It is not quite water into wine, but a Norwegian company that has built a leading position in vessel waste management systems claims to be on the verge of launching technology that can convert 3.5% sulphur content heavy fuel oil (HFO) into 0.1% fuel onboard a ship.
In what, if it comes to fruition, could be a novel way of dealing with the IMO 2020 sulphur cap, Teco Tech has come up with a system that is potentially easier to install than a scrubber and costs a similar amount.
Can it really be true? It is theoretically possible, according to experts, but Teco has gone on a long and winding road to end up at the desulphurisation destination, having originally tried to develop a unit that converted HFO into marine gasoil (MGO).
After cruise lines began to consider the IMO 2020 regulations to cut sulphur emissions from marine fuels, Teco Group founder and chairman Tore Enger, whose firm has installed 100 scrubbers on ships, started looking for alternative existing land-based technologies that, like scrubbers, could be scaled down to work in the more constrained space available on vessels.
In his inimitable way, he says, “I have been asking everyone in the industry: ‘With seven billion people on the planet, surely there must be one smart-arse somewhere in the world who can do this some other way than scrubbing the exhaust gases?’”
However, at the point TW+ interviewed Enger in late March, he was candid enough to admit: “We are just amazed that a little marine company like us might be able to come up with the game-changer. We are still not there, but we are working round the clock to get there.
“We are on an emotional roller coaster. One day it is three steps forward, the next two back again. I am basically dead scared on a daily basis. But we are getting so close.”
Teco Group’s competencies — ranging from initial operations 25 years ago in green chemical tank cleaning to ballast water systems, marine electronics and automation, setting up a naval architecture design unit and buying a shiprepair yard — have coalesced to make the step into onboard fuel desulphurisation.
The company has been developing the project since August 2017 and Enger says it has held discussions with cruise giants including Royal Caribbean, Carnival Corp and Norwegian Cruise Line.
Teco Tech is now in the final stages of development of a heavy fuel upgrader and desulphurisation unit that will deliver HFO output with a sulphur content of less than 0.1%, regardless of the sulphur percentage in the heavy fuel input. It uses a proprietary mixture of liquefied runny solids in the extraction process.
When TW+ met Enger, the company had been working on a system that created 0.1% sulphur MGO from the HFO. The test rig for an onboard distillery had produced results providing an 80% output of MGO from the input HFO, with an aim to boost that to 90%. That could make a return on investment in less than a year on the basis of a $300-per-tonne differential in the prices of HFO and MGO. However, it was running into problems of perception.
Scrubber suppliers know what we are doing. There is room for all of us
A potentially major criticism was that the conversion rate resulted in increased fuel consumption and greenhouse gas emissions, counter to the IMO aim of bringing shipping into line with global efforts to slow climate change. The IMO has set a first target of reducing CO2 emissions by 40% by 2030.
Enger, who worked for Norwegian product tanker company Osco before setting up Teco, had hoped the first sales would be to cruise lines. At that point he believed he had lined up buyers once a scaled-up unit had been demonstrated.
However, observers say cruise lines would be put off by the growing need to prove their green credentials to customers, and TW+ could not find any major lines showing enthusiasm to say much more than that they had seen trials.
In any case, Enger saw the real potential for sales in the wider bunker and tanker markets, where the aim had been to develop one machine, costing about $3.5m to buy and install, that could serve 85% of all ships — that is, those burning between 12,000 and 18,000 tonnes of bunker per year — so long as owners were happy sitting a mini-cracker operating at temperatures of up to 700°C on their ships.
Tore Enger says the market for scrubbers took a couple of years to get going after the IMO set the date for cutting sulphur in marine fuels to 0.5%. “We can now see next month it will explode [again] because there are so many owners out there who do not have a clue how to start, how to operate these things, how to manage it,” he says of the upcoming rules and planned launch of Teco’s marine fuel converter.
Teco’s repair yard has sold out of capacity to clean and prepare fuel oil tanks for diesel in the fourth quarter of 2019. How will 35,000 ships clean their tanks in the turnover period, he asks.
But now Teco has switched to desulphurisation, it has a 10-tonne-per-day upgrader unit at the assembly stage ahead of validation testing over an extended period in operation.
