Towards an integrated transport system in the Baltic Sea Region

Implications of new regulation regarding sulphur content in ships fuel on maritime transport sector within Baltic Sea Region
on the basis of the TransBaltic and Baltic Ports Organizations Port Debate: Implications of the I O reg!lations on the f!t!re pattern of the cargo flow in the Baltic held on "#th $!ne %&"% in 'elsin(i) *inland

July 2012
Photo: Port of Ra!ma

Towards an integrated transport system in the Baltic Sea Region

Report coordinator: Baltic Ports Organization Secretariat

Authors: Monika Rozmarynowska academic teacher at Gdynia Maritime Academy Bogdan Odakowski, BPO Secretary General

Baltic Ports Organization is made up of forty plus ma or ports in the nine countries surrounding the Baltic Sea! "he main o# ecti$e of BPO is to impro$e the competiti$eness of maritime transport in the Baltic region #y increasing the efficiency of ports, mar%eting the Baltic region as a strategic logistics centre, impro$ing the infrastructure &ithin the ports and their connections to other modes of transport!

"ransBaltic, as one of the fe& transnational pro ects so far, has #een granted a strategic status #y the authorities of the Baltic Sea Region Programme '(()*'(+,! "he o$erall o# ecti$e of "ransBaltic is to pro$ide regional le$el incenti$es for the creation of a comprehensi$e multimodal transport system in the BSR! "his is to #e achie$ed #y means of oint transport de$elopment measures and ointly implemented #usiness concepts! "ransBaltic is led #y Region S%-ne and lasts from + .une '((/ to ,+ 0ecem#er '(+'!

Towards an integrated transport system in the Baltic Sea Region

Contents
Introduction............................................................................................................................................. 3 1. New regulations concerning sulphur oxide emission from ships ....................................................... 4 2. Solutions to meet new regulation ....................................................................................................... 7 3. Economic effects of new IM regulation ......................................................................................... 14 4. !otential changes in future cargo flow in "S# due to new IM regulation ..................................... 1$ %. New regulation and its infrastructural implications for seaports .................................................... 2% Summar& and conclusions ..................................................................................................................... 31

Towards an integrated transport system in the Baltic Sea Region

Introduction
'he report has (een prepared on the (asis of the presentations at the 'rans "altic and "altic !orts rganisation)s seminar * +Implications of the IM regulations on the future pattern of the cargo flow in the "altic, held on 1%th -une 2.12 in /elsin0i. 'he important source of information and data were also studies assessing the impact of new IM regulations regarding sulphur limits in ships) fuel on maritime transport sector in SE12. In cto(er 2..3 the International Maritime rgani4ation 5IM 6 adopted amendments to 2nnex 7I of the M2#! 8 1on9ention which: inter alia: strengthened the re;uirements on the permitted sulphur limits in ships fuels. 'wo sets of emission and fuel ;ualit& re;uirements are defined (& 2nnex 7I< 516 glo(al re;uirements: and 526 more stringent re;uirements applica(le to ships in Sulphur Emission 1ontrol 2reas 5SE126. "altic Sea is included in SE12 area: where as of 1st -ul& 2.1.: the maximum sulphur limit has (een reduced to 1...=: 5from 1.%.=6: while from 1 -anuar& 2.1%: sulphur content in ships) fuel must (e (elow ..1=. New regulations caused great concern within countries located within "altic area. 2 series of studies ha9e recentl& (een performed (& 9arious organi4ations to assess the implications of the new sulphur standards for the shipping industr& and other sta0eholders. 'here is a great concern that new IM regulation will lead to increase of the sea transport costs. Significant costs) increase for transportation (& sea as a conse;uence of using the more expensi9e low sulphur fuel 5M> 6 ma& reduce competiti9eness of sea transport drasticall& and mean that: in man& cases: short sea shipping will not (e cost ? effecti9e. 'his ma& lead: to some extent: to a modal (ac0shift from sea to road and e9en to change of directions of logistics flows in Europe in order to a9oid the SE12. Switching to M> is not the onl& one option to meet new regulations. 'wo other solutions are under de9elopment< scru((ers and 8N> as a ships) fuel. /owe9er de9elopment of such solutions will in9ol9e simultaneous de9elopment of speciali4ed facilities in ports. >enerall&: the new en9ironmental regulations are a great challenge not onl& to shipping industr&: (ut also to ports within "altic Sea #egion. #eport outlines the most significant conse;uences for maritime transport sector within "altic Sea which ha9e resulted from upcoming rules.

Towards an integrated transport system in the Baltic Sea Region

1. New regulations concerning sulphur oxide emission from ships

MARPOL Annex VI Regulations for the Prevention of Air Pollution from hi!s" International regulations regarding pollution from ships are contained in the IM +International 1on9ention on the !re9ention of !ollution from Ships,: 0nown as M2#! 8 73@73. n 27 Septem(er 1$$7: the M2#! 8 1on9ention has (een amended (& the +1$$7 !rotocol, which includes 2nnex 7I titled +#egulations for the !re9ention of 2ir !ollution from Ships,. In particular: 2nnex 7I regulates the matter of emission of such su(stances as sulphur oxides 5S x6: nitrogen oxides 5N x6 and particulate matters. 2nnex 7I entered into force on 1$th Ma& 2..% and in cto(er 2..3 IM adopted a set of amendments to 2nnex 7I of the M2#! 8 1on9ention. 'he set of amendments to 2nnex 7I of the M2#! 8 1on9ention introduces new standards regarding emission from ships of such su(stances as sulphur oxides 5S x6 and particulate matters and nitrogen oxides 5N x6. 'he most stringent changes regard S x emission. #eduction of S x and particulate matter emission are going to (e achie9ed (& limiting the maximum sulphur content of the fuel oils used on(oard. 'wo sets of emission and fuel ;ualit& re;uirements are defined (& 2nnex 7I< 516 glo(al re;uirements: and 526 more stringent re;uirements applica(le to ships in Sulphur Emission 1ontrol 2reas 5SE126. n the glo(al le9el: sulphur cap will (e reduced initiall& to 3.%.= 5from the current 4.%.=6: effecti9e from 1st -anuar& 2.12A then progressi9el& to ..%. =: effecti9e from 1st -anuar& 2.2. 5or in 2.2% at the latest6: su(Bect to a feasi(ilit& re9iew to (e completed no later than 2.13. 2nnex 7I introduces much more stringent re;uirements for ships operated in SE12. 2s from 1st -ul& 2.1.: the maximum sulphur limit has (een reduced to 1...=: 5from 1.%.=6: while from 1st -anuar& 2.1%: sulphur content in ships) fuel must (e (elow ..1 =.
% ul!hur %ontent in shi!s& fuel '() 4 3 2 1 . 2...
Sox E12 glo(al

2..%

2.1.

2.1%

2.2.

2.2%

#igure 1$ ul!hur Limit in #uel 4

Towards an integrated transport system in the Baltic Sea Region

*a+le 1$ ul!hur Limit in #uel

ul!hur Limit in #uel ,ate ul!hur Limit in #uel in -.A /(0 1lo+al /(0 2000 1.% = 2... 4.% = st 1 July 2010 1.. = 2.12 3.% = 2012 ..1 = 2.2.C ..% = + alternati9e date is 2.2%: to (e decided (& a re9iew in 2.13 Source< M2#! 8 ,-.,/) 2nnex 7I Reg!lations for the !re9ention of 0ir Poll!tion from Ships ,ate

2t present four regions are defined as Sulphur Emission 1ontrol 2rea. /owe9er: it has to (e noted that Emission 1ontrol 2rea can (e designated not onl& for S x and !M emission (ut also for N x emission: or all three t&pes of emissions from ships. 2t present 'he E12 esta(lished are< 1. "altic Sea area * as defined in 2nnex I of M2#! 8 5S x onl&6A 2. North Sea area * as defined in 2nnex 7 of M2#! 8 5S x onl&6A 3. North 2merican area 5expected to enter into effect 1st 2ugust 2.126 * as defined in 2ppendix 7II of 2nnex 7I of M2#! 8 5S x: N x and !M6A and 4. Dnited States 1ari((ean Sea area 5expected to enter into effect 1st -anuar& 2.146 * as defined in 2ppendix 7II of 2nnex 7I of M2#! 8 5S x: N x and !M6.

#igure 2$ -xisting an3 !otential -mission .ontrol Areas

Source< http<@@(logs.dn9.com@lng@2.11@.2@lng?for?greener?shipping?in?north?america@

Towards an integrated transport system in the Baltic Sea Region

Moreo9er: other areas are considered to (e designated as Emission 1ontrol 2reas: for example< Mediterranean Sea: waters along the coast of Norwa&: -apan and Mexico.

