When the International Maritime Organisation decided, in October 2016, that the allowable sulphur content in marine fuels would be reduced from 3.50% to 0.50% from the start of 2020 – known as the global sulphur cap – it triggered a period of intense speculation and uncertainty about how affected industries would cope.
It also triggered a flurry of planning and activity at the IMO and among industry stakeholders to prepare for the new low sulphur regime. At the time of writing, with just four months to go, some uncertainties remain but we actually know a lot and the signals are getting clearer week by week.
Sure, many things may not go to plan, but help is at hand. IBIA has contributed actively to provide clarity and help, in particular in two areas: the IMO’s regulatory framework, and by establishing a group of industry organisations in a Joint Industry Project (JIP) to produce guidance on the safe supply and use of fuels meeting the 0.50% sulphur limit.
Seeking certainty
So what do we know? First of all, we know that the regulation will not be delayed. That signal has been coming through strong and clear from the IMO, despite concerns raised by member states and industry organisations about the availability and safety implications of the drastic reduction in the allowable sulphur content in marine fuels from 3.50% to 0.50%.
We know what needs to happen in the supply chain from refineries through to the actual bunker delivery to ship in order to be ready for the 2020 sulphur limit. We know that many refiners and suppliers have their plans in place and many are well down the line with implementing the necessary steps. Several products meeting the 0.50% sulphur limit have already been made, tested and trialled by ships and it seems the experience has been positive. However, everyone involved in these trials – from producing the fuel and all the way through to use on ships – has taken good care to ensure they prepared and handled these fuels properly. All participants need to take these actions going forward.
The signals from suppliers are strongly pointing to larger quantities of fuels complying with the 0.50% sulphur limit becoming available from October onwards, as they believe that is when demand will really begin to pick up.
What ships should know
In October 2018, the IMO’s Marine Environment Protection Committee (MEPC) approved the Ship Implementation Plan – a non-mandatory form to help ships plan and demonstrate the steps they have taken to become compliant with new regulations.
Ships will need to ensure they have cleaned their tanks prior to 2020. If this is not done, they risk contaminating compliant fuels because built-up residues of high sulphur oil (HSFO) may dissolve and push the sulphur content above the limit. Options for cleaning the tank include manual tank cleaning in dry dock, during operation or through use of additives.
The SIP includes an appendix on tank cleaning, based on a submission from IBIA, which provides further details on these options. At the behest of shipping organisations, the appendix also includes the option to clean tanks simply by flushing the system with compliant fuel method (the ‘flush through’ method). Ships that are planning to carry out tank cleaning in this way should be aware that this may pose a safety risk if the tanks have not been cleaned for a long time, as it is likely to dislodge significant volumes of built-up residues and cause large amounts of semi-solid sludge – a risk which IBIA highlighted in its original submission.
In addition to content on tank cleaning, the SIP also has an appendix covering impact on machinery systems. This contains preparatory elements to help ships plan for operating with a variety of fuel types with different handling characteristics (distillates and/ or fuel oil blends). One of the key messages in this appendix is that ships may need to adjust their fuel tank configuration and fuel systems. The emphasis is on allowing for a fully segregated fuel system and maintaining the existing heating arrangements where appropriate. This will allow for better management of potentially incompatible fuels and give the ship full flexibility to heat or not to heat the fuel. Very low sulphur fuel oil (VLSFO) meeting the 0.50% limit will need heating, and even distillates may require heating depending on their cold flow properties and the temperature of the ship’s operational area.
Fuel quality
Concerns remain about the quality of compliant fuel oil blends as blend recipes – and therefore fuel characteristics – will change. Points which may cause concern are:
- Stability – a measure of the resistance of a residual fuel to break down and precipitate asphaltenic sludge.
- Incompatibility – where two incompatible fuels are comingled they will become an unstable mix.
Fuels are likely to have more variable viscosity than the HSFOs used today. While stability should be tested during production, there are concerns that not all blenders will take proper care, and that new fuel blends may potentially deteriorate more rapidly during onboard storage and handling. One option for those who are nervous about the quality of fuel oil blends, or managing the fact that each new fuel oil bunkered may be incompatible with other fuels onboard, is to use only marine gasoil (MGO). MGO is a pure distillate and pure distillate fuels do not contain ashaltenes, so mixing MGO with MGO will not cause any issues with compatibility. Mixing MGO with a residual fuel, however, can result in an unstable blend. MGO also has variable cold flow properties which operators in cold areas need to be aware of.
All of this is described in detail in the Joint Industry Guidance, a 60 page document on the supply and use of 0.50% sulphur marine fuel produced by the Joint Industry Project, a collaboration involving industry experts from fuel testing agencies, the entire bunker supply chain and end users. It covers the responsibilities of bunker suppliers and users, and is packed with practical advice on dealing with the anticipated types of max 0.50% sulphur fuels coming into the market, including the potential incompatibility between different fuels.
The fuel supply and use issues covered by the JIP guidance document are not new, but the variability of fuels meeting the 0.50% limit is expected to be greater than it has been until now. This will make best practices and diligence more important. The document highlights ways to prevent and/or mitigate fuel problems, in particular the challenges around managing potential incompatibility between different batches of fuel. It was published in August and is available free on line at ibia.net.
HSFO, MGO or VLSFO?
High Sulphur Fuel Oil will not suddenly cease to be available in January 2020. Ships equipped with exhaust gas cleaning technology known as scrubbers can continue to burn HSFO, and there has been a lot of uncertainty regarding just how much HSFO will be needed globally as we enter 2020. For a while, take-up of the scrubber technology was slow and it looked like this would account for no more than 5% of global bunker fuel demand, but the number of installations has since picked up. Several analysts now peg the demand as likely to be closer to 10%. Suppliers in many parts of the world have indicated that they will continue to sell HSFO, and not only in the biggest port hubs like Singapore and Rotterdam. Even so, clear communication between suppliers and those ship operators who have scrubbers installed remains crucial to get the supply and demand balance right. HSFO has to be stored in different shore and barge cargo tanks from 0.50% sulphur fuels. Suppliers will not want to store and supply infrastructure required.
So, do we have perfect clarity now? No, we don’t, but do we ever have perfect clarity about the future? Uncertainty is not new and most of the things we speculate about regarding 2020 are things that we can never really know about the future anyway. Bunker fuel prices, demand, availability and quality have always been subject to fluctuations and variability.
MGO may be easier to handle than 0.50% sulphur fuel oil blends, but the supply industry is nevertheless preparing to provide these blends, and expect most ships to start using them for compliance in 2020. The reason is simple: blends will be cheaper than MGO. Just how much cheaper is one of the questions everybody is asking and which nobody will really know until the market determines it. The price difference will vary depending on the cost of the blend stocks used which will also vary, making prediction even harder. In June this year, a 0.50% sulphur blend in Singapore was about $30 per tonne cheaper than MGO. Some think the price differential will increase when we get closer to 2020, some don’t.
The question for operators will be what the predictability of MGO quality and handling characteristics is worth for them compared to buying various 0.50% sulphur fuel oil blends with all that entails regards to more complex fuel management. There are challenges ahead, but with the right guidance and care, the industry will manage them. Source – Seaways, The International Journal of The Nautical Institute, Unni Einemo, Director, International Bunker Industry Association (IBIA).