Enger says the individual component size and input parameters are based on previously successful bench and laboratory test results with yields averaging 94%-96% prior to purification from standard onboard HFO purifiers. Additional heavy particles, including water from the purification stage, are the only other residues lowering the yield.
Liquefied runny solids will be subject to onboard cleaning between each batch processed. The mixing and separation process is continued for several months before the solids are landed for regeneration. Residues would be stored onboard and pumped ashore.
Teco Tech aims to provide all the necessary cleaning solvents, including an exchange programme for spent liquefied runny solids, as part of a service scheme.
It has also looked into the concept of floating refinery vessels stationed at major bunker ports. “We are discussing with some of the big guys that maybe we should put a [large] fuel converter on a ship to make a floating fuel conversion unit,” Enger says.
Still, the main aim is to demonstrate that the 10-tonne desulphurisation unit can deliver results. Once that is proven, he says there should be no problem scaling up further in size. The long-term aim of the original converter was “to be delivering 100 units before the end of 2021. If we do that, we will have created a fantastic company for our shareholders. But we are aiming for a target of 1,000 ships before 2025.”
That would equate to a 2% market share from 50,000 ships, comprising existing vessels capable of benefiting from a scrubber and newbuildings delivered in the period. But that target depends on the window of opportunity not being missed; many observers think scrubber sales will last only five more years or so amid huge uncertainty about how bunker prices will evolve post-2020.
Still, onboard fuel desulphurisation might avoid the problem of ports banning the washing out of open-loop scrubbers. Maintaining a 0.1% level of sulphur, rather than the 0.5% required by the IMO for the new very-low sulphur fuel oils coming onto the market, could also reduce engine wear, as it would remove the possibility of differing levels in variable fuel types causing damage.
Others in the lower-sulphur bunker production chain might also have cause for cheer. “Scrubber suppliers know what we are doing,” Enger says. “There is room for all of us. We have to produce as much equipment as possible, so there will be sufficient HFO [demand] to buy it in many places in the world.”
Loss-making refineries could be happy too. “The refineries love shipping because it is getting rid of all the shit. We have heard that for big refineries to build a hydro cracking unit for converting HFO will cost $1bn, but Preem has said it would take $2bn.”
Teco has patents pending for its systems. But he says much of the equipment used in the system will be provided by big marine suppliers and so has been approved by class societies.
Enger says equipment will be fitted according to the IGF Code for ships using gases or low-flashpoint fuels and Teco intends to seek safe certification for marine use from DNV GL for each vessel installation.
“Once this is up and going, this is a game-changer compared to the scrubber,” Enger promises.Putting Norway back on the maritime map
Teco Tech is a new company focused on responding to maritime environmental regulations, within the technical services group founded in 1994 by Tore Enger.
At the time of the TW+ interview, the start-up was 60% owned by parent Teco Group, but it is looking for new investors.
“We are going into the next step where we need money to grow, and we need to grow fast, because the window is the next three, four, five years,” Enger says of the need to build and sell the technology it is developing to convert HFO into 0.1%-sulphur fuel oil onboard ships.
“CO2 and particulate matter are the next issues. We are already working on CO2, but the focus now is on the fuel desulphurisation unit. We will be a player there, but we have to succeed on this first.”
The group provides a wide range of technical services to shipowners and operators that he says are coming together in IMO 2020. “It is the first time we can see that everything we are doing is toward the same activity.”
Teco Group has 12 offices round the world employing close to 100 land-based staff, plus about 250 people on ships on any one day.
It was first involved in using green chemicals for cleaning ships’ tanks, a service that today represents just 10% of turnover. It then went into supplying high-pressure equipment to vessels and upgrading ballast tanks at sea, and in 2008 acquired Scanship, the biggest supplier of waste water management systems on cruiseships.
The group was sold to private equity investors and listed in Oslo in 2014, the same year it set up a naval architecture unit, Blom Maritime, to plan for scrubber installation (it has fitted 100 units), and developed marine electronics and automation subsidiaries. In 2016 it acquired the Crosscomar shiprepair yard in Algeciras, southern Spain.
“This could be something that puts Norway back on the maritime map for equipment. We will have an extremely high Norwegian content that will open up financing from [state credit finance group] Giek,” Enger says.
Commissioning units is likely to be its biggest bottleneck, but the company has signed contracts for new premises in Oslo, and will operate from sites in Singapore and Miami.