,ire%tive 14445625-. /as amen3e3 +y ,ire%tive 20025665-.0 Firecti9e 1$$$@32@E1 5as amended (& Firecti9e 2..%@33@E16 regulates the sulphur content of fuels used (& maritime transport and incorporates certain international rules into ED law: as agreed under the International Maritime rganisation 5IM 6. /owe9er: due to re9ision of M2#! 8 2nnex 7I in 2..3: the Firecti9e is no longer aligned with international 5IM 6 rules following the re9ision. 'he new M2#! 8 2nnex 7I rules on sulphur are now significantl& different from the 1$$$@32@E1 Firecti9e< the Firecti9e allows ships to use fuels with a sulphur content of up to 1.%= when operating in the SE12s: while the new M2#! 8 2nnex 7I allows a maximum sulphur content of 1...= and as of -anuar& 2.1% a maximum sulphur content of ..1=A the Firecti9e offers a strong operator compliance mechanism: while M2#! 8 2nnex 7I has no such enforcement mechanismA the Firecti9e allows for a limited range of e;ui9alent emission a(atement methods when compared to the re9ised M2#! 8 2nnex 7I. /owe9er: European Dnion Firecti9e 2..%@33@E1: introduces more stringent rules for ships while at (erth in European 1ommunit& ports. 2s from 1st -anuar& 2.1.: ships at (erth in all ports of the European 1ommunit& shall not use marine fuels with a sulphur content exceeding ..1= (& mass. Fue to some technical pro(lems that occurred: ships ha9e (een gi9en a transitional period till the end of 2ugust 2.1. to ma0e the necessar& technical changes. /owe9er: from 1st Septem(er 2.1. all ships co9ered (& directi9e must o(e& the rules. 2dditionall&: with effect from 1st -anuar& 2.1.: Mem(er States shall ensure that marine gas oils are not placed on the mar0et in their territor& if the sulphur content of those marine gas oils exceeds ..1 = (& mass. In order to ensure coherence with international law as well as to secure proper enforcement of new glo(all& esta(lished sulphur standards in the Dnion: the 1ommission proposes that

Towards an integrated transport system in the Baltic Sea Region

the pro9isions of Firecti9e 1$$$@32@E1 (e aligned with the re9ised 2nnex 7I to M2#! 8. In particular<1 Incorporation into the directi9e of the 2..3 amendments to 2nnex 7I to M2#! 8 concerning the sulphur content of marine fuels. 2lignment of the directi9e with the IM pro9isions authorising a (road range of e;ui9alent emission a(atement technologies. Glan0ing of these pro9isions (& additional guarantees to ensure that the e;ui9alent a(atement technologies do not ha9e unaccepta(le negati9e conse;uences for the en9ironment. Introduction of the IM control procedure for fuels.

'he 1ommission also proposes the following additional measures< introducing a new ..1= sulphur limit for passenger ships operating outside SE12 in 2.2. and de9eloping a non? (inding guideline for sampling and reporting. If this does not produce the desired effect: (inding rules would ha9e to (e considered.

2. Solutions to meet new regulation

'here are some options a9aila(le for ship operators operating in "altic Sea who wish to meet the new sulphur re;uirements. 'he first one is switching to marine gas oil 5M> 6. 'his option will (e pro(a(l& most popular due to the fact that using marine distillate in the main engines does not pose a maBor technical challenge. 'he ..1= re;uirement could also (e met (& using high sulphur fuel together with scru((ers or (& using alternati9e fuel such as 8N>. /owe9er: these two solutions are rather much more challenging.

,istillates 'he following fuels can (e used for 9essels<2 H #esidual oil< it is the hea9iest fraction of the distillation of crude oil: with high 9iscosit& and high concentration of pollutants 5e.g. sulphur6. H IG 33. 5Intermediate Guel il6 is a mix of $3= of residual oil and 2= of distillate oil. H IG 13. 5Intermediate Guel il6 is a mix of 33= of residual oil and 12= of distillate oil. Fue to the higher content in distillate oil: IG 13. is more expensi9e than IG 33..
Opinion of the 1!ropean 1conomic and Social 2ommittee on the 3Proposal for a Directi4e of the 1!ropean Parliament and of the 2o!ncil amending Directi4e "555.-%.12 as regards the s!lph!r content of marine f!els 1 M52.116 43$ final I 2.11@.1$. 51 F6 (2012/C 68/13) 0nalysis of the 2onse6!ences of 7ow S!lph!r *!el Re6!irements7 #eport commissioned (& European 1ommunit& Shipowners) 2ssociations 5E1S26: -anuar& 2.1.
2

Towards an integrated transport system in the Baltic Sea Region

H MF 5Marine Fiesel il6 mainl& consists of distillate oil and has a lower sulphur content than the three fuels descri(ed a(o9e. H M> 5Marine >as il6 is pure distillate oil and has the lowest sulphur content. Ship engines generall& run on hea9& fuel oil or intermediate fuel oil 5/G @IG 6. 8e9el of sulphur content in hea9& fuel oil depends on the sulphur content in the crude oil. Most of the sulphur remains in the hea9& fuel oil: so sulphur?rich crude cannot (e used to produce hea9& fuel oil with low sulphur content. /G containing less than ..%= sulphur is o(tained from crude oil with sulphur content less than J..1%=. 'he le9el of sulphur content of crude oil needed to production of /G with ..1= sulphur content is e9en lower then that needed to production of ..%= sulphur fuel. 2nd such crude oils are extremel& rare. Moreo9er: such crude oils are all highl& paraffinic: wax& crude oils which would (e unsuita(le for hea9& fuel oil production for marine (un0ers due to their high pour points. 3 2t present ships operating in SE12 ma& not use fuel with a sulphur content exceeding 1..=. It is possi(le to achie9e such sulphur content in fuel in two wa&s< hea9& fuel oil can (e made from crude oil: which naturall& contains less sulphur or high sulphur and low sulphur fuel can (e mixed together to achie9e ade;uate sulphur le9el. >enerall&: fuel containing less than 1..= sulphur: which is used at present in SE12: is high sulphur fuel which has (een mixed with a slightl& lower sulphur content fuel: to 0eep the sulphur content under the 1..= mar0. 'he new IM re;uirements regarding reduction of sulphur content of marine fuels to ..1= (& 2.1% means that ships operating in the SE12 would ha9e to switch from low sulphur fuel oil 58SG 6 with a sulphur content of 1..= to fuel with a sulphur content of ..1= (& 2.1%. It will (e technicall& impossi(le to mix fuel grades to achie9e ..1= sulphur fuel so ships will ha9e to switch to other a9aila(le fuels. 2t present: commonl& a9aila(le fuels that ha9e much lower sulphur content than hea9& fuel oil are distillates such as marine diesel oil 5MF 6 or marine gas oil 5M> 6 with M> ha9ing a maximum content of ..1= sulphur in Europe. MF and M> are also 0nown as light fuel oil. Fistillates are commonl& used in auxiliar& engines to generate electricit&. Energ& needs during the 9o&ages can also (e co9ered (& shaft generators: (ut distillates are usuall& re;uired at least when the ship is in port. 2ccording to ED legislation: ships ma& use propulsion and energ& generation fuelled (& /G at sea: whilst distillates ha9e to (e used (& the ship while it is at (erth in ED port. 'he use of marine distillate in the main engines does not pose a maBor technical challenge. /owe9er: the reduction of the sulphur content and the need of common use of distillates
3

Red!cing the s!lph!r content of shipping f!els f!rther to &8" 9 in the :orth Sea and Baltic Sea in %&"#: 2onse6!ences for shipping in this shipping area: IS8: Septem(er 2.1.

