Denmark is for Baltic NECA status

The major underplot of the recently held Baltic Sea Forum attended by the heads of the Baltic governments was, in our opinion, the issue of introducing NOx limits for the vessels’ emissions in the Baltic Sea. ‘Half-Baltic’ Denmark insisted on it while Russia and other Baltic states were more restraint in their comments. Meanwhile, Gazprom is already working on the projects to develop LNG bunkering infrastructure.

NOx limit introduction: pro and con

Against the background of crisis developments in the global economy and, consequently, difficult situation in shipping industry, International Maritime Organization (IMO) toughens environmental standards for vessels, thus aggravating the situation even more. From January 1, 2015, sulphur content in marine fuel should not exceed 0.1% (which is 10 times less as compared with the current limits) in Sulphur Emission Control Areas (SECA) including the Baltic and the North Seas. It will result in rejection of conventional bunker fuels and crush of the existing markets of shipping, shipbuilding and bunkering. All Russian ports are in the ‘far corner’ of the Baltic Basin, therefore this issue is specifically urgent for our country.

Sulphur restrictions can soon be supplemented with limits for the content of nitrogen oxides (NOx Emission Control Area (NECA) status for the Baltic Sea). Danish Minister for Trade and Investment Pia Olsen Dyhr insisted on this during the Baltic Sea Forum. When answering the question of IAA PortNews, Ms. Dyhr said that her country supports introduction of new sulphur content limits in marine fuels from 2015 as well as introduction of NOx emission limits in the Baltic Sea. In the course of the Forum she also appealed for support of other Baltic states, saying that the corresponding application to IMO should be made in the shortest time possible. “This issue has already been solved”, - was the Minister’s dogmatic statement. If IMO introduces these restrictions, all new vessels in the Baltic Sea will have to use engines meeting Tier III standard from 2016.

Meanwhile, Denmark is geographically located at the very entrance to the Baltic Sea. If it has the NECA status, all the vessels without engines meeting the corresponding standards will have to be unloaded in Danish ports or in Hamburg (Germany), hence Denmark and Germany (the premier violin in EU) will be able to increase the volume of transit cargoes passing their territory. Besides, European Union is to invest into the creation of LNG bunkering infrastructure at the Danish port of Aarhus which will also contribute to Denmark’s geographical role as the Baltic ‘gates’. At the same time, the estimates mentioned by the Danish Minister suggest that expenses of ship owners for the construction of new vessels in compliance with new NOx restrictions will climb by 24% as compared with the cost of vessels with conventional engines.

By the way, Ms. Dyhr specified that Denmark had also ordered a study into the feasibility of the North Sea NECA application but this is nothing more than words so far. It is the Baltic, not the North Sea to apply for to IMO.

Norwegian Prime Minister Jens Stoltenberg also called for severe environmental restrictions. He announced that environment should not be sacrificed to economic interests and noted that tough environmental policy in Norway resulted in increased fish catch. It should be noted that Norway does not border the Baltic Sea at all and fishing in the Baltic Sea can hardly be called the core economy of the Baltic states.

However, the head of the Russian Government Dmitry Medvedev indicated at the Forum that Russia’s position in this issue is not so clear-cut. “This issue is not so simple, - Dmitry Medvedev said. - When handling this issue it is necessary to take into consideration the common shipping practice of the Baltic Sea, all the more so, because we have not yet found any mission reduction methods to be efficient enough”.

Representatives of other states did not touch this issue in direct way which can also speak for their will not to spur the process of limits introduction. As Polish Deputy Prime Minister Janusz Piechociński commented personally to IAA PortNews as regards reasonability of introducing NOx limits in the Baltic Sea, “an efficient solution should be found here so that our region wouldn’t lose its competitiveness”. This answer can also be treated as reluctance of Poland being a real Baltic state, unlike Denmark and Germany, to risk her interests for the sake of unconfirmed environmental benefits.

Actually, a number of experts point out that restrictions on sulphur content and Nox emissions to be imposed on sea-going vessels will lead only to the shift of cargo flows to other types of transport, first of all, automobiles, which is to deliver almost a harder blow to environment with boosted carbon dioxide emission. 

Gas attack

At the Forum, supporters of restrictions suggested the development of LNG-powered shipping as an alternative. Nevertheless, the use of LNG has a number of disadvantages, in particular, bulky LNG tanks (making LNG fuel unfavorable for container carriers, bulk carriers and tankers), lack of infrastructure and unpredictable volatility of prices (also making LNG fuel unfavorable for tramp shipping). Taking into consideration, that the core of cargo turnover at Russian ports of the Baltic Sea is made by containers, bulk cargo, crude and oil products, it becomes clear that LNG is not a panacea for Russian maritime industry. Other alternatives, like scrubbers are also controversial because of their long pay-back period.

This issue was covered at the Forum by the deputy Director General of Russian Maritime Register of Shipping Pavel Shikhov. According to his forecasts, no revolutionary upsurge of LNG fuel consumption should be expected and by 2020 LNG can account for no more than 20% of the bunker market. Shikhov believes that the majority of ship owners will chose purification systems which, as we mentioned, have a long pay-back period.

As for LNG bunkering infrastructure, it does not exist at all at the Baltic Sea so far. For widespread use of LNG fuel it is necessary to build liquefying facilities on the shore, to build gas pipelines and specialized bunkering vessels. Also, private investors want to be sure in stable demand while the absence of LNG bunker market and numerous ‘cons’ related to LNG bunkering do not investors’ confidence. In Europe, the infrastructure development will be financed under EC programs – as we have mentioned before, it is profitable for such countries as Germany and Denmark.

In Russia, Gazprom is determined to complete the pre-investment feasibility study for LNG bunker terminal by the end of 2013, while the parameters and location of the terminal have not been determined yet, nor the method of bunkering. Primorsk Commercial Seaport is willing to provide the territory. Presently, the port is negotiating it with Gazprom.

To summarize, a conclusion can be made that present environmental discussions in the world are too engaged with economic and political interests of different states and industries. However, the scientists have not yet reached a consensus as regards global cooling or global warming threatening the world and what is the impact of human activity here. 

Pros and cons of LNG as marine fuel are covered in details by the new edition of «Port Service. Bunkering Market» (2012). 

Vitaly Chernov

Related links:

High aims of “low” sulphur >>>>

RF shipping community considers NECA designation for the Baltic Sea to be premature>>>>