New sulphur regulations puts model operator under pressure

Ferry operators affected by new sulphur emission regulations are facing hard choices, as Brittany Ferries’ deputy MD, Christophe Mathieu, explains to Justin Merrigan

New sulphur regulations puts model operator under pressure
Pont Aven is one of the ships in the Brittany Ferries fleet which will have scrubber technology installed

This article first appeared in the Spring/Summer 2015 issue of International Cruise & Ferry Review. To read other articles, you can subscribe to the magazine in printed or digital formats

The introduction on 1 January of new sulphur emission rules, without regard to their impact on the industry, has presented significant challenges to ferry operators across northern Europe; challenges that are being met in a variety of different ways.

Ships trading in the Sulphur Emission Control Area (SECA), extending from the English Channel into the Baltic Sea, must now use fuel oil on board with a sulphur content of no more than 0.1%, against the previous limit of 1%. Basically, ships are required to either burn expensive marine gas oil (MGO), use scrubbers to ‘clean’ the sulphur content in heavy fuel oil (HFO) emissions, or burn a cleaner fuel such as LNG, which has no sulphur content.

The reduction from 1% to 0.1% is not a small one and has created a major headache for the ferry industry, when going to 0.5% would have been a more reasonable transition point. The resulting increase on the price of a ticket to absorb increased operating costs is a big ask of passengers and transport companies.

One of Europe’s leading ferry operators is Brittany Ferries, a French company well known for the style and presentation of its luxury ferries. Not surprisingly, Brittany Ferries has a reputation not only of adhering to the latest environmental regulations, but of frequently anticipating them. The company operates six routes in the western Channel, one France-Ireland service and three UK-Spain routes affected by the new regime. It had intended to meet the sulphur issue head-on with a £320 million investment programme.

It is a perhaps a measure of the situation facing all ferry operators that in the wake of being refused an exemption from the incoming emissions regulations, this progressive company shelved its plans late last year. The exemption would have given it the financial grounds with which to proceed with its new investment. Instead it must meet the hefty annual cost of burning vastly more-expensive fuel instead of heavy fuel oil until its ships have been adapted with scrubbers, as well as investment in longer-term solutions, in what effectively amounts to a ‘double penalty’.

Mathieu explains: “We sought a two-year period of exemption to allow us to proceed along our ‘route to compliance’. This involved fitting scrubbers to three of our older ships, converting thee others to burn LNG and building a new state-of-the-art luxury LNG-powered cruise ferry for entry into service in early 2017.

“This would have resulted in one of the most environmentally friendly fleets in Europe with an impact over the next five years in terms of sulphur emissions that would have been lower than that caused by simply complying with the new MARPOL VI regulations from 1 January.

“We were prepared to invest a total of £320 million over the next two and a half years to achieve this but were thwarted by the EU’s lack of flexibility and lack of support by both the French and UK governments. This, unfortunately, means we have to burn low-sulphur marine gas oil, which is some 40% more expensive than heavy fuel oil, until ships have scrubbers fitted,” Mathieu says.

The operator is engaged in a programme of fitting scrubbers to six cruise ferries: three during the 2014-2015 winter (the Cap Finistère, Barfleur and the Normandie) and three during the winter of 2015-2016 (the Mont Saint Michel, Armorique and Pont-Aven). Until all the scrubbers are fitted, MGO is being used as fuel with the resulting cost penalty.

In many ways the EU has shot itself in the foot by rushing to introduce the new sulphur rules, as it is now more difficult for shipping companies to provide a sea highway alternative to road links. Brittany’s longer routes have been extremely effective at moving freight off the roads, but the new measures make these services particularly vulnerable. Predictions indicate that the environmental benefits will be lost to large quantities of cargo moving from ships to the roadside.

“Certainly these new rules will encourage modal shift, which is very much at odds with the EU’s ‘Motorways of the Sea’ policy,” says Mathieu. “We have already seen the demise of some routes because of these regulations: DFDS’s Portsmouth-Le Havre and Harwich-Esbjerg routes and LD Lines’ Poole-Santander, Poole-Gijon and Nantes-Gijon services.”

Much has been written about the best preventative solution for operators and for some the jury is out on scrubber technology, which was ‘only just about ready’ less than three months before the rules took effect.

Mathieu says: “The technology has moved on extremely quickly and it was not until very recently that we were confident enough to place orders for scrubbers. Even so, the regulations governing these (e.g. open-loop or closed-loop) remain unacceptably vague for operators.”

The EU has made some funding available to operators, but largely the gesture falls well short, in his opinion. “Financial support is available but this only meets a small proportion of the total costs. Furthermore, any such funding is not available to cover the 8-10 weeks that each ship is out of service (and therefore unable to earn revenue) when the scrubbers are fitted.”

Despite the setback and companywide disappointment in the decision to cancel the Pegasis eco-ship project, Brittany Ferries remains bullish about the future. In recent times the company has moved closer towards ro-pax tonnage, particularly with the introduction of the Étretat. That does not, however, mean a retreat from the cruise-ferry style which is such an attraction for the Breton company.

“As we operate longer routes, cruise ferries will always form part of our fleet,” promises Mathieu. “Indeed, the Pegasis project was based on a new cruise ferry. The type of ferry we operate varies according to the requirement of the route but all depend upon the right balance of passenger and freight traffic.”

And what of the Pegasis project – is it lost forever? “Not at all,” he says. “It has been delayed.”

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Justin Merrigan
By Justin Merrigan
Monday, May 4, 2015