Towards an integrated transport system in the Baltic Sea Region

ha9e raised great concern among shipping sector: which is mainl& connected with the fuel costs. Fistillates are far more expensi9e than hea9& fuel oils: mainl& due to much complicated wa& it is manufactured. Khilst /G is the untreated component of crude oil remaining after 9acuum distillation: distillate undergoes se9eral refiner& processes all of which utili4e refiner& energ& to produce the finished product. Gurthermore: as the demand for it increases: it will also presuma(l& go up in price. 'he use of distillates is also associated with permanent higher costs for lu(ricants (ecause the sulphur?rich /G has (etter lu(rication properties which need to (e replaced (& alternati9es.4

%ru++ers 2nnex 7I of M2#! 8 ena(les the continued use of high sulphur fuels: howe9er: is such cases additional technological solutions must (e implemented to achie9e Le;ui9alent le9els of emissions. It means that special installations remo9ing sulphur from ships: called +scru((ers, should (e installed on ships. Scru((ing has (een used on shore with success to reduce S x emissions of industrial plants since the 1$3.s. #ecentl&: inter alia: such companies as KMrtsilM: /amworth& and M2N ha9e (een wor0ing on scru((er technolog& for ships. So far: first such installation has (een de9eloped and underwent successful trials. Some classification societies 5including FN7 and >86 ha9e alread& certified some installations. Gour 0inds of scru((ers can (e used on ships< seawater scru((ing 5Lopen scru((er6: the freshwater scru((er 5Lclosed?loop scru((er6: a com(ination of the two 5the h&(rid technolog&6: and the 1SN x s&stem: which targets not onl& sulphur oxides (ut also nitrogen oxides and 1 2. 'he seawater scru((ing technolog& was de9eloped and commercialised (& /amworth& and KMrtsilM. It is (ased on the natural al0aline characteristic of seawater: it is used to neutralise the acidic exhaust gases. Gurther to the a(sorption of the S x molecules (& the seawater: the water is then discharged (ac0 into the sea after extracting and storing the rele9ant sludge from scru((ing. 'he sludge must (e stored on (oard and then deli9ered to a shore reception facilit&. 2 s&stem (ased on seawater scru((ing is alread& a9aila(le on the mar0et.

Red!cing the s!lph!r content of shipping f!els f!rther to &8" 9 in the :orth Sea and Baltic Sea in 2015: Consequences for shipping in this shipping area, ISL, September 2010

Towards an integrated transport system in the Baltic Sea Region

'he fresh water scru((ing technolog& was de9eloped and commercialised (& KMrtsilM. 'he principle of the fresh water scru((ing is a 9ariation of the technolog& which re;uires the addition of caustic soda 5Na /6 to react with and a(sor( the sulphurous emission gases. Its main (enefit is that it opens the possi(ilit& to use the scru((ing technolog& in sea areas where the natural al0alinit& of the sea water is not sufficient to react on its own with sulphuric products. 8i0e for the seawater scru((er: the resulting sludge must (e stored on (oard and then deli9er to a shore reception facilit&. Scru((er was testes on (oard of tan0er S!!la in 2..3?2.1.. 2fter two &ears of testing KMrtsilM indicated that the freshwater scru((er for marine exhaust gas is read& for commercial application. Installation was certified (& two classification societies 5FN7 and >86.

#igure 6$ %ru++er on tan8er Suula

Source< http<@@worldmaritimenews.com@archi9es@2..3.

'he third technolog& was de9eloped and commercialised (& 2al(org and it)s (ased on a com(ination of the two t&pe of technolog& descri(ed pre9iousl&. 'he h&(rid approach ena(les operation in closed loop mode when re;uired: for instance whilst in port and during maneu9ering using Na / as a (uffer. Khen at sea the switch can (e made to open loop using onl& seawater. 'he technolog& has (een installed on (oard of the Tor *icaria in -ul& 2..$. It is still under extensi9e tests. 2 fourth technolog& is (ased on 1SN x s&stem which is (eing de9eloped (& Ecospec. 1SN x: is the first of its 0ind in the world capa(le of reducing car(on dioxide 51 26: sulfur dioxide 5S 26: and nitrogen oxide 5N x6: all in a single s&stem and (& a single process. It is (ased on the use of seawater. So far: the 1SN x s&stem has (een tested on a 2framax tan0er. 'his technolog& is still under extensi9e tests.

1.

Towards an integrated transport system in the Baltic Sea Region

In9estment cost of scru((ers is depended on t&pe of scru((er: t&pe of ship and engine power. /owe9er: generall& it can (e estimated that cost will (e around 2?4 mln Euro.%

L91 as shi!:s fuel New regulations on emissions of sulphur oxides 5S x6 within the "altic Sea and the North Sea ha9e recentl& increased the interest in and demand for alternati9e fuels. 8i;uefied Natural >as 58N>6 as an alternati9e fuel is currentl& the most popular option. Dsing 8N> instead of oil considera(l& lowers the emissions of S x and N x. Natural gas is the cleanest form of fossil fuels. Natural gas consists of methane with minor concentrations of hea9ier h&drocar(ons such as ethane and propane. Khen ships are fuel with 8N>: no additional a(atement measures are re;uired in order to meet the IM re;uirements. 'he (urning process of natural gas is clean. 8N> contains 9irtuall& no sulphur: hence S x emissions from natural gas engines are reduced (& close to 1.. =. 'he particle emission is also reduced (& close to 1.. =. Moreo9er: (urning 8N> produces 3%= ? $.= less N x than the con9entional fuel: and greenhouse gas emissions are reduced (& 1% ?2. =.E 8N> has (een used as marine fuel since 2..1. Norwa& has (een the forerunner for 8N> * powered ships. 'he first ship in histor& that was propelled (& 8N> was ferr& ;l!tra: put into ser9ice in 2... and operated (& GBord1. 1urrentl&: o9er 2. 8N>? fuelled ships 5other than 8N> carriers6 are (eing operated in Norwegian waters. 8N> ships that are in use in Norwa& toda& are ranging from coast guard (oats to suppl& 9essels and ferries. Man& manufactures are offering 8N> fuelled engines alread&. >as engines which are currentl& a9aila(le on the mar0et can (e di9ided in two main categories< dual fuel engines 5e.g. KMrtsilM: Man6: lean?(urn gas engine 5e.g. #olls?#o&ce: Mitsu(ishi6. 'hese engines ha9e 9ar&ing characteristics and le9els of efficienc&. 'he dual fuel engine runs on (oth 8N> and con9entional fuel. It is flexi(le solution when the a9aila(ilit& of 8N> fuel is uncertain 5e.g. lac0 of 8N> (un0ering stations6. Khereas: the lean (urn mono fuel engine gi9es a simpler installation on (oard and is a more suita(le solution for ships operating in regions with a de9eloped grid of 8N> (un0ering stations. M2#IN'EN carried out the studies which indicate that additional costs for a gas fuelled ship will (e of 1.?1%= of the total cost of a con9entional ship. 'his additional cost is connected
5

The 0.1% sulphur in fuel requirement as from 1 January 2015 in SECAs - An assessment of available impact studies and alternative means of compliance, Technical Report, EMSA, 2010 6 Greener Shipping in the Baltic Sea, DNV, June 2010

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Towards an integrated transport system in the Baltic Sea Region

mainl& with large 8N> tan0s and the fuel piping s&stem. It can (e estimated that for a t&pical ro?ro ship of %E.. FK': the additional costs will (e a(out 3.2 million Euro.7 'here are maBor challenges to the widespread implementation of 8N> as a ship)s fuel. ne of the main challenges is that large space is re;uired on(oard for 8N> tan0s: and this contri(utes for the loss of cargo space. Gor example 8N> re;uires a(out 1.3 times more 9olume than MF 5marine diesel oil6 with e;uall& energ& content. If we added the tan0 insulation the needed 9olume is a(out 2.3 times higher.3 Gor new ? (uild ships it is ;uite simple to find space for the larger fuel tan0s: while this ma& (e much more difficult or e9en impossi(le: to find it on ships which are alread& in operation. 'herefore: there is 9er& little pro(a(ilit& that existing ships will (e using 8N> instead of con9entional fuel. It is more li0el& that 8N> as marine fuel will (e used (& new? (uild ships. Moreo9er: it has to (e noted that in order not to lose so much cargo space: the operational range due to the (un0er capacit& of the 9essel must (e reduced. 'herefore: 8N> is a fuel alternati9e (asicall& for 9essels which can (e re?fuelled ;uite often. /ence: this fuel alternati9e is not suita(le for large 9essels engaged in deep sea shipping. 8N> as ship)s fuel is most con9enient for short sea shipping and such ships as ro?ro and ferries. 'hat)s wh& more in9estment in 8N> powered ships is expected in this segment. Dntil 2.13 a(out 13 ships fuelled (& 8N> are going to (e put into operation in SE12 area: these are mainl& car and passenger ferries: offshore 9essels and also ro?ro ships. 'he first 8N> propelled ro?ro ships were ordered (& the Norwegian ship?owner Sea 1argo in "harati ship&ard in India. 'wo %:$.. FK' 9essels are planned to (e deli9ered in 2.12. 7essels will (e 132.3 metre long and 13 metres wide and will ha9e two 8N> tan0s with a capacit& of 24. m3 each. Ships will operate on a ten da& round trip ser9ice co9ering "altic: Norwegian and "ritish ports. 2nother two ro?ro 9essels ha9e (een ordered (& Nor 8ines 2S: the Norwegian logistics and shipping compan& (ased in Sta9anger. 'he ships will (e (uilt at 'suBi /ea9& Industries 5-iangsu6 Ship&ard: 1hina. Feli9er& of the new ships is expected in cto(er 2.13 and -anuar& 2.14. Each of the %:... FK' ships will ha9e a capacit& e;ui9alent to at least 2.. truc0 loads and will operate along the west coast of Norwa&.

