LOW SULPHUR FUELS

Sunday, March 04, 2018
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In 2016, the International Maritime Organization (IMO) announced that the effective date for the reduction of marine fuel Sulphur content will be 1 January 2020. Under the new global cap, ships will have to use marine fuels with a Sulphur content of no more than 0.5%, against the current limit of 3.5%, in an effort to reduce greenhouse gas emissions from ships. This should have global positive health and environmental benefits, particularly for coastal populations and those living in Port cities, such as Durban.

According to a study published in Nature Communications Journal, ship air pollution is linked to approximately 400,000 premature deaths from lung cancer and cardiovascular disease alone and around 14 million childhood asthma cases annually. It is estimated that the new Sulphur cap will help avoid around 700,000 cancer and cardiovascular disease-related premature deaths and around 40 million childhood asthma cases during the first five years of its implementation.

Ships will have the option of either using low sulphur fuels or alternatively having scrubbers fitted into existing ships (a scrubber is a piece of equipment that sprays alkaline water into a vessels exhaust to remove Sulphur and other unwanted chemicals).  Scrubbers and the requisite sludge retention and disposal is however not seen as being viable by most ship owners as it comes at a cost of around USD6-10 million per ship, with no real return on such investment. In the circumstances, it is anticipated that the majority of ship owners will opt for low sulphur fuel oil.

Additionally, most of the refining industry will have to reconfigure itself to supply the required fuel quantity to the shipping industry. This could pose issues for refiners whose fuel is sourced from high sulphur crude sources. Refineries must consider options of upgrading systems and possibly changing their sources to include low sulphur crudes.

While the costs of the IMO’s regulatory change is currently unknown, all analysts predict that it will be large. Besides affecting vessel owners and refiners, the regulatory change will also have repercussions for crude oil producers and bunker suppliers.

These rules on the Sulphur cap apply to all global waters- both the open sea and coastal waters. Implementation is the responsibility of Flag and Coastal states, and sanctions for non-compliance are established by the individual states who are members of the International Convention for the Prevention of Pollution from Ships (MARPOL Convention.)  

The global sulphur cap is meaningless unless properly enforced. Some major shipping companies have already formed the “Trident Alliance” which is a group committed to supporting robust and transparent enforcement of Sulphur regulations and compliance with the regulations. Its members include some of the largest shipping companies globally, such as Maersk. For companies such as these who are committed to complying, effective enforcement of the Sulphur cap is the only way of ensuring a level playing field between shipping companies, as otherwise there is a very real danger that ship owners who are not committed to complying will be in a position to use cheaper, non-complaint fuel with higher sulphur levels and undercut companies which do comply, on shipping rates.

Accordingly, a proposal was made to the IMO in late 2017 to the effect that vessels without scrubbers should not be permitted to carry any fuel on board for use in the ships engines which has a Sulphur content over 0.5%.

Major industry players including BIMCO, Cruise Lines International Association and the World Shipping Council, (amongst others) are of the view that the proposed ban will help ensure robust, simplified and consistent enforcement of the global Sulphur cap, as making it an offence to carry non-compliant shipping fuels, it is submitted, would be the most effective way to enforce the ban on such fuels being burned at sea, while the ship is outside the reach of the relevant Port Authorities.

The proposed ban is currently being considered by the IMO and it is expected to provide its recommendations in April 2018.

This article first appeared in the Sunday Tribune.