Integr8 Fuels: Bunker Quality Trends 2022

Bunkers remain a huge proportion of the day to day running costs of vessels across many sectors at this time given continued high flat prices combined with economic and geopolitical challenges in the world today.

This is the first Integr8 Fuels Bunker Quality Trends Report covering the last six months of supplies globally, where we dissect and compare the likelihood of off specification issues across all commercial grades of bunkers and key ports. Using data from approximately 35,000 deliveries, we will also assess fuel quality trends using our own Integr8 Quality Index which scores the proximity (or otherwise) of individual parameters within each sample to the relevant Table 1 or Table 2 specification limits within ISO 8217. We will also consider the availability of fuels in general, what specifications are being guaranteed, and the potential for hidden losses which must never be ignored when purchasing given the current commercial backdrop.

How likely are we to be faced with an off specification situation?
The last 180 days owners’ analysis available to Integr8 Fuels has highlighted that you are most likely to have an off specification issue (Note 1) with High Sulphur Fuel Oil (HSFO) followed by Very Low Sulphur Fuel Oil (VLSFO) and then Marine Gas Oil (MGO).

What is the likelihood of receiving non-compliant or critically off-spec bunkers?
It is important, however, to consider the context of the off-specification incidents. To do this it is essential to consider the likelihood of Marpol (Sulphur) or SOLAS (Flash Point) compliance and the likelihood of Critical Off Specification Incidents such as Cat-Fines, Total Sediment, Used Lubricating Oil, Sodium and Ash Content (High Risk) against routine and easily rectifiable off specification issues classified “low risk” such as high viscosity in HSFO.

Purely on likelihood of an off specification occurrence we are more likely to have one with HSFO than VLSFO or MGO however at least double these are considered low risk.

Turning our attention to compliance Low and Very Low Sulphur Fuels, these fare far worse with us being approximately three times more likely to have a Sulphur or Flash Point off Spec incident with VLSFO and MGO, than HSFO, which are only found to be non-compliant in three deliveries per thousand.

Critical off specification issues such as Metals and Sediment are seen to be just as likely in HSFO as VLSFO but are very unlikely in Marine Gas Oils.

Finally, when we combine both compliance and high risk off specifications, the fuel with the highest incidence of off specification continues to be VLSFO at 1.7%, followed by HSFO at 1.2% and MGO at 1.0%. There are many nuances,
from geographical to port-to-port and even supplier-to-supplier. It therefore remains essential to consider these when buying bunkers and we will address some of the challenges later in the paper.

Availabilty of Products
Unsurprisingly, Marine Gas Oil is the most available product (567 ports) given the ability to substitute and supply higher quality inland or automotive grades and the ease of logistics to supply what are quite often small quantities.

VLSFO is also seen to be readily available across all continents but at 17% fewer ports (463). This is because of larger quantities being ordered and the storage and barges needed to support these supplies in general.
High Sulphur Fuel Oil is the only product which is not readily available with only 187 ports listed, as of August 2022 (Fig. 2). HSFO availability is concentrated around bunkering hubs and geographically key areas likely to receive passing trade from Very Large Crude Carriers (VLCC) and / or other scrubber fitted sectors. It is important, therefore, to plan bunkering carefully for HSFO and equally consider the type of scrubber fitted to the vessel and any local limitations in forthcoming voyages that may require a fuel switch to Low Sulphur Marine Gas Oil (LSMGO) for example.

Availability of Grades
The fact that four ISO 8217 grades are still being requested remains one of the greatest challenges for the industry to address. Which other industry would even allow a fuel to be supplied using a specification that is obsolete, twice since revised, and 17 years old?

Indeed, during the period assessed for the report, 11.6% of all fuels supplied by Integr8 Fuels were still only guaranteed to 2005 specifications. Drilling into this further, it can be seen in the charts below that this is predominantly a distillate issue, with 16% of these fuels being still sold as 2005 (Fig 3) compared to only 2% of residual fuels.

It is positive news that at least for residual fuels we are seeing 2005 specifications becoming virtually obsolete probably because of two main drivers. Firstly, fewer customers are now requesting 2005 specifications given the added protection afforded for critical parameters like Catalyst Fines (Aluminium and Silicon ) and Sodium with 2010 (or later) specifications, and secondly, suppliers have in general moved away from 2005 specifications because of their position being more problematic when faced with the inevitable notice relating to Clause 5 or chemicals and added substances.

The same, however, cannot be said for distillate fuels with almost a fifth of fuels still being sold to this 17-year-old specification, the supply of which is particularly prevalent in the Indian subcontinent with pockets noted elsewhere, one such area being the eastern seaboard of the United States.

It is therefore important to consider what issues may arise because of only obtaining 2005 specification and where you may face this issue.

Firstly, 2005 specifications offer no guarantee for Lubricity, Oxidation Stability, Acid number or Hydrogen Sulphide and whilst it is rare that issues arise, the added cover for a fuel which may have aged afforded by the Oxidation stability parameter is an important one.

Of greater concern is the fact that a supplier is afforded more scope with regard minimum Viscosity guarantees which allows a minimum level of 1.5cSt rather than 2.0cSt for 2005 compared to 2010 specs and beyond. Such low levels can be particularly problematic to vessels which do not have the ability to cool the fuel given the need to inject the fuel at a minimum of 2cSt stipulated by most engine manufacturers and the possibility of fuel pump issues or even loss of propulsion as a result.

 Cross referencing back to the eastern seaboard we note that around 25 percent of all samples testing below 2.0cSt in the last 180 days, this in a location where we may have no guarantee to protect us from this issue (Fig 5). Indeed in the port of Norfolk (Vi.) where only 2005 specifications are available, 65% of all samples have recently tested under
2cSt for Viscosity. Therefore, if bunkering in the USA and particularly the eastern seaboard it is highly recommended to purchase 2010 specification or higher.

Integr8 Quality Index
The last 6 months have identified a generally improving picture for both VLSFO and HSFO, however, the back story is that the improvement is from historic lows of the Integr8 Fuels Quality Index in Q1 of 2022, a period that coincided with the start of the war in Ukraine, Russian sanctions and the spike in oil prices as can be seen from Figure 6 below which compares Brent crude against Quality Index.

At the time of writing and given the crack has narrowed only slightly and remains more than $600/MT, these challenges show no real sign of abatement so in the short to medium term we do not expect to see significant improvement in fuel quality or compliance.

Full Report

Source: Integr8 Fuels