Singapore, the world’s largest bunkering port, is unlikely to face a bunker fuel supply crunch come 2020 when all ships are required to burn 0.5% sulphur content cap fuel, but owners can definitely expect to face higher bunker bills, according to industry players.
The International Maritime Organisation, IMO’s Marine Environment Protection Committee (MEPC 70) confirmed at its meeting last week that the 0.5% cap on sulphur emissions from ships will enter rather than the later date of 2025.
The toughest regulation on curbing shipping emissions, to date, has raised concerns particularly on the global availability of low-sulphur bunker fuel and the hike in vessel operating costs amid low earnings in the shipping market.
The port of Singapore, which sold 45.16m tonnes of bunkers in 2015 and 36.54m tonnes in the first nine months of this year, is anticipated to meet the demand needs from fuel buyers, albeit at higher costs.
“Right now in Singapore, SK Energy is already bringing in low-sulphur marine fuel oil. As for ExxonMobil, BP, Shell and other big cargo traders, they do have the low-sulphur products but they are mostly for deliveries in Europe. Players will have to bring these products over to Singapore so on the supply we may not see a problem,” Simon Neo, executive director of Piroj International, said.
SK Energy, ExxonMobil, BP and Shell are all licensed by Maritime and Port Authority of Singapore (MPA) to sell bunkers in Singapore.
He added that Singapore will also commence its first LNG bunkering pilot programme in early 2017, giving the industry an alternative clean fuel to use. MPA has issued LNG bunker supplier licenses to two suppliers – Pavilion Gas and a venture between Keppel Offshore & Marine and BG Group.
“Price wise it will be much higher than the normal marine fuel oil,” Neo pointed out. Singapore 380 cst prices are considered low at around $290 per metric tonne in present times due to soft oil prices.
Bunker traders spoken to by Seatrade Maritime News all concurred that more expensive bunker costs for shipowners will be the immediate economic impact that is inevitable.
A Singapore-based bunker industry veteran believed that big market players like the oil refiners are expected to “control the market for a while leading to higher prices”. There could also be some issues with the quality of the 0.5% sulphur content fuel due to heavier blending required.
“The drop from 0.5% from 3.5% is very drastic,” the bunker veteran said. Currently the IMO regulation mandated a global 3.5% sulphur content limit, which has been manageable for ship operators to comply.
“It is easy with a stroke of the pen to change the regulation, but the shipping and bunkering industries would have a mammoth task to ensure that they can comply, especially so for third world or less developed countries where low-sulphur fuel availability and supplies are limited,” he said.
The International Bunker Industry Association (IBIA) continues to call for a phased introduction of the 0.5% sulphur regulation rather than an immediate switchover.
“We believe it would be better to have a more phased introduction, allowing the market to adapt more gradually, thereby preventing a sudden severe strain on global product supply and prices, allowing a longer period for owners to install abatement technology rather than a last minute rush, and gaining experience with new low sulphur fuel formulations in a more controlled manner, without the entire global fleet becoming a test bed,” Unni Einemo, IBIA’s IMO representative said during a presentation of a paper on the matter to MEPC 70.
“Fixing the start date for a phased process, and defining a clear line of progress toward a complete transition to the global sulfur cap, could give industry the certainty it desires,” she said.
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