We are not certain which will be the fuel of choice for transition

As the shipping sector is gearing up to move towards energy transition, Anil Devli, Chief Executive Officer (CEO), Indian National Shipowners’ Association, in an exclusive interview with Future Fuels explains the perspectives of fuel transition from the Indian ship owners’ point of view and he also speaks on what they are expecting from the government to go green in shipping sector.

Q. After COP26 summit at Glasgow, the focus is back on strengthening measures to cut down GHGs in global shipping with green transition? Do you think the agenda on green fuel transition in shipping is heading in right direction?

If one is to take larger direction then surely we have been in the right direction. We as a generation need to be mindful of those coming behind us. The fury of climate change is been seen by all of us, so yes the direction is correct, but the direction is also broken and that has to with the fact that we are still early days today as there is still a great sense of uncertainty about what path to take. What is being proposed versus what finally will be executed as a product is not known. A ship owner is today standing at a junction or several options are before him, and it would be extremely difficult for him to choose what path he has to take. In addition to this one of the other important things we are making is as a world we are making a lot of motherhood statements, but execution of those motherhood statements, I find that my members specially lack the direction that is to be adopted for the execution of them. This will happen over a period of time. Yes, we are in right direction but alot more clarity needs to be happen so that entire ecosystem needs to come to a place.

Q. What should the industry association and government do in the initiative towards decarbonisation?

Obviously, there is no choice for us but to come in line with the thinking of the world, as our Prime Minister himself has set a target of NetZero 2070 at the recent COP26 summit. At the end of the day shipping is an international business we cannot be different from what world is doing. At this stage I must also mention and complement our DG Shipping as we asked him will this extend to our coastal shipping as well he unequivocally said that this going green.

We as Indian ship owners are there to do what needs to be done. I am proud to say that our members have already taken several steps with respect to short-term immediate goals like Energy Efficiency Ship Index (EEXI) and Carbon Intensity Indicator (CII) and then we move to complete transition. But there is a lot that needs to be done by the government; the first is the awareness itself. Except DG shipping, and Ministry of shipping and our media outside our community very few people understand importance of what we are doing. The other issue that often comes along is that if you look at shore-based industries, shipping industry per say worldwide is the lowest in terms of carbon emissions, yet there is a pressure on shipping to perform. We are happy, I can say this on behalf of our leading companies like Great Eastern, Seven Islands, Sanmar Shipping. Continuously at the board meetings they are discussing ways and means to educate first of all what we need to do in order to carry out this transition and what is that we are doing. To give a few examples our members today are engaged in doing various activities some of them are putting speed limit devices, another owner has gone in for hull structure painting another owner was mentioning to me that they have got into use of biofuels. As India we are not a large shipping nation though we should be, but even within that restricted size all my members and all ship owners have taken whatever steps needs to be done. One ship owner I was talking to yesterday told me that he has been able to report 10 increase in efficiency, thanks to just these small measures. This is really encouraging but we need a lot of support coming from the government. These are voluntary measures today we are taking at a cost but not huge. But when we take larger steps they involve huge costs and there needs to be an environment to be created and I trust with great understanding whatever needs to be done on the coastal and foreign going ships will be done and Indian shipping industry will comply with decarbonisation goals.

Q. There are several options for shipping to go green like hull painting, fitting scrubbers, using alternative fuels or biofuels, and fuel additives? What in your opinion is going to happen or which technology will prevail?

A. The favourite here seems to be hydrogen, of late, everybody is talking about hydrogen. Maersk has put a big bet on Hydrogen, obviously when Maersk does something it would be a well-researched and thought out thing. But my personal favourite is ammonia, though it’s a little bit hazardous but there seems ammonia has a greater chance of becoming one of the preferred fuels in this transition. If one has to start planning and building new vessels the values have gone up considerably so this is not the time to go and buy assets. Nevertheless, ships are now being built with new propulsion system but the question that comes up here is what sort of propulsion these ships will have. As of today people are talking about dual fuel engines, whether we reach and have hydrogen as one of the main fuel for engines we do not know. All of this is fraught with a lot economic issues. If you look at the European Union (EU) wanting to have the emission trading scheme. There is a proposal where they wanted to impose some levy on ships not meeting the emission standards. But the point here is that the cost of doing all of this cannot be borne by the ship owner this will have to get passed on to the consumer. So when you are talking about new fuels also one has to worry about the ability of shipping to economically carry out that service. When you go for green obviously the costs will increase and the question is who will bear that cost and how that cost will be offset by the trade. We are not certain which will be the fuel of choice, as it will be driven by science. But people who are senior to me in the industry agree that ammonia is at fore front, though hydrogen seems to be politically popular choice for everybody else. LNG and others will also be a choice but not necessarily a choice in terms of emissions.

Q. In this phase of transition what is that you are expecting from the Indian government?

This is one of the most important issues we are working as an association and as a representative of Indian ship owners. There are two things we need from the government one is support in terms of awareness and support in terms of financial assistance. There are two types of costs involved one is capital cost and the other is revenue expenditure, the former involves changing the equipment and propulsion system the latter involves daily costs like changing the fuel.

What most ship owners now thinking is will it be feasible to convert and retrofit the old assets so that it can run for another three to five years depending on the age of the vessel. As you are aware that Indian’s main line fleet has an average age of 22 years and this year it has come down to about 21 years thanks to the new tonnage that has increased due to new subsidy scheme announced by the government. But there are some vessels which may not fit with the retrofitting and those vessels will have to be scrapped and they can be replaced with new builds so there is huge investment involved.  We are looking for a long-term support from the government subsidies and offering long-term loans. We are not saying that government should bear all the costs; we want the government to become a partner with us in in all of this where they give us some kind of rebate for us like they have given to cars and other sectors. If the cost is about Rs 100 one can say Rs 20 or Rs30 will be borne by the government through subsidy, another Rs 20 or Rs 30 can become long term loan, and the rest of the costs will be borne by ship owner. This way, ship owners can be incentivised to carry retrofitting. But if you see this from consumer’s point of view with all this retrofitting and other equipment changes will lead to increase in the cost of transportation and the impact all of this on the economy is something that the government will have to look at. Obviously the costs will increase across world in all sectors including maritime and transport sectors as the initiative to go green will happen in all sectors. Here, there will have to be awareness about the increase in costs. We believe that the government needs to handhold us in this transition. We were hoping that the government would see something in this Budget, but I was told by our senior members that it is too early to expect anything, as proper framework has to be prepared and we will have to discuss with government and only then a they will be able to come up with some kind of response to assist us. But I can say that both DG Shipping and Shipping Ministry have already began engaging with us in ascertaining what is that the industry will need.