Maritime Gas Fuel Logistics. Developing LNG as a clean fuel for ships in the Baltic and North Seas, MAGALOG, December, 2008, s. 18. 8 http://www.worldcruise-network.com/features/feature687 (15.11.2010).

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Towards an integrated transport system in the Baltic Sea Region

Gigure 4. #o?ro ship fuelled (& 8N> ordered (& Sea 1argo
Source< http<@@www.sea?cargo.no@news.$O.3.asp

In turn: the first 8N> propelled passenger ferr& that will (e operated in "altic Sea is (eing (uilt for 7i0ing 8ine in the ship&ard in 'ur0u. Ship will ser9e the route connecting 'ur0u: in Ginland and Stoc0holm in Sweden. It is planned that 9essel 5recentl& named the M@S 7i0ing >race6 will (e deli9ered to the ship?owner in -anuar& 2.13. 'he %7:... FK' 9essel will (e 214 meters long: 31.3 meters wide and will ha9e a draught of E.3 meters: and it will ha9e a capacit& to accommodate 2:3.. passenger. It will (e the largest 8N> propelled passenger ferr& e9er (uilt.

#igure 2$ Passenger ferry fuelle3 +y L91 or3ere3 +y Vi8ing Line

Source< http<@@www.lngworldnews.com@a((?wins?deal?for?9i0ing?line?lng?ferr&?finland@

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Towards an integrated transport system in the Baltic Sea Region

3. Economic effects of new IMO regulation

It can (e expected that in the near future the most widel& used solution within "altic Sea meeting new IM regulation will (e switching to marine gas oil 5M> 6. 'his is mainl& due to the fact that the alternati9e solutions are now rather in de9elopment stage and at the moment pose some technical challenge. 'he& re;uire additional in9estments not onl& on (oard of the ships (ut also at the seaports 5see chapter %6. Switching to marine distillates seems to (e the most suita(le option for maBorit& of shipping operators as M> can (e used in the main engines: without posing a maBor technical challenge. /owe9er: using M> ma& contri(ute to increase of costs and prices of sea transport in "altic Sea and North Sea as distillates fuels are more expensi9e than residual fuels. >enerall&: the price for shipping fuel is dependent on the price of crude oil. 'he international price of (oth crude oil and marine fuel is steered (& suppl& and demand: howe9er is shaped in the short term also (& expectations a(out the future. In turn: the expectations are shaped (& economic forecast: unrest in different parts of the world: production forecasts from oil? producing countries: stoc0 le9els: seasonal 9ariations: and much else. Furing the last do4en or so &ears: the cost of ships) fuel has (een characteri4ed (& a large fluctuations. /owe9er: generall& the increasing tendenc& was o(ser9ed. 'he distillate fuels ha9e (een alwa&s more expensi9e than residual fuels.

#igure ;$ Pri%es of +un8er fuels in 2000<2011

Source : Industrys perspective on the compliance with the low sulphur requirements, Bernard Lombard, Bruksela, 2011

14

Towards an integrated transport system in the Baltic Sea Region

2t the (eginning of the past decade price of (un0er fuels was rather low so the difference per tonne (etween residual fuels and distillates was not too high and was a(out %.?1.. DSF. 2s the prices of (un0er fuels increased the difference deepened: at first to 2..?3.. DSF and then reached a pea0 in 2..3 5%..?E.. DSF6. 2fterwards: the difference returned to pre crisis le9els 52..?3.. DSF6. >enerall&: during the last se9eral &ears distillates fuels were from 3.= to almost 1..= more expensi9e than Intermediate fuel oil 5IG 6. 2dditionall& low sulphur fuel oil with sulphur content of 1= 58SG 6 that are used in SE12 area are usuall& a(out %?1%= more expensi9e than fuel with higher content of sulphur 5IG 6. !redicting how (un0er fuel prices will change in future is a matter of pure speculation as the price le9els are influenced (& a series of different factors: e.g.< suppl& of crude oil: demand: de9elopment of alternati9e fuels: geopolitical de9elopments. Furing the last few &ears series of studies ha9e (een carried out that tried to assess impact of new regulations on transport costs. Studies present expected price of M> in 2.1% and expected price difference (etween fuel of 1.%= sulphur content and M> 5..1=6. 'a(le 2 summarises the results of 9arious studies. It has to (e noticed that much of these studies were carried out when 1.%= standard was in force. /ence: studies usuall& assume that ships underta0e a complete shift from 1.%= fuel to M> . 'hat approach ma& not sufficientl& ta0e into account that there is alread& a re;uirement to use 1..= in SE12s and that a maximum of ..1= sulphur in fuel is alread& re;uired while at (erth in an& ED port. 'he >erman stud& was performed after the entr& into force of the 1..= re;uirement within SE12 and has compared the prices of 1..= sulphur fuel to prices of ..1= sulphur fuel.
*a+le 2$ Estimated price of MGO in 2015 and estimated price difference between MGO and 1.5%
sulphur fuel

tu3y

-x!e%te3 !ri%e for M1O /071 ( 0 !er ton in = , in 2012 E%E ED# : 333 DSF

The COMPetitiveness of Europe ! Short sea freight Shipping compared with road and rail transport "COMP SS#7 %ommissione3 +y -. nal$sis of the Conse%uences of &ow Sulphur 'uel Re%uirements7 -. A Reducing the sulphur content of shipping fuels further to ()* + in the !orth Sea and Baltic Sea in ,(*-. Conse%uences for shipping in this area 7 I L Impact ssessment for the revised nne/ 0I of M RPO& 7 -9*-. Sulphur content in ships 1un2er fuel in ,(*-3 Stud$ on the impacts of the new IMO regulation on transportation costs 7 =niversity of *ur8u

-x!e%te3 3ifferential !er ton +et>een 1$2( an3 0$1( 7 if in3i%ate3 E%=

8ow<%.. DSF Medium< 7%. DSF /igh< 1... DSF 8ow< 3%. DSF /igh< 13.. DSF

3.=

Scenario 1< %4% DSF Scenario 2< 727 DSF 47.?%.. ED# 5historic !rice used in calculation6 5E33?E73 DSF6

7.?3E= 5price difference 1:%= to .:1= S6 %7?7%= 5price difference 1:.= to .:1= S6 Scenario 1< $2 and 42= Scenario 2< 11$ and %$= 73?3%= 5historic price difference 1:%= to .:1 = S6 'he historic price difference

1%

Towards an integrated transport system in the Baltic Sea Region

(etween 1:. = and .:1= S has (een %1?E2= *as8 2 an3 6 Impact Stud$ on the future re%uirements of nne/ 0I of the M RPO& Convention on Short Sea Shipping 7 %ommissione3 +y -. Conse%uences of the IMOs new marine fuel sulphur regulations 7 >e3ish Maritime A3ministration E%E ED# : 333 DSF No compara(le pro9ided. 9alues

8ow< EE2 DSF Medium< 11%3 DSF /igh< 1E%. DSF

No compara(le pro9ided.

9alues

Source< The &8"9 s!lph!r in f!el re6!irement as from " $an!ary %&"# in S120s < 0n assessment of a4ailable impact st!dies and alternati4e means of compliance: EMS2: Fecem(er: 2.1.

'he ta(le a(o9e suggests that in normal circumstances the price for M> in 2.1% would (e somewhere (etween E..?$.. DSF. "ased on the ta(le: it seems that the shift from 1.%= sulphur fuel to M> 5..1=6 ma& lead to increase of fuel price (& around E%?3.=. Not all ships will (e similarl& affected (& the increased fuel prices. Impact depends on the share of fuel costs out of the o9erall transport cost for the specific ship t&pe. It can (e concluded that such t&pes of ships as container ships: general cargo ships will (e particularl& affected (& an increased fuel price. 2ccording to the 1 M!2SS stud&: fuel represents 47= of the dail& costs 5including all costs such as fuel: capital in9estment: interest: manning: gross margin: repairs: maintenance: insurance etc.6 for container 9essel of %..?7.. 'ED. 'he share for a ro?ro ship is estimated at 32=. 'he Ginnish stud& similarl& indicates that the share of fuel costs in total dail& operational cost is the highest for container ships 5%4=6. Gor general cargo 9essels it is 33=: for ro?ro around 3E= and for ro?pax 3.= 5figure 76.

