Collaboration key to meeting shipping’s coming challenges
The annual Lloyd’s List end of year Outlook Forum in 2019 concluded that shipping will confront unprecedented challenges in 2020
THE Outlook 2020 Forum, co-sponsored by DNV GL among others, agreed companies will have to adapt or risk obsolescence in an environment in which the very nature of the macro-economic system is shifting.
Challenges are coming from regulators, financiers, clients and labour.
There was unanimous opinion that there needs to be more collaboration in the industry, and to enter the necessary period of innovation shipping requires to respond to a growing list of regulatory and commercial challenges.
More than half of the respondents in a Lloyd’s List Outlook survey that prefaced the forum said fuel technology will be a greater challenge over the next five years than regulatory, supply chain digitalisation and change management issues.
Newbuilding orders are stalling amid fears that ships propelled by liquefied natural gas or residual or distillate fuels may have a limited lifespan. There’s also rising concern that the adoption of LNG-fuelled engines is slow because it’s seen as a “transitional” marine fuel.
However, the world’s largest classification society, DNV GL, signalled at the forum that gas might be used for longer than expected as a marine fuel.
“Many talk about gas as a fuel being a transition type of fuel. I’m not so certain that the transition will be short,” panellist Knut Ørbeck-Nilssen, DNV GL Maritime chief executive, told the December 10 forum in London. Shipowners had only two choices today — to do nothing, or use LNG as a fuel, he said.
“We could even see in 2050 and beyond that gas as a fuel will still be a very attractive solution. Gas is absolutely a very viable solution now and will be for the next couple of decades,” Mr Ørbeck-Nilssen said.
Fellow panellist Grahaeme Henderson, vice-president of shipping and maritime for oil major Shell, said delays in addressing decarbonisation are the biggest threat to shipping over the next five years. Emissions could be as much as 60% to 70% lower on the newest, LNG-fuelled vessels, he told the forum.
“We should be doing the very best that we can do today, not sitting back and waiting,” Mr Henderson said. Shell chartered almost 700 tankers in the spot market last year and is the third-party operator of a further 200, giving the oil company an influential voice in shipping’s decarbonisation debate.
Some 51% of Lloyd’s List Outlook survey respondents cited fuel strategies as the greatest medium-term challenge to operational efficiency in shipping.
The global commercial fleet of some 60,000 vessels must halve greenhouse gas emissions by 2030 and reach zero by 2050 under new International Maritime Organization targets. However, the decarbonisation agenda is accelerating faster than the development of zero-carbon fuel alternatives such as ammonia and green hydrogen to replace existing marine fuels.
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The forum discussed recent challenges for a hydrogen-fuelled vessel trialled by Shell. Mr Henderson said hydrogen was chilled to a liquid at minus 253 degrees Celsius, compared to -162°C for LNG. As a result, Shell could not use the same inerting system for LNG.
Panellist Kathi Stenzel, the managing director for Intertanko, said there were no regulations for shipping hydrogen, either as a fuel or as a cargo, and that the trial presented significant engineering challenges. Intertanko represents independent tanker owners shipping energy commodities for oil traders and companies.
Hydrogen was piped initially through the same pipe as LNG in the trial, she said. “There was liquid oxygen forming out of the air around it, which if course is incredibly dangerous and not to be recommended,” Ms Stenzel said.
There’s no single solution for alternative fuels, she added. “Batteries and fuel cells might be the answer for the ferry sector and shortsea shipping. LNG right now is [a solution for tankers] but it’s probably not getting us close to where we want to be [on carbon emission reductions].”
Another panellist, BIMCO shipping analyst Peter Sand, told the forum that protectionism is the biggest threat to shipping. “In the world of shipping, we are the facilitator of global trade, and protectionism is bringing down global trade. The whole walk away from globalisation is a negative for shipping. Many of the disruptions [impacting shipping] will live on efficiency.
“If the shipping fleet was 100% efficient, it would be a completely different environment. I see protectionism as the bigger threat and it’s getting bigger by the day,” Mr Sand said.
Michael Parker, Citi Group’s
Fellow panellist Michael Parker, Citi Group’s chairman of Global Shipping, Logistics & Offshore, said the industry needs to concentrate efforts on its core weaknesses.
“Shipping should start to focus on (the threats) it can control, and overcapacity has always been, fundamentally, the issue that’s affected shipping. It’s why shipping has been so unprofitable, so fragmented and facing the challenge of zero emission shipping.
“(With) the technological changes that shipping faces, the last thing we should be doing is building old, analogue 20th century vessels when the focus needs to be around … digitalisation of data (which) will enable the existing world fleet probably to have much greater life extension and save the building of many new ships that are likely to be stranded assets within 10 years,” Mr Parker said.