Compliance with IMO 2020 set to accelerate despite initial hiccups
Compliance with the International Maritime Organization’s lower global sulfur limit for marine fuels from January 1 could reach as high as 95% in the first few months, well above some industry estimates that pointed to around 65%-70% a year ago, an industry event in Singapore was told Monday.
While restrictions on sulfur emissions in shipping are not new — emissions control areas have long existed in certain regions — the transition to IMO 2020 is daunting, with the majority of bunker demand having to switch to 0.5% sulfur, from 3.5%.
“The IMO has done a good job at the MEPC [Marine Environment Protection Committee] discussion to come up with various guidance’s to ensure consistent implementation [of the rule]. So, in general, I believe that enforcement will be quite consistent and there will be a level playing field,” Goh Chung Hun, director (shipping) at the Maritime and Port Authority of Singapore, said.
Speaking at the 35th Annual Asia Pacific Petroleum Conference organized by S&P Global Platts, he said Singapore was IMO 2020 ready, adding that the world’s largest bunkering port already had ample low sulfur bunker fuels available.
“But we just need to bear in mind that there are some countries that are not parties to MAPROL Annex VI. So they may not be able to enforce domestically.”
Overall, compliance will be fairly high, Adi Imsirovic, head of oil at Gazprom, said.
The biggest users are fairly large companies and there will likely be a big reputational risk if a company did not comply, Imsirovic said.
Maite Bolivar Klarup, GM BIMCO, said the carriage ban on the use of HSFO on bunker tankers was a positive move and would also aid compliance.
However, by March 1, 2020, HSFO has to be removed from ships completely. That is a complex process because shipowners and charterers have to work together to meet the deadline and resolve disputes regarding when to do it and how to apportion or bear the costs, she said.
The need for compliance and particularly enforcement is going to come from a broad group of people and just not port states, Savvas Manousos, global head of trading at Maersk Oil Trading said.
“You have got insurance companies and P&I clubs that if there is an incident, one of the first things they are going to do is test your fuels and if you are found to be off-spec, your insurance will be invalid,” he said, adding that non-government organizations were also planning to be vigilant in that area.
Enforcement rests on port state control while flag states also have a role to play, Elfian Harun, environment manager & assistant regional manager Asia-Pacific, INTERTANKO, said.
It was important for them to standardize regulatory enforcement methods so that ships comply with the regulations strictly, Harun said.
COMPATIBILITY A KEY CONCERN
Compatibility risk is something that exists wide across the supply chain, Eddie Gauci, Global Head of Marine Fuels, BP, said.
“One of the things we are trying to do in an effort to give our customers some reassurance is that we are undertaking quite a lot of testing and evaluation throughout the whole supply chain,” Gauci said.
“At this point of time, we are not intending on having logistics which co-mingles high sulfur with low sulfur…we are trying to segregate the two because we recognize there are some key risks associated with this,” he said, adding the sampling process was going to become even more important as the industry headed into 2020.
High sulfur is a fairly simple blend, largely driven by the fact it is a low margin product. On average there is about 95% compatibility, Manousos said.
However, with the blend compositions that are coming, this figure could drop to 75%, exposing shipowners and operators to considerably larger risks, he said.
Therefore, maintaining diligence, being the custodian of the value chain, testing of the fuels before burning them on the vessel was going to be critical, he said.
The joint industry guidance released last month is a welcome step while the ISO is also coming up with a publicly available specification on potential issues, Harun said.
Most shipowners are already forging ahead with ship implementation plans, their fuel choices, tank cleaning and segregation, Klarup said.
However, crew training on various aspects — handling new blends, procedures to take samples onboard and deal with fuel oil non availability reports — needed more attention, she said.
“You have to have a strategy now because if you are not ready, you are preparing to fail,” Klarup said.