12.= 1..= 3.= E.= 4.= 2.= .= %4= 4.= 33= 3E= 33= 3.= other operati onal costs fuel costs %.= 47= .= 32= 1..= other operational costs fuel costs 1.=

22=

#innish stu3y

.OMPA

stu3y

#igure ?$ hare of fuel %osts in total o!erational %ost for 3ifferent ty!es of shi!s 1E

Towards an integrated transport system in the Baltic Sea Region

Source< S!lph!r content in ships b!n(er f!el in %&"#8 0 st!dy on the impacts of the new I O reg!lations on transportation costs7 Ministr& of 'ransport and 1ommunications: /elsin0i: 2..$A 2O P0SS The 2O Petiti4eness of 1!ropean Short<sea freight Shipping compared with road and rail transport) commissioned (& European 1ommission F> En9ironment: 2.1.

'he (un0er costs are an important component in the total freight rate. 2ccording to the E1S2 stud&: the share of fuels costs in the freight rate in short sea shipping depend on route length and ships speed (ut t&picall& reaches 2.= to 2%=: with pea0s up to %.= for fast 9essels 5when /G 1.%= cost %%E DSF per tonne6. 2 shift to the use of M> 5assuming 1... DSF per tonne6 would increase the (un0er share to a le9el of 3%=?4.= with pea0s up to a le9el of E4= for fast 9essels. Studies performed (& E1S2 show also some estimates of minimal increase in freight rates$ per unit as a result of shift from /G 51.%=6 to M> 5..1=6. 'he calculations ha9e (een made for 17 short sea shipping routes in SE12 area. 'hree scenario were presented< 8ow 5/G 1:%= ?273 DSF per tonne: M> ? %.. DSF per tonne6: "ase 5/G 1:%= ?417 DFS per tonne: M> ? 7%. DSF per tonne6: /igh 5/G 1:%= ?%%E DSF per tonne: M> ?1... DSF per tonne6. Gor traditional short sea ser9ices a9erage freight rate increase is estimated to reach 11.%= for the low scenario and around 2.= for the high scenario. Gor fast short sea ser9ices the figures are much higher< on a9erage 2E= for the low scenario and 4.= for the high scenario. If we ta0e into account routes (etween ports in the 8e /a9re?/am(urg range and "altic ports 5excluding fast short sea ser9ices6 total increase in freight rate per trip in low scenario ma& 9er& form 7.1= to 12.4= and from 13..= to 21.%= in high scenario. Greight rate per trip on intra "altic routes ma& increase from 3.2= to 13.7= in low scenario and from 1%.$= to 3..3= in high scenario 5figure 36.

The freight rate is defined here as the total unit price customers pay for using the short sea service (typically per 17 lane meters equivalent to a truck/trailer combination). The freight rate used in this e ercise includes all surcharges (booking fees! fuel surcharges! etc..).

17

Towards an integrated transport system in the Baltic Sea Region

#igure @$ -x!e%te3 minimal in%rease in freight rates !er unit as a result of the use of M1O /0$1(0 A short sea vessels >ith an average %ommer%ial s!ee3 of 1@$2 8nots7 ex%e!t route 1? /fast shi!0
Source< 0nalysis of the 2onse6!ences of 7ow S!lph!r *!el Re6!irements7 #eport commissioned (& European 1ommunit& Shipowners) 2ssociations 5E1S26: -anuar& 2.1.

Khile E1S2 studies estimates the increase of freight rates on different short sea shipping routes: studies carried out (& Dni9ersit& of 'ur0u for Ginnish Ministr& of 'ransport and 1ommunications gi9es examples of (& how much transportation freight rates for certain t&pes of cargo will rise 5per transported tonne or per 'ED6. 2ccording to the studies the costs for transportation (& sea can (e expected to rise (etween 23= and %1= as a conse;uence of using fuel with sulphur content not exceeding ..1=. 'he highest increase of freight rates is expected for containers 544?%1=6: and the lowest for oil 23?32=: for other cargo the increase is estimated to (e around 3%?4.=. 1. Some estimation regarding the increase of freight rates due to new IM ..1= sulphur re;uirement were also presented (& representati9e of Ginnish !orts 2ssociation during the de(ate held on 1%th -une in /elsin0i. 2ccording to Ginnish !orts 2ssociation the sea freights ma& increase (& 2%?4.=: per each cargo ton it will (e additional 2?1. Euro.

10

S!lph!r content in ships b!n(er f!el in %&"#8 0 st!dy on the impacts of the new I O reg!lations on transportation costs7 Ministr& of 'ransport and 1ommunications: /elsin0i: 2..$

13

Towards an integrated transport system in the Baltic Sea Region

. !otential changes in future cargo flow in "S# due to new IMO regulation
Significant increase in costs of transportation (& sea as a conse;uence of using the more expensi9e fuel ma& reduce competi9eness of sea transport drasticall& and cause that: in man& cases: short sea shipping will not (e cost ? effecti9e. 'his ma& lead: to some extent: to a modal (ac0shift from sea to road and or e9an change directions of logistics flows in Europe in order to a9oid the SE12. Se9eral studies tried to assess the potential modal shift due to new IM regulation. 1 M!2SS stud& indicates the maBor corridors where modal shift ma& occur. 'hese are< !ortugal@Spain *southern part of North Sea: Kest Europe?"altic States: >erman&@Fenmar0? Sweden: and DN 9ia English 1hannel to 1ontinental Europe 5figure $6. In the E1S2 stud& the similar corridors ha9e (een ta0en into account. 'hese corridors ma& (e regarded as the most sensiti9e to modal shift from short sea shipping to land transport.

#igure 4$ Main %orri3ors >here mo3al shift may o%%ur 3ue to ne> IMO regulations
Source< 2O P0SS The 2O Petiti4eness of 1!rope0n Short<sea freight Shipping compared with road and rail transport) commissioned (& European 1ommission F> En9ironment: 2.1.

1 M!2SS stud& includes some estimation of cargo reduction for different t&pes of ships operating in short sea shipping in SE12. 'he results are di9ided according to routes) distance. It can (e seen from the ta(le 3 that for ro?ro and lo?lo 9essels as the route)s distance increases the reduction in cargo 9olumes also increases. 'his thing is not so o(9ious for ro? pax 9essels: mainl& due to the specifics of the routes and small sample for ro?pax 9essels routes. Gor example: in the case of ro?pax small routes: o9er 9er& short distances 5P%.0m6
1$

Towards an integrated transport system in the Baltic Sea Region

this ser9ices ma& (e affected (& relati9el& large cargo 9olume reduction. 'hese routes are (etween Sweden and Fenmar0: where the resund "ridge is alternati9e to a short sea shipping. Gor the %.?1.. 0m and 1..?3.. 0m distances the ro?pax small routes remains 9er& competiti9e due to its short port turnaround times and high fre;uenc& of ser9ice: this ena(les it to transport a large amount of cargo in a gi9en time period. 'he distance 1..?3.. 0m is represented (& route (etween DN and "elgium. In this case the Eurotunnel could * in theor& * (e a 9alid alternati9e. /owe9er: e9en toda& rail transport (etween "elgium and the DN remains 9er& limited. 'he ro?pax large 9essel routes remains competiti9e o9er the distance .?3..0m due to the same reason as was mentioned in the case of ro?pax small 9essels routes. 'he cargo losses for the distance range of %..?1...0m are small: (ecause this distance is represented onl& (& two port to port routes from Norwa& to >erman& where short sea shipping has (een shown to (e dominant.
*a+le 6$ -stimate3 re3u%tion in %argo volumes in%reases for 3ifferent shi!s ty!e an3 3ifferent ranges of o!eration
hi! *y!e 0<20 Ro<ro /200 trailers an3 12 3rivers0 Ro<!ax small /60 trailers an3 1000 !assengers0 Ro<!ax large /600 trailers an3 1000 !assengers0 Lo<lo /200 an3 ?00 *-=0 x ?E.33 x x 20<100 x ?..24 ?..E3 x Ranges of O!eration /8m0 100<600 ?1.13 ?1.2. ?2.74 x 600<200 ?3.47 ?3.$2 ?4.1E ?3.E$ 200<1000 ?3.3% x ?..33 ?E..E 1000<2000 ?4.33 x ?E.%. ?E..E B2000 ?7.%3 x x ?7.E%

Source< 2O P0SS The 2O Petiti4eness of 1!rope0n Short<sea freight Shipping compared with road and rail transport) commissioned (& European 1ommission F> En9ironment: 2.1.

