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NIMASA reveals plans to enforce IMO 2020 as bunker cost leads concerns for ship owners

The Nigerian Maritime Administration and Safety Agency (NIMASA) has revealed plans to enforce the low sulphur content regulation of the International Maritime Organisation, now known as IMO 2020 for ship bunker, which kicked in on Januray 1, 2020.

NIMASA said it would ensure vessels on Nigerian waters comply with the IMO rule on the reduction of emission.

This is as ship owners have begun to lament the significant rise in operating costs, due to the IMO 2020 rule. It would be recalled that the IMO had set January 1, 2020 for all vessels to comply with the new regulation that limits the sulphur content in the marine fuel used by vessels from the current 3.50 per cent to 0.50 per cent to ensure cleaner and safer environment free from pollution.

Dakuku Peterside, director-general of NIMASA, said the agency would create sufficient awareness among shipping stakeholders to ensure that they were abreast with the new regulation towards its implementation and enforcement. According to him, the agency has fashioned out a four-dimensional process that will enforce compliance with the IMO new order in the nation’s shipping sector this year.

“We have initiated an engagement with ship owners, ship operators, captain of ships and seafarers on the new regime and the need for compliance,” Dakuku said at an industry forum in Lagos recently.

“The second approach is that the agency has similarly engaged the Department of Petroleum Resources (DPR) and the Nigerian National Petroleum Corporation (NNPC) to ensure that marine fuel that meets the new IMO standard is refined at the NNPC refineries or imported. If you are importing fuel that will be used as ship bunker, it must meet with the new IMO standard.

“The third approach is the development of transparent enforcement regime that will be known to all the operators and stakeholders. This is to ensure that nobody will have an excuse of lack of knowledge of the development because when we come on board your vessel and you don’t comply, then you face the consequences of your action,” he said.

Dakuku also said NIMASA was engaging the Nigeria Customs Service, ship owners, the Standards Organisation of Nigeria (SON) and other relevant agencies to seek their aid in the implementation of the new global ship bunker regulation of the IMO.

Meanwhile, with availability no longer an issue, ship owners are lamenting the significant rise in operating costs, due to the IMO 2020 rule. The reason being the almost doubling of fuel costs. In its latest weekly report, shipbroker, Intermodal said that “the early days of IMO 2020 coming into force have certainly had an impact on the industry, but so far it seems that those who feared of major problems for global shipping have not been verified and it looks like we have avoided the destructive consequences.”

According to the shipbroker, lack of availability of the VLSFO, massive breakdowns of main engines from poor blends, detentions from non-compliance where just some of the warnings and the possible problems that many were expecting, and none of it has happened so far, at least to a widespread extent.

“It hasn’t been smooth, but fortunately there hasn’t been any disruption of the world trade”, said the shipbroker.

Theodore Ntalakos, Intermodal’s SnP broker said, “Unavailability of the fuel which was for a long time the biggest concern does not seem to be an issue; compliant fuels are available and supply will only improve. Also, although it may be too soon to spot a pattern from the incompatibility from the fuel blends, so far there have been no major events. From the world fleet of thousands of vessels, we have the first reported cases of breaches of compliance with the IMO2020, as the Chinese authorities have caught two vessels for low sulphur fuel violations. There can be fines or detentions but I would guess that it is still too early and the authorities are still a bit lenient on imposing strict penalties”.

Ntalakos added that “the biggest problem is the price of the fuel, which is very similar to MGO and very close to the highest levels that the shipowners have ever paid for heavy fuel. This is not entirely an IMO 2020 effect, the high oil prices are mostly courtesy of the trade wars, torpedo attacks, air strikes, missile strikes and the other events that sent the oil price to the recent highs. However, the spread between the compliant fuels and the HFO, which is currently getting cheaper, has peaked from $280/mt up to more than $400/mt in some major bunkering ports and the fact is that most owners are experiencing high and uncertain heavy fuel oil price levels. So this is good news for those owners who rushed to install scrubbers, invested millions and suffered 60 days or more of lost earnings. It’s payback time for them as they get better charter rates and see their investment’s payback time to get shorter and shorter”.

Intermodal’s broker added that “we expect the 0.5 percent compliant fuel to get increasingly cheaper as more of the product becomes available, refinery inventory builds up, and as more companies and tankers/barges start delivering it. Furthermore, according to news agency Reuters, China has approved a long-awaited tax waiver on exports of the compliant fuel, paving the way for Chinese refiners to boost production of the 0.5 percent. Although initially shipments will focus on the coastal marine fuel market, this tax waiver will definitely impact both the supply and the price of the VLSFO.”

“Global shipping is a beast, an enormous organism, that at first seems to be very slow to react, but in fact once again it has proven to be very flexible and relatively quick in adapting. Most shipowners have been operationally well prepared in making the transition smooth and are now ready to focus in the commercial side of things and the shipping market itself”, Ntalakos concluded.
Source: Business AM

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