The Shipping Industry’s Challenge as it Adapts to Sulphur Restrictions

The hopes of the shipping and bunker refining industries that the global 0.5% sulphur-in-fuel cap would be deferred from 2020 to 2025 appear to have been dashed.

0.5% by 2020

Masamichi Morooka, director of the International Chamber of Shipping (ICS), announced in February that although postponement was ‘still a possibility’, the industries should be prepared for a 2020 implementation – whatever the cost implications of the lack of availability of compliant fuel.

The fuel availability study, which the International Maritime Organisation (IMO) is legally required to complete before the end of 2018, had given the ICS grounds for lobbying for the fuel cap to be postponed, as any supply problems identified in 2018 would leave governments with too little time to react.

Meanwhile, regardless of what the IMO decides, the European Union is set to apply the 0.5% limit to all international shipping within 200 miles of any EU member state by 2020.

This makes it very likely that the EU will push for global implementation in 2020 in order to head off the possibility that, between then and 2025, non-compliant shipping will attempt to get round the restriction by forging a narrow shipping corridor off North Africa.

Early impact of 0.1% cap

The shipping world is already seeing the effects of the 0.1% cap on sulphur-in-fuel in Emission Control Areas (ECAs), introduced on 1st January this year.

In the US bunker market, buyers’ interest in 0.1% fuel oil has been subdued, a reflection of the financial, managerial and other uncertainties surrounding low sulphur fuel oil.  The main challenges include the need for engines to be modified, largely because of the difference in oil viscosity, and the expense of the alternatives, notably scrubbing technology (especially if the vessel will only briefly pass through an ECA) or switching to LNG.

However, non-US suppliers are spotting fresh opportunities and tackling the availability problem.  A new refinery in Cartegena, which is to produce 0.1% sulphur fuel oil, is well placed to supply fuel for ships heading to ECA areas.

Shipping companies have begun to turn to new technologies in recent months in response to the 0.1% cap.  Passenger ferries are largely favouring scrubber installation, and inland shipping is inclining towards LNG, but most other shipping has opted to move away from residual fuel and towards distillate in the form of low sulphur Marine Gas Oil , for which there is already a reliable bunker supply chain.  Other companies are investigating biofuels and fuel cells.

In ECAs, fuel oil has to be tested before loading to ensure it complies with the limits (and, in the case of compliant oil, to check it has not been mixed with higher-sulphur oils during the transfer process).  Parker Kittiwake has built a reputation as a global leader in bunker fuel testing and oil sampling solutions, for more information please call the team on +44 1903 731470.