Studies carried out (& E1S2 also presents some expected impact of use of M> on freight 9olumes. Short sea operators operating within "altic Sea and North Sea ha9e (een as0ed how much 9olumes the& expect to lose due to the assumed increases in freight rates. #esults depend on route distance and are pro9ided for three different scenarios< 8ow 5M> ? 2.. DSF per tonne6: "ase 5M> * %.. DSF per tonne6 and /igh 5M> ?1... DSF per tonne6. Gor the low scenario the respondents expected that the a9erage 9olume losses reach 3=. Gor the (ase scenario it is 14.%=. 'he routes co9ering medium?range distances 54..?7%.0m6 are
2.

Towards an integrated transport system in the Baltic Sea Region

li0el& to (e hit the strongest with expected 9olume losses of 21=. 'he long?distance routes 5Q7%.0m6 seem to (e less affected 51.1=6. 'his might (e explained (& the limited modal shift potential from short sea to road. Gor the high scenario it is expected that the a9erage 9olume losses will reach 4..1=. In this case: the routes co9ering medium?range distances 54..?7%.0m6 are li0el& to (e hit the strongest with expected 9olume losses of %.= and the less affected will (e long?distance routes 53.=6. Studies commissioned (& Swedish Maritime 2dministration anal&se potential changes of transport pattern to and from Sweden. It indicates that a ris0 from a transfer of cargoes from ship to (oth truc0 and train is pro(a(le. /owe9er: the scale of this phenomenon is different in each of three scenarios considered 5depending on ships) fuel costs6. 'he decrease in transportation performance 5tonne?0m6 for shipping ranges from 2= to 1.=: depending on scenarios: in fa9our of rail and road transportation. 'he transfer is estimated to mainl& ta0e place to road in Sweden and to railwa& outside Sweden. 'he transfer from routes 9ia the !ort of >othen(urg to routes 9ia the Rresund "ridge is the single largest effect. In some cases: it would (e more cost effecti9e to go from north of Sweden to >erman& or e9en to southern Europe (& lorr&. Gor shipping: the results show that a transfer of freight transport from Sweden)s east coast to west coast will ta0e place. Moreo9er: in man& cases: it will also (e (eneficial to choose the port of Nar9i0 in Norwa& instead of the ports in northern Sweden. It is also expected: that the transfers from ports in northern Sweden to ports in central and southern Sweden will ta0e place. 2ll of this will contri(ute to longer transport Bourne&s on land. ther calculations that show the potential ris0 of shift to land routes due to IM sulphur regulations ha9e (een carried out (& >erman Institute of Shipping Economics and 8ogistics. Estimations were made for ro?ro shipping and container shipping. Gor ro?ro shipping anal&sis co9ered % routes< form >erman "altic Sea ports to Kestern Sweden @ Norwa&: from >erman "altic Sea ports to Southern Sweden: from >erman "altic Sea ports to Ginland: from >erman "altic Sea ports to #ussia@ "altic States and from "elgium to Kestern Sweden. Gor container shipping anal&sis co9ered % different routes from the North Sea into the "altic Sea 5North Sea to !oland: North Sea to 8ithuania@8at9ia: North Sea to #ussia@Ginland@ Estonia: North Sea to Sweden: North Sea to Fenmar0. 2 differentiation was made (etween feeder shipping and short sea shipping since different parameters are affecting the choice of transport mode here. It is estimated that in 2.1% a(out 2.7 million trailers could (e transported on selected ro?ro routes. /owe9er a(out 22= 5around E.. thou. units6 of that 9olume ma& (e threaten (& a shift directl& to land routes or to routes with shorter sea leg. 'raffic (etween South Sweden
21

Towards an integrated transport system in the Baltic Sea Region

and Ginland can expect to suffer the highest a(solute losses. It is mainl& due to the current high le9el of units on this route. In percentage terms: the route (etween >erman "altic ports and #ussia@"altic States will suffer the most. 'he more stringent SE12 regulations will ma0e truc0s more competiti9e despite the long routes: and will e9en gi9e them a clear competiti9e ad9antage on some of the routes. 'he o9erall conclusion can (e that the medium and long routes will suffer much more strongl& than short routes: and the proportion of sea transport in the total transport chain will decline 5from sea to road6.

#igure 10$ hift ris8 of trailers from sea to roa3 3ue to IMO regulations
Source< Red!cing the s!lph!r content of shipping f!els f!rther to &8" 9 in the :orth Sea and Baltic Sea in %&"#: 2onse6!ences for shipping in this shipping area: IS8: Septem(er 2.1.

2ccording to IS8 stud& feeder shipping will (e the most strongl& affected segment of the container shipping sector in a(solute terms. It can (e expected that up to E3.:... 'ED of containers transported (& feeders will shift from sea transport to land transport in 2.1%. 'he main routes which lose the most 5in a(solute terms as well as in percentage terms6 are the routes from North Sea ports to Fenmar0: Sweden and !oland. 'he ris0 of a shift is low particularl& on the long routes (ecause containers cannot use the scale effects of large truc0s during further transport on land routes. 'his therefore remains relati9el& expensi9e compared to sea transport.

#igure 11$ hift ris8 of %ontainers 3ue to IMO regulations

Source< Red!cing the s!lph!r content of shipping f!els f!rther to &8" 9 in the :orth Sea and Baltic Sea in %&"#: 2onse6!ences for shipping in this shipping area: IS8: Septem(er 2.1.

22

Towards an integrated transport system in the Baltic Sea Region

'he short sea shipping is the most strongl& affected in percentage terms with an a9erage expected shift of 27=. In a(solute terms it will (e around 1$.:... 'ED. In the case of short sea shipping more affected in percentage terms will (e shorter and medium distance routes. Such long route as North Sea ports *#ussia@Ginland@Estonia will (e the less affected in percentage terms. /owe9er due to large 9olumes generated on this route: it will (e most affected in a(solute terms. Some estimates regarding the impact of new IM sulphur regulations on cargo flows from@to Ginland were presented during the port de(ate held on 1%th -une in /elsin0i: (& managing director of port of /elsin0i. Sea route from south Ginland to south "altic Sea area 5route 1: sea figure 126 is a main route from Ginland to the continent: general cargo 9olume from South of Ginland to the continent 5"altic Sea area6 is more than 1. million tons per &ear. >eneral price le9el for a trailer on this route is a(out 1:... * 1:%.. ED#. /owe9er: due to SE12 regulation sea freight on this route ma& grow e9en (& 3. * %. =. 2ccording to the presentation some cargo flow from Ginland * 1ontinent sea route 516 ma& shift to two main alternati9e routes< 9ia #ail "altica 5route 26: through Sweden and 9ia 1openhagen ? Malmo (ridge 5route 36. It is (elie9ed that a(out 2. * 3. = of route 1 9olumes ma& (e shifted to the optional routes 2 and 3 after 2.1% 5mailn& to route 26.

23

Towards an integrated transport system in the Baltic Sea Region

3. 1. 2.

#igure 12$ *rans!ort routes from5to #inlan3

Source< !ort of /elsin0i /ar(ours: Nimmo MM0i: /elsin0i: 1% -une 2.12 ?presentation
th

7arious studies pro9ide differing conclusions regarding the impact of new IM regulations on modal shift. 'his can (e explained (& the difference in routes selected for their anal&ses and different assumption of fuel prices. /owe9er: studies agree that there are certain ris0s for shifting from the sea transport to other transport modes. >enerall&: the higher the price of M> the greatest ris0 for shifting. 8ong and medium routes are more li0el& to (e affected than short routes. /owe9er studies underline that some of these routes ma& lose not necessaril& in fa9our of routes in9ol9ing onl& land transport (ut: what)s most pro(a(l&: in fa9our of routes in9ol9ing a shorter sea leg and longer land leg. 'his change of transportation patterns ma& pose a potential ris0 of losing cargo in some "altic ports in fa9our of other "altic seaports.

24

Towards an integrated transport system in the Baltic Sea Region

'here is also another anxiet& in a "altic port sector: which has not (een assessed. 2fter introducing the new IM regulations competi9eness of "altic ports ma& (e reduced in comparison with ports in other regions of Europe and that logistics flow in Europe will change in fa9our of European ports not included in the E12 5for example 8e /a9re or Marseille in Grance or west coast ports in D.N.6. Gor example: it is possi(le that cargo flow to and from countries of 1entral Europe such as 14ech: Slo9a0ia: /ungar&: 2ustria and also southern part of !oland will (e: to some extent: ta0en o9er and handled (& the Mediterranean ports. /owe9er: it is onl& a h&pothetical scenario: and no one reall& 0nows how significant the changes in directions of logistics flow in Europe could (e.

