Optimization in liner industry with new sulphur cap regulation

• Main Author: Yan, Zirui
• Other Authors: Wang Zhiwei, David
• Format: Final Year Project
• Language: English
• Published: 2019
• Subjects: DRNTU::Engineering::Maritime studies
• Online Access: http://hdl.handle.net/10356/77663
• Institution: Nanyang Technological University

Shipping carries more than 90% of the world’s cargo volume, which plays an essential part in the worldwide trade. Although shipping is considered as an environmentally friendly transportation mode, the International Maritime Organization (IMO) still strives to further reduce the environmental impact by shipping activities, hence, the stricter sulphur regulation, which is known as ‘0.5% low sulphur regulation’, will come into force in year 2020. With less than one year before this new regulation taking into effect, shipping companies actively search for ways to cope with this big challenge. There are various options available in the current market for shipping companies to choose in order to comply with the new regulation. They can choose to install marine scrubber to wash off the sulphur content from High Sulphur Fuel (HSF), or using low sulphur fuels with a sulphur content less than 0.5% such as Low Sulphur Marine Gas Oil (LSMGO) or using Liquified Natural Gas (LNG). This paper focuses on the analysis of two options which are installing marine scrubbers or switching to LSMGO from the perspective of the container shipping industry. Fixed sailing schedule, fixed routes and regularity are the distinct characteristics for liner shipping hence, it is important for container shipping companies to meet the service schedule and demand at the lowest round trip cost. To meet the fixed schedule and certain demand, there could be more than twenty vessels deployed in one service. For a big container shipping companies such as Maersk, they operate dozens of services and hundreds of vessels, so it is too costly and risky to adopt only one option for all the vessels in order to comply with the low sulphur regulation. In practice, many liner shipping companies choose to install marine scrubbers for some vessels while leaving other vessels to use compliant fuel when the time comes. There is no conclusion on which option or which combination of options is better. This paper provides liner shipping companies a theoretical guidance on which combination of options is more economically viable by formulating a mathematical model with an objective to minimize the daily total round-trip cost of a fleet of vessels.