BIMCO weighs in with help on charters ahead of low-sulphur fuel regulations

BIMCO weighs in with help on charters ahead of low-sulphur fuel regulations

BIMCO has published two IMO 2020 clauses for inclusion in charter parties relating to the content of bunkers after 1 January 2020, covering the transition from 3.5% sulphur content heavy fuel oil (HFO) to 0.5% low-sulphur fuel (LSFO).

The world’s largest shipping association, which counts over 65% of global tonnage within its membership, said it was also setting up a working group to examine if an exhaust gas cleaning system (scrubber) clause would be required.

Scrubber technology, which acts as a mini onboard refinery by washing sulphur from the fuel, will allow ships to continue to consume cheaper HFO after 1 January 2020.

Although it is expected that only around 5% of ships will have scrubbers installed by the start of IMO 2020 regulations, that proportion could increase substantially if the investment affords shipping lines a long-term advantage over competitors opting for LSFO.

Read the full article here 


 ‘Major Risks Remain’ as Sulphur Cap Near

 ‘Major Risks Remain’ as Sulphur Cap Near

The introduction of the IMO’s global sulphur cap still poses a big risk to shipping and the global economy as 2020 nears, say the authors of the supplemental marine fuel availability study.

As reported, the supplemental study (commissioned by a BIMCO-led consortium) provoked debate at IMO’s Marine Environment Protection Committee in 2016, presenting a less optimistic analysis of potential availability issues than the official study by CE Delft and others. Now the authors – EnSys Energy and Navigistics Consulting – have updated the study and say that the potential impact of low availability is becoming worse, not better, as the picture becomes clearer.

The updated study notes that demand for low-sulphur fuel will be higher than anticipated due to low uptake of scrubbers and limited availability of low-sulphur fuels. It predicts a ‘scramble period’ in which less complex refineries, competing to produce distillate fuels, bid up the price of light sweet (low-sulphur) crude.

According to EnSys’s oil industry modelling, this scramble could cause distillate prices to exceed US$1,000 a tonne and US retail gasoline prices to spike at more than US$5 a gallon in 2020. These peaks will be within range if Brent crude prices begin 2020 at around US$80 a barrel and spike to around US$120 a barrel.

Refinery capacity will be a key issue. Navigistics Consulting’s analysis shows that nearly four million barrels a day of high-sulphur residual fuel will need to be ‘switched’ to 0.5% sulphur marine fuel by 1 January 2020 to achieve full compliance. However, EnSys Energy’s assessment of the global supply-demand refining balance points to a maximum capability of around three million barrels a day in the first half of 2020.

Martin Tallett, president, EnSys Energy, said: “Especially if allied to strict enforcement, this outlook leads to severe market strains affecting all products in all regions – not just marine fuels. The increase in product ‘supply costs’ could take between US$500 billion and US$2 trillion out of the global economy for the year.”

David St. Amand, president, Navigistics Consulting, noted that a “strict” implementation approach by IMO will also likely lead to severe economic disruption in the maritime industry. Challenges could range from substantial increases in the cost of crude oil and petroleum products shipped by sea, to potentially problematic handling of situations where compliant fuel is not available.

The implementation plan for IMO’s 2020 marine fuel rule will be debated at a special Intersessional meeting of IMO’s Pollution Prevention and Response (PPR) sub-committee beginning on July 9 in London.

The study was updated as part of the subscription-based Marine Fuels 2020 service provided by EnSys and Navigisitics to oil companies, ship owners, and bunker suppliers.

source: Motorship



There are a host of surveys doing the rounds and almost all of them refer to the availability of new low sulphur fuels before the IMO global sulphur cap comes into force in January 2020. As we have been saying for many months now, the real issues at this stage are about the availability of the new fuels, the prices to be charged and the bunkering. These were some of the issues raised at meetings at Posidonia 2018 and by a couple of maritime publications over the past month.

Essben Poulson, newly re-elected chairman of the International Chamber of Shipping said in May that serious issues were in danger of impeding the smooth flow of maritime trade. He said it was still far from certain that sufficient quantities of compliant fuels would be available in ports worldwide by the start date of January 1 2020. With ship owners still not sure where and when the new fuels would be available from and importantly, at what prices, there is still more work to be done before the global sulphur cap becomes a smooth reality.

The suggestions of ships having to use non-compliant fuels have been mentioned and these concerns will only add to a sense of confusion until strong decisions and announcements are made. Then there are the costs to be added into this mixture of uncertainty: with scrubbers being touted at between $3-6 million dollars each and their size large enough to worry some ship owners about retrofitting, there have been many choosing to go down less expensive routes.

Ship owners and managers remain to be convinced about scrubbers but what other solutions are viable? According to an article in The Loadstar:  Less than 18 months before the IMO’s 0.5% sulphur cap regulations come into force for merchant shipping, container lines are worried that the estimated $50bn extra cost of the greener fuel could tip them into bankruptcy. “We’re all going to go bust,” MOL’s president and chief executive Junichiro Ikeda told the Financial Times. He expressed his concern that ocean carriers would be unable to recover sufficient amounts from shippers to mitigate the impact of the $300 a tonne extra cost of low-sulphur fuel oil (LSFO).

This idea about severe financial implications have been making the rounds in the past few months and yet the refiners are only now starting to calm some fears with announcements about low sulphur fuel oil (LSFO) and its availability. Whatever the issues they are all viewed as having the potential to negatively impact fuel and machinery systems and this is where alternative solutions such as fuel treatments enter the picture. There is still time for owners to make final decisions before everyone starts with tank cleaning and looks forward to an LSFO future. What there is no time for though is indecision and keeping anyone in the dark.

“Time Is Fast Running Out” For Global Sulphur Cap Says ICS

“Time is fast running out” for implementation by IMO Member States of the 0.5% global sulphur fuel cap by 1 January 2020, says Esben Poulsson (pictured above), chairman of the International Chamber of Shipping (ICS).

In a statement, ICS says that the IMO global sulphur cap is expected to see shipping’s bunker prices increase significantly.

“While ICS fully supports the objectives of the IMO cap, the overnight introduction of this regulatory game-changer will have enormous implications for ship operations. It will be vital to get the implementation right.”

The statement also highlighted concerns about: “Whether sufficient quantities of compliant low sulphur 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.”

In the absence of agreed standards for new fuels, including blends that will be compliant with the 0.5% sulphur 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.

While the industry is fully committed to immediate implementation, 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; destinations which are not always known long in advance.

If 0.5% sulphur fuel is not available in every port worldwide, ICS notes that ships may still bunker and use other compliant fuels, such as 0.1% distillate, but warns this raises other serious issues not least those relating to compatibility.

Esben Poulsson emphasised: “It is vital that ship operators, charterers and fuel purchasers start making the necessary preparations to be ready for this major change. This also means that 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.”