On October 27, 2016 the International Maritime Organization (IMO) confirmed that a global sulphur cap of 0.5% m/m (mass/mass) on marine fuels would start on January 1, 2020 under its MARPOL Annex VI regulation.
This new restriction on marine sulphur emissions is occurring against a background of sweeping changes to improve the sustainability and environmental performance of the shipping industry, and according to the IMO’s own calculations up to 70,000 vessels could be affected. The global sulphur cap’s arrival heralds the biggest change in ships’ fuel since the switchover from coal to oil, and a new era for bunkering.
The International Convention for Prevention of Marine Pollution from Ships – or MARPOL – was first adopted in 1997, and 11 years later in October 2008 the IMO’s Marine Environmental Protection Committee (MEPC 58) agreed to adopted revisions to its Annex VI aimed at progressively reducing fuels’ by-products such as sulphur oxides or SOx.
In 2012 the global cap for ships was reduced from 4.5% m/m to today’s current limit of 3.5% m/m, and from July 2010, there have also been more stringent controls for vessels operating inside the Emission Control Areas (ECAs) of the Baltic Sea, the North Sea, along the majority of the US and Canadian coasts, and the US Caribbean of 0.1% m/m. Since 2016 there have also been Chinese ECAs in the Pearl River Delta, the Yangtze River Delta and the Bohai Sea, all of which require the use of fuel at berth with less than 0.5% m/m. Latest from 1 January 2019, the 0.50% fuel sulphur limit will extend to ships operating within the designated Chinese ECAs and they will be required to make the fuel changeover prior to entry.
There are three main compliance options available to owners and operators: the installation of scrubbers to permit the continued use of heavy fuel oil, low sulphur fuel oil such as MGO or distillates, or switching from oil-based bunker fuels to low sulphur alternative fuels such as LNG. However, due to the long lead times and capital-intensive nature of both scrubbers and LNG, the reality is that distillates and distillate-based products will almost certainly become the most widely used solution in 2020.
Nevertheless, while the macro picture is clear, there is real uncertainty for individual ship owners and operators in deciding which compliance solution they should adopt. The key to understanding how this will impact fuel payers’ operations is planning.
As we enter this new era for bunkering, owners and operators will need to construct a compliance strategy on a vessel-by-vessel basis; one that is fully modelled and costed as far as is possible, and which will provide insights on the financial and operational impact on each ship’s trading routes and operations.
For the marine sector, the complexity of the challenge raised by the new IMO rules cannot be overstated. Bomin has a dedicated 2020 compliance team with a deep and detailed understanding of the make-up of the future fuel supply chain. Our insight and knowledge of future supply, demand and pricing scenarios can help our customers to develop a specific 2020 fuel procurement strategy that meets the demands of each vessel within their fleet based on their trading routes.
Most importantly we can ensure compliance and product supply, as well as the most cost effective way to manage the challenges of the 2020 global sulphur cap.
If you would like to learn more about how your fleet can successfully navigate this fundamental transition, please contact us.
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