$. New regulation and its implications for seaports

9e> regulations an3 !ort mar8eting strategies Some "altic ports see their chances for de9elopment in new IM re;uirements. It is (elie9ed that in man& cases long sea routes ma& lose in fa9our of routes in9ol9ing a shorter sea leg and longer land leg. 'his means that some "altic ports ma& lose and some "altic ports ma& win. Some ports are in9ol9ed in proBects which aim is to attract cargo (& offering cost effecti9e connections. 'he example is port of s0arshamn and 12#> ' proBect. 'he o(Becti9e of the 12#> ' is to esta(lish a coherent freight transport connection >othen(ourg@BSn0Sping@ s0arshamn@7entspils@Moscow and further East. It will (e a regular ferr& connection (etween 7entspils and s0arshamn (ased on a sta(le cargo flow. 12#> ' is wor0ing with strategies for transports on road and railwa& from NMssBS@-Sn0Sping to s0arshamn and reloading on ferr& to 7entspils and e9en Ginland. NMssBS@-Sn0Sping area will connect MalmS: >othen(urg: slo and Natrineholm to the 12#> ' corridor and 1IS countries 5see figure 136. 'he idea of 12#> ' is to meet future increased 9olumes (etween Scandina9ia and 1IS countries. It is estimated that new route s0arshamn?7entspils ma& attracted up to 2.= 9olumes from routes north of s0arshamn and 2.= 9olumes from routes south of s0arshamn.11

11

http://www.cargoto.se

2%

Towards an integrated transport system in the Baltic Sea Region

#igure 16$ .AR1O*O %orri3or

Source< http<@@www.cargoto.se

9e> regulation an3 its infrastru%tural im!li%ations for sea!orts Introduction of new IM regulation regarding sulphur content in ship)s fuel and connecting with that de9elopment of such solutions as scru((ers and 8N> as a ships) fuel will in9ol9e simultaneousl& de9elopment of speciali4ed facilities in ports. In the case of scru((ers: the waste that are generated during the whole process in scru((er should (e handled properl& and not (e discharged at sea. It means that the& must (e stored on (oard and then deli9ered to a shore reception facilit&. #egulation 17 of M2#! 8 2nnex 7I re;uires port reception facilities for scru((er residues. /owe9er: the infrastructure for scru((er waste disposition is not &et in place and no regulations exist that regulate the port)s responsi(ilit& to handle such waste. In -ul& 2.11: the IM issued a resolution gi9ing guidelines for reception facilities under M2#! 8 2nnex 7I. 'here exists also need to re9ise Firecti9e 2...@%$@E1 of the European !arliament and the 1ouncil of 27 No9em(er 2... on port reception facilities for ship generated waste and cargo residues. !ending the re9ision: Mem(er States should ensure: in accordance with their international o(ligations: the a9aila(ilit& of port reception facilities ade;uate to meet the needs of ships using exhaust gas cleaning s&stems.

2E

Towards an integrated transport system in the Baltic Sea Region

ther needed in9estments in SE12 seaports are connected with use of 8N> as a ships) fuel. Se9eral 8N> fuelled 9essels that will operate in SE12 ha9e (een ordered alread& and will (e put into ser9ice in one or two &ears. 'o offer 8N> as a fuel to ships: infrastructure for distri(ution of 8N> fuel must (e esta(lished. 'hree (asic solutions can (e implemented< 1. 'an0 truc0 to ship (un0ering 2. 8N> terminal to ship 9ia pipeline (un0ering 3. Ships to ship (un0ering 'wo first out of this three options are now used in Norwa&. In the first case: (un0ering ta0es place at (erth from tan0 truc0s. 'ruc0 capacit& 9aries from 4. to 3. m3 of 8N>: depending on tan0 design and regulations. 'his solution ma0es it possi(le to (un0er the ships in an& locali4ation: howe9er: it ta0es a lot of time. "un0ering process form one %% m3 tan0 truc0 last a(out one and a half hour. Khich means that (un0ering process for t&pical 8N> passenger ferr& operated in Norwa& that has two tan0 of capacit& of 12. m3 last a(out E.% hour. Fue to duration of (un0ering: this solution is suita(le for small 9olumes: up to 1..?2.. m3: of (un0er fuel. In the second case: (un0ering process ta0es place at (erth form port facilities. "un0ering can (e carried out at high loading rates and large 9olumes: which means that (un0er times can (e 0ept short. 'erminal tan0s ma& 9ar&: from 9er& small 52. m36 to large 5%.:... m36 depending on re;uirements: needs: a9aila(le space etc. Such 8N> terminals could (e supplied (& a small scale 8N> shuttle 9essel 5e.g. 2.:... m36 from local 8N> import terminal which would ser9e as a hu( to such (un0er stations. "erth access and distance (etween source and recei9ing 9essel are essential factors in the success of pipeline to ship solutions. 'he main limitations of the solution relate to the challenges associated with long li;uid 8N> pipelines. Gor longer distances: it is difficult to fuel 8N> directl& from 8N> terminals: from technical: operational and economic perspecti9es. 'his implies that storage tan0s must (e situated in close proximit& to the (erths where (un0ering operations are performed. 'he third option is not used &et. 2t present wor0s are (eing carried out to create a rules that regulate the ship?to?ship (un0ering operations. "un0ering could (e performed alongside ;ua&s: (ut it is also possi(le to (un0er at anchor or at sea during running. '&pical capacities of 8N> (un0er 9essels ma& range from approximatel& 1:... to 1.:... m3. Small 9essels or (arges can also (e used in some ports with capacities of less than 1:... m3. Ship?to?ship (un0ering is expected to (e the (un0ering method for 9essels that ha9e (un0er 9olumes of 1.. m3.

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Towards an integrated transport system in the Baltic Sea Region

#igure 1C$ *y!es of +un8ering solutions

Source< :orth 1!ropean 7:; infrastr!ct!re pro=ect8 0 feasibility st!dy for an 7:; filling station infrastr!ct!re and test of recommendations: Fanish Martime 2utorit&: Ma& 2.12.

#igure 12$ -xisting an3 !lanne3 !ro3u%tion !lants an3 L91 terminals in the -.A
Source< ;as Infrastr!ct!re 1!rope: 2.11. 2G: 2.11: >asnor: >a4prom

'he future infrastructural networ0 for distri(ution 8N> fuel is "altic Sea and North Sea ma& include all three solutions. In order to select the (est solution for an indi9idual port: the following critical parameters should (e ta0en into consideration< the 8N> (un0ering 9olumes: ph&sical limitations in port: logistic issues: t&pes of 9essels and shipping companies:
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Towards an integrated transport system in the Baltic Sea Region

in9estment and operating costs: safet&: technical and operational regulations: en9ironmental and regulator& issues. Sufficient num(er of filling stations needs to exist to pro9ide an ade;uate networ0 of (un0ering terminals and at the same time sufficient demand needs to materialise to ensure the financial 9ia(ilit& of indi9idual terminals. Studies carried out (& Fanish Maritime 2uthorit& 0 feasibility st!dy for an 7:; filling station infrastr!ct!re and test of recommendations shows how networ0 of terminals ma& de9elop such that suppl& can meet demand and 9ice 9ersa. 'he num(er of small scale and medium scale terminals: (un0er 9essels and tan0 truc0s re;uired to meet the maritime 8N> demand in SE12 has (een estimated. Studies assumed e;ual proportion of pipeline (un0ering and ship?to?ship (un0ering. Studies assumes that in 2.1% the demand for 8N> will reach 1:%$.:.. tonnes. Grom logistics point of 9iew the minimum networ0 for distri(uting 8N> fuel in SE12 should consist of 7 medium si4e terminals: 13 small si4e terminals: 11 (un0er 9essels of different si4e 5from 1... m3 to 1.... m36 and % tan0 truc0s. In 2.3. when the demand ma& reach o9er E mln tonnes the minimum networ0 should consist of 11 medium si4e terminal: 33 small si4e: 3% (un0er 9essels: 3 tan0 truc0s. 'his is the minimum from logistic point of 9iew. 'he logistics point of 9iew implies that 8N> infrastructure is an optimal wa& across the different owners: ports operators etc. 'his is onl& exemplar& networ0 and it must (e noticed the o9erall design of an appropriate suppl& structure depends on the proportion of (un0ering 9ia pipeline 9ersus ship?to?ship (un0ering and man& other factors.

