3 questions, 3 answers

“We have to make it work”

Captain Rahul Khanna, Global Head of Marine Risk Consulting for Allianz Global Corporate & Specialty, explains why the shipping industry lagged behind others in tackling environmental problems, and how it’s handling the shift to cleaner fuels.

 

Recently there was a widely publicized factoid that the world’s 15 biggest ships create more pollution from sulphur than all the cars on earth. Why is the shipping industry just now starting to clean up its act?

Shipping was indeed a little late in addressing the environmental concerns which other industries of the world have taken on relatively earlier. The shipping industry is a huge industry, and a very global one in the sense that the rules and regulations that govern it are difficult to tie down to a particular country or region. The logistics of this industry are so complicated, with ships being owned by different entities, operated in different countries and by different crews, financed by different parties, governed by different bodies and so on.

IMO, the International Maritime Organization, is the body which generally makes the frameworks by which shipping is governed; however, IMO doesn’t have teeth to implement these frameworks, it’s the national governments that have to ratify the conventions that IMO creates.


So what finally prompted the shift to cleaner fuels?

National governments started putting pressure on IMO. The traditional fuel used in the shipping industry is heavy fuel oil, which is really one of the lowest grades of fuel you’ll ever see – it’s a black tarry substance – and many countries have imposed restrictions on burning this fuel while sailing or docked in their waters or near their coastlines. As per these restrictions heavy fuel oil can be used in ship’s main and auxiliary engines only if sulphur content of the fuel is below a certain level.

Over the years a lot of research has been done, and now ships are being built with new engine types that can use liquefied natural gas, or LNG, which produces fewer harmful emissions. For the purposes of the shipping industry, LNG is now touted as the next generation of fuel, and the cleanest.


Can we expect “smooth sailing” in this transition to increased use of LNG as fuel?

Well, there are certain challenges with LNG. It’s a gas that becomes liquid at minus 160 degree Centigrade. So at such low temperatures, handling LNG is not an easy task. Now LNG is nothing new, so you might ask why there are concerns regarding handling LNG as fuel. The simple reason is that for the last few decades, LNG was carried as cargo on a few specialized ships with crews that are very highly trained, and these capital-intensive ships are equipped with state-of-the art technology, and thus the necessary investment levels are very high. The carriage of LNG on ships is a highly regulated industry, and the training standards and safety equipment are at a very high level. In this context, there have been very few accidents.

But now that we’re talking about using LNG as fuel, that means it will be handled by people who may not be so well-trained in handling such a complicated and risky substance. Since it is a gas, if it is not handled correctly and the safety procedures aren’t at the highest level, there could be a catastrophic explosion. And when you have lots of different ships in many different ports all around the world, controlling the risks and maintaining the required safety level with LNG becomes a major challenge.

However, while we have significant challenges, LNG must be the way forward as there is no other viable alternative. We have to make it work. We have to use cleaner fuel. The industry understands this, we’re doing research and working together and I believe we will be able to create and implement the right frameworks that provide enough technical and safety training to mitigate the risks.

Captain Rahul Khanna, Global Head of Marine Risk Consulting for Allianz Global Corporate & Specialty, explains why the shipping industry lagged behind others in tackling environmental problems, and how it’s handling the shift to cleaner fuels.
Captain Rahul Khanna, Global Head of Marine Risk Consulting for Allianz Global Corporate & Specialty

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