The wide publicity of the grounding and the ensuing environmental damage by the tanker MT EXXON VALDEZ in 1989 brought the implementation of MARPOL regulations and the OPA 90 Act which effectively mandated the use of double hull tanker vessels. Since there have been very few high profile maritime disasters since then, disasters that could trigger another round of regulatory reforms, newcomer players in shipping with short institutional memory assume that today’s vessels are meant to be traded for their whole design life of usually 25 years. It is assumed the risk for technological obsolesce is minimal, and more or less a straight depreciating line over twenty-five years defines residual values.
A recent article on well established technologies for electric boats in Königsee lake in Bavaria since the beginning of the century and new technologies for ‘mass-made’ speed boats in Zürich Lake with 120 kilowatts (162 horsepower) and 60 km per hour top speed, made the Captain ponder whether electric tankers and dry bulk vessels might not be so far in the future.
The design of tankers, and all types of vessels in general, has evolved tremendously over the several decades, especially with the use of computers, AutoCAD and Fine Element Analysis (FEA), to provide for an almost pollution-free movement of commodities and finished products due to pollution that may be caused by the cargo itself when in an accident. However, ‘forced’ technological evolution may come not only from regulators concerned with the cargo and the cargo holds/tanks arrangements, but also from regulators concerned with emissions and also the market place itself.
The Energy Efficiency Design Index (EEDI), adopted by the International Maritime Organization (IMO) in July 2011, mandates that newbuilding vessels delivered from 2015, 2020 and 2025 should have energy efficiency improvements of 10%, 20% and 30%, respectively, over the EEDI baseline index. Possibly, in the present turmoil in shipping, 2015 and later years might seem a very lengthy proposition, especially for owners who may be financially insolvent by then; however, since shipping is an industry better planned in terms of decades, a great deal of vessels will be affected by such implementation, including vessels that are being delivered now or even in the last decade. There will be waivers, no question, and the industry will be given time to adjust, just as it happened with the transition from single hull to double hull tankers that almost took more than a decade. However, single hull tankers got lucky as the first decade of this century was one of the best ever in shipping with tight tonnage supply and single hull tankers proved to be much more profitable than any other type of vessel. However, the EEDI implementation comes at a time when the market is extremely oversupplied with modern tonnage, and likely will not enjoy the luxury of time or be given the benefit of the doubt. And, more importantly, while single hull tankers actually enjoyed the preference of the charterers due to their lower cost, the EEDI index works against the vessels and the owners and in favor of the charterers. While there may be people who still question ‘global warming’ evidence or may be less than motivated to make an effort to reduce Greenhouse Gas Emissions (GHG), when an EEDI vessel offers 10% savings over a comparable vessel, it’s a no-brainer which vessel a charterer will choose, especially in an oversupplied market. By way of illustration, 10% efficiencies for a VLCC that usually burns ninety tons per diem of bunker fuel translates to savings of nine tons of fuel per diem, which, at today’s price of more than $600 per ton, it economizes almost $5,500 per diem. For a typical trip from Middle East to US Gulf, the savings can typically be almost $200,000 for the trip. Maybe the day of a Prius VLCC may not be such a farfetched thought, after all.
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