#igure 1;$ 9um+er of small s%ale an3 me3ium s%ale terminals7 +un8er vessels an3 tan8 tru%8 reDuire3 to meet !otential maritime L91 3eman3$
Source< :orth 1!ropean 7:; infrastr!ct!re pro=ect8 0 feasibility st!dy for an 7:; filling station infrastr!ct!re and test of recommendations: Fanish Martime 2utorit&: Ma& 2.12.

2$

Towards an integrated transport system in the Baltic Sea Region

'he choice of location for a 8N> (un0er station depends (oth upon where potential users of 8N> are and where there are areas a9aila(le. 8N> is considering as an alternati9e fuel mainl& for ships operating in liner ser9ice 5such as ro ? ro ships: ferries and feeder container 9essels6. /ence: 8N> terminals for (un0ering purpose should (e constructed in locations where there are most dense liner ser9ices. In the "S# se9eral 8N> (un0er stations are considered.

L91 terminal in 9ynEshamn / >e3en0$ 8N> terminal in N&nMshamn owed (& 2>2 >as 2" is a first 8N> terminal in Sweden and on the whole "altic Sea. 'erminal was put into operation in Ma& 2.11. It is a medium si4e import facilit& of a capacit& of 3..:... ? 4..:... tonnes per &ear. 'an0 height is 3E.E meters: diameter 37.% meters: and the 9olume 2. ... cu(ic meters. 'he har(our for the terminal is a(le to recei9e tan0ers up to 1E. m in length: $ m in depth and with a capacit& of %.:... cu(ic meters. 'here are plans to upgrade terminal to ma0e it possi(le to load 8N> on 9essels that suppl& other 9essel with 8N> fuel. L91 terminal in 1othen+urg / >e3en0 'he proposed 8N> terminal in >othen(urg will (e a small scale terminal esta(lished especiall& for (un0ering purpose. 2ccording to the planned schedule the terminal will (e put into operation (& &ear 2.13. 'he o9erall proBect was initiated (& >Ste(org Energi together with !ort of >othen(urg. >asnor ha9e later Boined. In earl& 2.1.: >Ste(org Energi and >asnor formed a new compan&: 7:; ;OT: which will manage the operations of the terminal.12 'he main o(Becti9e is to construct terminal which will (e a(le to recei9e 8N> and deli9er it to (un0er (oats suppl&ing 9essels. !laned terminal)s storage capacit& is 1.:... m3.

*erminal L91 > Firsthals /,enmar80 'he Norwegian compan& >asnor and the !ort of /irtshals ha9e signed a letter of intent regarding esta(lishment of a small scale 8N> terminal at the !ort of /irtshals. 'he terminal will (e owned and operated (& >asnor. 'he cooperation (etween >asnor and the !ort of /irtshals is effected (& GBord 8ine: which plans to put two newl& (uilt cruise ferries fuelled (& 8N> into ser9ice (etween Norwa& and /irtshals in 2.12. 13

http://www.lnggot.com/2010/press-release-2010-06-22/ , http://www.lngworldnews.com/gothenburg-portmoves-forward-with-lng-sweden/ 13 http://www.portofhirtshals.com/default.aspx?m=4&i=125&pi=2&pr=0

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Towards an integrated transport system in the Baltic Sea Region

L91 terminal in #inlan3 'here are plans to construct 8N> (un0er stations also in Ginland. >asum indicates se9eral potential locali4ations for such facilit&. 2t first: compan& plans to construct small 8N> terminal in Naantali. 'erminal would (e used as a (un0er station for passenger ferr& which is (eing (uilt for 7in0ing 8ine and will (e put into operation in 2.13 2dditionall&: >asum indicate that 8N> terminal could (e constructed also in other locali4ation< in 'ol00inen: !or9oo: Not0a: /amina: /an0o.

Summar% and conclusions

New IM regulation regarding sulphur content in ships) fuel caused a great concern within the maritime transport sector in SE12 area: particularl& in "altic Sea #egion. 'here are three main options a9aila(le for ship operators who wish to meet the new re9ised 2nnex 7I sulphur re;uirements< switching to M> : use scru((ers or use 8N> as a ships fuel. /owe9er: the two last options are now rather in de9elopment stage and at the moment pose some technical challenge. 'he& re;uire additional in9estments not onl& on (oard of ship (ut also in seaports. /ence: it can (e expected that in the near future the most widel& used solution to meet new IM regulation will (e switching to gas oil 5M> 6. Switching to marine distillates seems to (e the most suita(le option for maBorit& of shipping operators as M> can (e used in the main engines: without posing a maBor technical challenge. /owe9er: distillates fuels are more expensi9e than residual fuels. >enerall&: during the last se9eral &ears distillates fuels 5MF : M> 6 were from 3.= to almost 1..= more expensi9e than Intermediate fuel oil 5IG 6. 'his cause a concern that using M> instead of fuel with higher sulphur content ma& contri(ute to increase costs and prices of sea transport in "altic Sea: which is included in SE12. In turn: this ma& lead to modal shift from sea to land transport and change of future pattern of the cargo flow in "altic. 2ccording to E1S2 studies: for traditional short sea ser9ices (etween North European seaport and "altic seaports as well as intra "altic ser9ices a9erage freight rate increases are estimated to reach 11.%= for the low scenario and around 2.= for the high scenario. Gor fast short sea ser9ices the figures are much higher< on a9erage 2E= for the low scenario and 4.= for the high scenario. Man& studies agree that there are certain ris0s for shifting from the sea transport to other transport modes due to IM regulations. 'he most 9isi(le relation is that the higher the price of M> the greatest ris0 for shifting. >enerall&: it can (e expected that medium and
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Towards an integrated transport system in the Baltic Sea Region

long sea routes are more li0el& to (e affected than short sea routes. /owe9er studies underline that some of these routes ma& lose not necessaril& in fa9our of routes in9ol9ing onl& land transport (ut: what)s most pro(a(l&: in fa9our of routes in9ol9ing a shorter sea leg and longer land leg. Geeder shipping will (e the most strongl& affected segment of the shipping sector in a(solute terms as a result of the shifts. 'his potential change of transportation patterns ma& pose a potential ris0 of losing cargo in some "altic ports in fa9our of other "altic seaports. 'here is also anxiet& that after introducing the new IM regulations competi9eness of "altic ports will (e reduced in comparison with ports in other regions of Europe and that logistics flow in Europe will change in fa9our of European ports not included in the E12 5for example 8e /a9re or Marseille in Grance or west coast ports in D.N.6. 8osing a cargo due to IM regulation is not onl& one conse;uence for "altic ports. Introduction of new IM regulation regarding sulphur content in fuel and connecting with that de9elopment of such solutions as scru((ers and 8N> as a ships) fuel will in9ol9e simultaneousl& de9elopment of speciali4ed facilities in ports. In the case of scru((ers: the waste that is generated during the whole process in scru((er should not (eing discharged at sea. It means ports should (e e;uipped with special reception facilit&. 2nother needed in9estment in SE12 seaports are connected with use of 8N> as a ships) fuel. 'o offer 8N> as a fuel to ships: infrastructure for distri(ution of 8N> fuel in ports must (e esta(lished.

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PORT DEBATE
Implications of the IMO regulations on the future pattern of the cargo flow in the Baltic 15th June 2012 Helsinki, Finland Venue: Gatehouse, Vousaari Harbour
Organized by B O and !ransBalti" #u$$orted by Finnish orts %sso"iation & ort o' Helsinki

9.00 Intro uction ( Bogdan O)dako*ski, #e"retary General, B O ( +iktor #zydaro*ski, ro,e"t -anager, !ransBalti" Port of !elsin"i # recent facts $ figures an e%pecte impact of IMO regulations .i//o -0ki, -anaging 1ire"tor, ort o' Helsinki &orecasting the future cargo flow in the Baltic 1r2 !a$ani #ti$a, ro,e"t -anager, !he Balti" 3nstitute o' Finland Main ri'ing forces for future cargo flow in the B(R +iktor #zydaro*ski, ro,e"t -anager, !ransBalti" !ow the shipping line are a )usting to new rules* Olo' +iden, -anaging 1ire"tor, Finnish #hi$o*ner4s %sso"iation +0.,0 # ++.00 -offee .rea" &innish ports espouse to new situation after /0+0 Heikki 5issinen, Vi"e(6hair/an, Finnish ort %sso"iation Re'iew of anal1sis assessing the impact of (E-A rules on transport sector -onika 7oz/aryno*ska, %ssistant, Gdynia -ariti/e %"ade/y +/.00 De.ate *ith s$eakers and in8ited 9uests +/.20 3unch

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