiency would require a radically different approach to design and/or use of materials. Since it is not feasible to replace the world fleet by 2030, we will need other fuel and operational measures such as optimizing speed for on-time arrival at port, to supplement any advances in design.

Speaking on the impact of CO2 reduction decision on ship speeds, Tikka informed that vessel speed has “a significant impact on required power and therefore on fuel consumption and CO2 emissions.”

As a result, ships in sectors that typically operate at higher speed “are likely to work at lower operational speeds in future. And maybe more importantly these speeds will need to be optimized for the most efficient utilization of the vessel in the logistics chain rather than the traditional approach of specifying the speed in the charter party.”

Tikka said that addressing the CO2 requirements “will certainly take a holistic approach across the industry.”

The leveraging of more real-time and accurate vessel performance data will form an integral aspect of achieving these improved efficiencies. Digital technology and improved connectivity will offer tools not only for reporting and improving vessel performance but also for optimizing the wider logistics chain, Tikka concluded.

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SHIP SCRUBBERS

LR has today launched the ‘Sulphur 2020 – Options Evaluator’ to help the industry identify the best strategy for compliance with the global sulphur in fuel oil limit of 0.50% m/m, which comes into effect on 1 January 2020.

The ‘Options Evaluator’ aims to bring some much-needed clarity to what the potential cost and investment implications could be for the various compliance strategies, such as transition from fuel oil to MGO, use of scrubbers and HSFO or use of other compliant fuels such as LNG or Methanol.

There is no clear strategy to compliance. It is dependent on trading patterns, distance travelled, speed, size and type of vessels. The ‘Options Evaluator’ allows ship operators to compare different compliance strategies by reviewing emissions output and comparing the different CAPEX and OPEX implications of each option.

LR’s Douglas Raitt, Regional Consultancy Manager Asia, commented: “2020 is around the corner and to date it appears most operators will transition from fuel oil to gas oil operations to meet the global sulphur in fuel oil limit. Scrubber uptake or LNG and Methanol as a marine fuel are slowly evolving, perhaps as a function of a ‘wait and see’ approach by the shipping industry. We developed the options evaluator to give some guidance to operators who have not yet fully considered their options for 2020 compliance.”

Justin Murphy, CEO International Bunker Industry Association, said: “IBIA is fully involved at IMO on all matters marine fuel related and for years has been the voice of the industry pushing for practical regulations whichever options industry players choose. This options evaluator tool, one of a number being developed, is an aid that may complement owners’ and operators’ future efforts to develop a compliance strategy.”

 

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