IMO to decide on timing of global 0.5% fuel sulphur cap in October

The International Maritime Organisation (IMO) is expected to decide on the implementation timing of the global 0.5% sulphur content cap for marine fuels in October this year, and the International Bunker Industry Association (IBIA) has outlined the potential implications of the regulation and options for the industry.

Under IMO’s Marpol Annex VI regulation, a review is up on 2018 to decide on the enforcement of the global 0.5% sulphur content limit in 2020 or 2025.

The Marine Environment Protection Committee (MEPC) of the IMO is set to give a clearer guidance on the implementation timing of the global regulation in October, based on the result of a low sulphur fuel availability study.

Peter Hall, chief executive at IBIA, said: “Regardless of whether the global 0.5% sulphur limit takes effect in 2020 or 2025, the change from the current 3.5% to a 0.5% sulphur limit is a seismic shift on an unprecedented scale in the history of refining and shipping. It seems unrealistic to expect to successfully achieve a shift of this magnitude overnight.”

The enforcement of the global 0.5% sulphur content limit in 2020 outside of the designated Emission Control Areas (ECAs) where the fuel sulphur content limit is 0.1% would likely be more challenging than 2025 from an overall supply-demand balance standpoint, but a delay to 2025 would nevertheless bring a number of transitional challenges, IBIA said.

Even if there is sufficient refining capacity globally to produce the ultra-low sulphur fuels, IBIA believed that there would still likely be regional and/or local disparities with some ports facing shortfalls.

The abrupt change on the scale required for global shipping to shift from burning mainly high sulphur heavy fuel oil to low sulphur products is an enormous logistical undertaking not just for refiners, but also other links in the supply infrastructure.

In retrospect, the industry has coped with the 2015 change from 1% to 0.1% sulphur content cap in ECAs, mainly from using heavy fuel oil to marine gas oil. However, the additional annual volumes involved were limited to no more than approximately 40m tonnes of distillates, applied to designated geographical areas, IBIA pointed out.

The 0.5% global sulphur content cap, on the other hand, would require an additional annual volume of around 210m tonnes.

IBIA said the refining industry, and the market, is able to absorb incremental annual demand growth for distillates, but an abrupt major increase like the one associated with a global shift to 0.5% sulphur content fuels for shipping will very likely to cause a period of supply shortages in some regions.

The uptake of abatement technology such as scrubbers is expected to allow a portion of the world’s fleet to continue using high sulphur bunker fuel both in ECAs and globally.

However, if bunker suppliers expect the demand for high sulphur bunkers to shrink dramatically, it could become a niche market with fewer suppliers willing to offer it, and there is a risk that supply of high sulphur bunkers will begin to disappear just as more ships are installing scrubbers, IBIA said.

The association highlighted a series of options for the industry, including the introduction of the 0.5% sulphur content limit only in Exclusive Economic Zone (EEZ) of Annex VI signatory countries rather than globally, gradual imposition of the regulation by ship type, and allowing exemptions for ships committed to emission compliance retrofits.

Other options include allowing a period of adaption and monitoring before requiring and enforcing compliance, and confirm the issuance and acceptance of Fuel Oil Non-Availability Report (FONAR) permitted under Annex VI. 

Copyright 2017 Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.