The International Chamber of Shipping (ICS) is raising concerns about not only the increased cost of bunker fuel when a stricter limit on its maximum sulfur content goes into effect on Jan. 1, 2020, but also about whether the fuel will be universally available and whether it will be a consistent product.
Esben Poulsson, chairman of the ICS, said his organization supports the decision by the United Nation’s International Maritime Organization (IMO) to reduce the maximum sulfur content in bunker fuel from 3.5 percent to 0.5 percent worldwide, but pointed out that “the overnight introduction of this regulatory game-changer will have enormous implications for ship operations. It will be vital to get the implementation right.”
Most ships use fuel that is mostly made up of heavy viscous residual oil with a high sulfur content. In 2012, the global cap on the maximum sulfur content in marine fuel was lowered from 4.5 percent to 3.5 percent. In 2020, the cap will be cut to 0.5 percent. (Alternately, ships do have the option of installing “scrubbers” that remove sulfur from their engine emissions, but few have done this or are planning to do so.)
In some parts of the world — along the coastline of the United States and Canada and in some parts of Northwest Europe — ships will continue to have to use even cleaner fuel with a 0.1 percent sulfur content. They commonly use a lighter distillate fuel, though again, some companies have installed scrubbers or even power their ships with liquefied natural gas (LNG).
A note published by ICS said, “The cost of low-sulfur fuels is typically about 50 percent more than the cost of residual fuel.”
The website Ship and Bunker on Sunday showed the global average price of IFO380, a residual fuel, was $457.50, while the global average price for marine gas oil, a distillate fuel, was $739.50.
ICS said that with the “increased demand for low-sulfur fuels that will now arise in 2020, the cost of bunkers compared to the current price of residual fuels is likely to increase considerably.”
The note said, “Even if the cost of oil stays at the lower levels which have applied since the significant fall in prices in 2015, this mandatory switch to low-sulfur fuel in 2020 could mean that bunker costs for the majority of ship operators could return to their 2014 peak.”
Poulsson said, “Oil refiners and bunker suppliers will need to ensure that compliant
fuels are actually available for ships to purchase well in advance of
January 2020.
“As well as concerns as to whether sufficient quantities of compliant low-sulfur fuels will be available in every port, there are a number of complex practical issues which IMO needs to urgently resolve within the next 18 months if the unfair treatment of ships is to be avoided,” he said.
“In the absence of agreed standards for new fuels, including blends, that will be compliant with the 0.5 percent sulfur limit but which may differ in their composition from port to port, ICS is very concerned this could lead to serious compatibility and mechanical problems,” the organization explained.
Changing between two different fuel types such as from heavy residual fuel to distillate fuels can be tricky and present a safety issue if a ship loses power.
“There could possibly be an initial period of ‘teething problems’ when suitable compliant fuel might not always be available in every port until it can be shipped in from elsewhere. This is more likely to be a significant problem for ships in tramp trades which call at diverse port destinations which are not always known long in advance,” ICS warned.
If 0.5 percent sulfur fuel is not available in every port
worldwide, ICS noted that ships may use other compliant
fuels, such as 0.1 percent distillate and warned, “This raises other serious issues, not least those relating to compatibility.
“If, in 2020, oil prices remain at around $70 a barrel, it has been estimated that the differential between compliant low sulfur and the current cost of residual fuels could spike by as much as $400 a ton,” ICS said.